oversight

The City and County of San Francisco, CA, Did Not Always Ensure That Homelessness Prevention and Rapid Re-Housing Funds Were Used as Required

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-12-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                                 Issue Date
                                                                       December 21, 2010
                                                                 Audit Report Number
                                                                          2011-LA-1005




TO:         Maria Cremer, Acting Director, Office of Community Planning and
            Development, San Francisco, Region IX, 9AD


FROM:       Tanya E. Schulze, Regional Inspector General for Audit, Region IX, 9DGA

SUBJECT: The City and County of San Francisco, CA, Did Not Always Ensure That
         Homelessness Prevention and Rapid Re-Housing Funds Were Used as Required

                                    HIGHLIGHTS

 What We Audited and Why

      We audited the City and County of San Francisco (City) because its grant of more than
      $8.7 million was one of the largest Homelessness Prevention and Rapid Re-Housing
      Program (HPRP) grants in the State of California. Our objective was to determine
      whether the City disbursed HPRP funding in accordance with program requirements.


 What We Found

      The City paid for HPRP services for ineligible participants and participants whose
      eligibility was not supported. It also paid for ineligible activities. We reviewed 31 case
      files and found that 4 participants were ineligible and 10 did not have adequate
      documentation to support eligibility. We also identified 17 additional participants that
      the City had reviewed during monitoring whose eligibility was not adequately supported.
      Thus, we questioned the City‟s use of more than $63,000 in HPRP funds.
What We Recommend

     We recommend that the Acting Director of the San Francisco Office of Community
     Planning and Development require the City to (1) reimburse the program $8,820 from
     non-Federal funds for the ineligible participants and activities and determine and
     reimburse any amounts that have been spent since our review for these participants; (2)
     provide supporting documentation for participants‟ eligibility or reimburse its program
     accounts $31,172 for participants reviewed who lacked adequate documentation and
     determine and reimburse any amounts that have been spent since our review for these
     participants; (3) provide supporting documentation for participants‟ eligibility or
     reimburse its program accounts $23,016 based on the City‟s monitoring review and
     determine and reimburse any amounts that have been spent since our review for these
     participants; (4) develop and implement procedures to ensure that its subgrantees verify
     and document participant eligibility in accordance with HPRP requirements; and (5)
     develop and implement effective monitoring procedures to ensure, at a minimum, that
     reviews are timely, deficiencies and corrections are clearly documented, and any
     reimbursements for ineligible participants or participants whose eligibility cannot be
     determined are repaid to the program.

     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 provided the Authority a draft report on November 24, 2010, and held an exit
     conference with the Department‟s officials on December 3, 2010. The Authority
     provided written comments on December 8, 2010. It generally disagreed with our report.

     The complete text of the auditee‟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 Paid for Ineligible and Unsupported HPRP Services   5

Scope and Methodology                                                     9

Internal Controls                                                         11

Appendixes

  A.   Schedule of Questioned Costs                                       12
  B.   Auditee Comments and OIG‟s Evaluation                              13
  C.   Schedule of Noncompliant Cases Per Subgrantee                      27
  D.   Summary of Expenditures for Files Reviewed                         28
  E.   Criteria
                                                                          29




                                             3
                       BACKGROUND AND OBJECTIVE

The Homelessness Prevention and Rapid Re-Housing Program.

The Homelessness Prevention and Rapid Re-Housing Program (HPRP) is a new program under
the U.S. Department of Housing and Urban Development‟s (HUD) Office of Community
Planning and Development. It was funded under the American Recovery and Reinvestment Act
of 2009 (Recovery Act) on February 17, 2009. Congress has designated $1.5 billion for
communities to provide financial assistance and services to either prevent individuals and
families from becoming homeless or help those who are experiencing homelessness to be
quickly re-housed and stabilized. HPRP funding was distributed based on the formula used for
the Emergency Shelter Grant program.

The City and County of San Francisco, CA.

HUD allocated program funds for communities to provide financial assistance and services to
either prevent individuals and families from becoming homeless or help those who are
experiencing homelessness to be quickly re-housed and stabilized. HUD used its Emergency
Shelter Grant formula to allocate program funds to metropolitan cities, urban counties, and
States. On July 31, 2009, HUD entered into a grant agreement with the City and County of San
Francisco (City) for more than $8.7 million in program funds. The agreement was pursuant to
the provisions under the Homelessness Prevention Fund, Division A, Title XII, of the Recovery
Act. The City is responsible for ensuring that each entity that administers all or a portion of its
program funds or receives all or a portion of its program funds to carry out activities fully
complies with the program requirements. On October 1, 2009, the City entered into subgrant
agreements with six nonprofit entities to carry out the program. The six nonprofit subgrantees
were Catholic Charities CYO, Holy Family Day Home, Tenderloin Housing Clinic, Hamilton
Family Center, Larkin Street Youth Center, and Eviction Defense Collaborative.

Mayor’s Office of Housing and Human Services Agency.

Two departments within the City, the Mayor‟s Office of Housing and the Human Services
Agency entered into a memorandum of understanding to oversee and administer the program
funds awarded to the City. According to this memorandum of understanding, the Mayor‟s Office
of Housing is the primary point of contact between the City and HUD for submitting required
reports and drawing down program funds. The Human Services Agency is responsible for the
day-to-day program administration, which includes coordination and monitoring of subgrantees,
ensuring the eligibility of program participants and program expenditures, and quarterly
reporting of participant data to HUD.

Our objective was to determine whether the City disbursed HPRP funds in accordance with
program requirements.




                                                 4
                                      RESULTS OF AUDIT

Finding: The City Paid for Ineligible and Unsupported HPRP Services

The City paid for HPRP services for ineligible participants, ineligible activities, and participants
whose eligibility was not supported. This condition occurred because the City did not review
eligibility documentation when approving payments to the subgrantees or establish effective
monitoring procedures to ensure that the documentation was in the subgrantees‟ files.
Consequently, it spent more than $63,000 on services for ineligible participants and participants
for whom eligibility was not supported.



    HPRP Funds Were Used for
    Ineligible Participants and
    Ineligible Activities

         We reviewed 31 case files out of 130 for the period selected and found that the City paid
         $8,320 for HPRP services for 4 ineligible participants. The ineligible participants are
         discussed below.

         Two participants were documented by the subgrantees as undocumented immigrants. In
         one case, the participant had provided and the subgrantee included in the case file a
         notice to appear in removal proceedings because he was “an alien present in the United
         States who was not admitted or paroled.”1 In the other case, the subgrantee wrote in the
         participant‟s case notes that the two adults in the household “are monolingual Spanish
         speaking undocumented immigrants.” In accordance with Title IV of the Personal
         Responsibility and Work Opportunity Reconciliation Act of 1996, no entity that receives
         funds under HPRP may knowingly provide HPRP assistance to an alien who is not a
         qualified alien.

         One participant was not eligible for assistance because he was not at imminent risk of
         becoming homeless. When he applied and was approved for assistance, he was not
         behind in his rent and was not threatened with eviction, but the subgrantee approved the
         payment of rental subsidies for 4 months.

         One participant did not meet the City‟s income requirement because his income exceeded
         30 percent of area median income ($23,750). The subgrantee did not correctly annualize
         the participant‟s gross annual income. It miscalculated the participant‟s gross annual
         income by taking income of $950 for a 2-week period, multiplying it by 2 to arrive at a
         monthly income of $1,900, and then multiplying by 12 for an annual total of $22,800.

1
 The subgrantee made the assistance payment for this ineligible participant (client C3 in appendix D). However, it
had not submitted an invoice to the City requesting reimbursement for this payment as of October 6, 2010.
Therefore, the $8,320 in ineligible costs does not include the assistance payment made for this participant.

                                                         5
         The correct calculation is $950 multiplied by 26 2-week pay periods annually, which
         equals $24,700. The income was understated by $1,900; therefore, the City made
         ineligible payments for this participant. The subgrantee also failed to show that this
         participant was at imminent risk of becoming homeless. In three other cases, annual
         income was incorrectly calculated, but the participants met requirements when income
         was calculated correctly.

         We also found two payments totaling $1,033 for ineligible activities, although they
         assisted eligible participants. In one case, the subgrantee did not obtain adequate
         confirmation from the landlord of the back rent owed and, consequently, overpaid by
         $500. In the other case, the subgrantee provided $533 in assistance for a partial month‟s
         rent, although the participant‟s file showed that the City also provided rental assistance
         for the same period through another program.2 HPRP requirements do not allow rental
         assistance payments to be made for the same period and for the same cost types when
         assistance is provided through another housing subsidy program (see appendix D for a
         listing of funds spent per case).

    The Subgrantees Did Not
    Always Adequately Support
    Participants’ Eligibility

         The City paid for HPRP services totaling $31,172 for 10 participants whose eligibility
         was not supported. Each of the four subgrantees visited provided assistance without
         adequate documentation of participant eligibility. For example, 7 of the 31 files reviewed
         did not include documentation or verification that the participant was imminently at risk
         of becoming homeless.

         Case files did not contain adequate documentation of income verification and/or financial
         documentation. Subgrantees did not always ask all adult household members whether
         they had income. When subgrantees calculated annual income based on only one part-
         time pay stub, the files did not show an attempt to determine whether it was
         representative of the usual hours worked.

         Although pay stubs or Social Security letters showed direct deposit to bank accounts,
         case workers often failed to ask for bank statements and wrote in the file that the
         participants had “no bank account.” When files did include bank statements, it did not
         appear that case workers considered the information they contained. In one case, the
         recent bank statement showed deposits exceeding the income shown on the pay stubs the
         participant provided. If the deposits to the bank account were an indication of true
         income, the participant exceeded the City‟s income eligibility requirement (see appendix


2
 The subgrantee made the assistance payment on behalf of the participant for this ineligible activity. However, it
had not submitted an invoice to the City requesting reimbursement for this payment as of October 6, 2010.
Therefore, the assistance payment of $533 was not included as part of the ineligible costs computation.


                                                         6
     C for a full listing of cases of noncompliance and appendix D for a listing of funds spent
     per case).

All Assistance Payments Made
by One Subgrantee Were
Unsupported


     We selected 4 of 6 subgrantees to visit. While we were doing fieldwork, the City issued
     its monitoring report for one subgrantee that we did not select for our case file reviews
     and disclosed significant deficiencies in eligibility documentation. The City had
     reviewed files for all 17 of the subgrantee‟s participants assisted as of July, 2010. The
     City suspended this subgrantee from accepting new participants and instructed the
     subgrantee‟s supervisory staff to review all case files and correct all deficiencies in
     documentation of eligibility, income, and financial assistance. Monitoring findings
     included, “Insufficient documentation of why the assistance that was provided was
     needed, or explanation of how the level of assistance was calculated; inconsistent
     compliance with documentation of the „but for‟ rule to determine eligibility - that the
     client would be homeless but for receiving HPRP assistance; missing or inconsistent
     income verification for the primary client; missing or inconsistent documentation of
     income for each household member; multiple forms in one file with information that was
     contradictory, including the need for assistance, amount of assistance provided, intake
     and discharge dates, and family composition and ethnicity; and no evidence of
     habitability inspections being conducted prior to occupancy when assistance was used to
     move clients into a new unit.”

     The City did not document or maintain specific records showing the deficiencies found
     for individual case files during monitoring reviews. A City official told us that the City
     reviewed the files for corrective action and found that the subgrantee had improved its
     file documentation. For closed cases, it was not possible to obtain better documentation,
     but for the ongoing cases, the City was able to add to the files. The City could not
     support the eligibility of the assistance to the subgrantee‟s 17 participants; therefore, we
     questioned the $23,016 in services paid for these participants.

The City Needs To Improve
Subgrantee Monitoring

     The subgrantees began assisting participants in October 2009; however, the City
     performed its first onsite monitoring reviews in July 2010. When the City reviewed
     participant case files during monitoring, it did not detect significant deficiencies relating
     to eligibility for five of its six subgrantees, nor could the City provide documentation
     showing which files were reviewed or the results for each file. Based on the results of
     our case file reviews, the City needs to improve procedures to ensure that HPRP funds
     are only used to assist participants for whom eligibility is documented.



                                               7
Conclusion


    The City did not always ensure that HPRP funds were used as required. We attribute the
    deficiencies to the City‟s failure to develop procedures to ensure that subgrantees
    determined and documented participant eligibility in accordance with program
    requirements and inadequate monitoring. Although the City identified significant
    deficiencies in the eligibility documentation for one subgrantee during monitoring, it did
    not find significant eligibility problems when it monitored the other five subgrantees. We
    found that all subgrantees needed better oversight.

    Eligibility criteria and documentation requirements were published in Federal Register
    Notice FR-5307-N-01 and HUD provided guidance on how to meet the requirements on
    its website. (see appendix E)

Recommendations

    We recommend that the Acting Director of the HUD San Francisco Office of Community
    Planning and Development

    1A.      Require that the City reimburse the program $8,820 from non-Federal funds for
             the ineligible participants and activities and determine and reimburse any amounts
             that have been spent since our review for these participants.

    1B.      Require that the City either provide supporting documentation for participants‟
             eligibility or reimburse its program accounts $31,172 for participants reviewed
             who lacked adequate documentation and determine and reimburse any amounts
             that have been spent since our review for these participants.

    1C.      Require that the City either provide supporting documentation for participants‟
             eligibility or reimburse its program accounts $23,016, based on the City‟s
             monitoring review, and determine and reimburse any amounts that have been
             spent since our review for these participants.

    1D.      Require the City to develop and implement procedures to ensure that its
             subgrantees verify and document participant eligibility in accordance with HPRP
             requirements.

    1E.      Require the City to develop and implement effective monitoring procedures to
             ensure, at a minimum, that reviews are timely, deficiencies and corrections are
             clearly documented, and any reimbursements for ineligible participants or
             participants whose eligibility cannot be determined are repaid to the program.




                                              8
                         SCOPE AND METHODOLOGY

We performed our onsite audit work at the City‟s office and selected subgrantee offices in San
Francisco, CA, between July and September 2010. The audit generally covered the period
September 1, 2009, through June 30, 2010. We expanded our audit period as necessary.

To accomplish our objective, we interviewed HUD staff, grantee staff, and subgrantee staff
responsible for program execution. We also reviewed

       Applicable HUD requirements, including the Recovery Act; the Revised HPRP Notice,
       Redline with Corrections, issued June 8, 2009; and program guidance issued by HUD;
       The City‟s substantial amendment to the consolidated plan/2008 action plan for HPRP;
       The HPRP grant agreement between HUD and the City;
       The memorandum of understanding between the Mayor‟s Office of Housing and the
       Human Services Agency;
       The subgrant agreements between the City and its six nonprofit subgrantees;
       The City‟s accounting policies and procedures for subgrantee reimbursement requests
       and program funds drawdowns;
       The City‟s policies and procedures for subgrantee program monitoring and fiscal
       monitoring;
       The City‟s and subgrantees‟ disbursement records; and
       Subgrantee participant case files.

Between January 1 and June 30, 2010, the City disbursed nearly $1.5 million in HPRP funds.
During our survey, we reviewed $120,714 in program expenditures (8 percent of total HPRP
funds disbursed), which included financial assistance provided to participants by three
subgrantees, data collection expenses, and administrative expense. For each of these 3
subgrantees, we selected 4 participant files for review for a total of 12 participant files. Although
inconsistencies and errors were found in these participant case files, the City and subgrantees
contended that issues were found only because these files were from the early days of the
program before HUD provided guidance. The City and subgrantees insisted that procedures and
documentation had improved in more recent participant case files.

By August 31, 2010, the City had disbursed more than $1.8 million in HPRP funds. In the audit
phase, we revisited the three subgrantees and added a fourth subgrantee. The fourth subgrantee
was added because it was the only subgrantee that provided rapid re-housing assistance. We
reviewed an additional $42,952 in financial assistance provided to 19 more participants whose
program entry dates were from 2 recent months between May and July 2010. For each of the
four subgrantees, we selected the greatest of 20 percent of new participant entries for the 2-
month period or four participants to review. With the additional 19 participant files selected, we
reviewed a total of 31 case files.




                                                 9
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               10
                              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 control was relevant to our audit objective:

               Controls to ensure that subgrantees follow applicable laws and regulations with
               respect to the eligibility of HPRP participants and activities.

       We assessed the relevant control identified above.

       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.

 Significant Deficiency


       Based on our review, we believe that the following item is a significant deficiency:

               The City did not have adequate controls in place to ensure that its subgrantees
               followed Federal requirements for the eligibility of HPRP participants (see
               finding 1).




                                                11
                                      APPENDIXES

Appendix A

                   SCHEDULE OF QUESTIONED COSTS

Recommendation                   Ineligible 1/                    Unsupported 2/
number
1A                               $8,820
1B                                                                $31,172
1C                                                                $23,016

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. These costs consist of HPRP funds used to assist ineligible participants and
activities.

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. These costs consist of HPRP funds used to assist participants whose eligibility was
not supported by appropriate documentation.




                                                 12
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         13
Comment 1




            14
Comment 1 & 2




Comment 3




Comment 4




                15
Comment 5




Comment 6




Comment 7




            16
Comment 8




Comment 9




            17
Comment 10




Comment 11



Comment 12




             18
Comment 13




Comment 14




Comment 15




             19
Comment 15




             20
Comment 15




Comment 16




             21
Comment 16




Comment 17




             Exhibits made available upon request




                                            22
                                OIG Evaluation of Auditee Comments

Comment 1        The 2009 and 2010 guidance for assessing the risk of homelessness (as quoted by
                 the City in its response to this audit) are essentially the same.3 In both of the
                 quotes cited by the City, the key is determining if the applicant has other housing
                 options or has financial resources or support networks to obtain immediate
                 housing or remain in current housing. Both the March 2010 citation the City
                 quoted above, and the revised HPRP notice from June, 2009, state that the
                 assistance is specifically for " individuals and families who are homeless or would
                 be homeless but for this assistance." Regarding the requirement to assess and
                 document an applicant's risk of homelessness, the 2009 HPRP Notice also stated:

                 "Grantees are responsible for verifying and documenting the individuals’
                 risk of homelessness that qualifies them for receiving rental assistance."

Comment 2        During the audit, OIG reviewed 31 case files (see appendix D). In addition,
                 recommendation 1C refers to 17 files that the City reviewed during its monitoring
                 of Larkin Street Youth Services.

Comment 3        We evaluated the reasons the City gave for disagreeing with questioned costs and
                 did not find that the additional information provided warranted any changes to the
                 amounts questioned. Additional documentation obtained after audit field work
                 was complete can be provided during the audit clearance process. The City's case
                 by case comments and OIG's evaluation are below.

Comment 4        Holy Family Day Home - Client A4: It was the City's decision to set an annual
                 income requirement that was lower than the one established by HUD. Once a
                 limit was established, it should have been applied equally to all applicants. In this
                 case, the file showed a miscalculation of income, not a decision to make an
                 exception.

Comment 5        Tenderloin Housing Clinic - Client D3: As noted above, the requirement to verify
                 and document the risk of homelessness existed from program inception. The file
                 did not contain such documentation and the individual was current on his rent.
                 The case file showed that the client initially applied for HPRP assistance in
                 November 2009 when he asked for assistance paying his December rent. The
                 other subgrantee said it could not help and referred him to Tenderloin Housing
                 clinic. When he applied for help from Tenderloin in December, his December
                 rent was paid without HPRP assistance, providing an indication he may have had
                 other resources

Comment 6        Catholic Charities CYO - Client B6: OIG found three deficiencies in this case
                 file. First, there was nothing in the file that actually documented the niece's
                 residence in the aunt's former apartment, or her imminent risk of becoming

3
 The HPRP Notice was revised and reissued on June 8, 2009, in advance of the City's October, 2009, start of HPRP
program assistance.

                                                      23
            homeless. The niece's name was not on the arson report. Second, both the aunt
            and the niece had bank accounts, evidenced by the income documentation
            obtained by the caseworker, who did not obtain or review the bank statements to
            determine if the participants had financial resources to pay the security deposit.
            The caseworker wrote "No bank account" in the file. Therefore, eligibility was not
            supported. Finally, although there was no direct effect on income eligibility, the
            subgrantee incorrectly calculated annual income. The subgrantee did not rely on
            the Section 8 calculation worksheet; it relied on only one pay stub which was for
            a one-week pay period. The subgrantee took the $269.23 earned by the niece in 1
            week and multiplied it by 2, incorrectly arriving at $538.46 monthly earned
            income and $6,461.52 annual income. The correct calculation would have been
            $269.23 per week multiplied by 52 weeks = $13,999.96. Added to the aunt's
            $929 monthly SSI the correct annual income was $25,147.96.

Comment 7   Catholic Charities CYO - Client B7: Documentation of bank accounts can be
            provided to HUD during the process of clearing the findings. We do not agree
            that the grantee can rely on an assumption that assets should have been verified by
            another agency that also provided assistance. We also noted that case notes said
            this client was spending $50 per month on internet and sending $50 to assist a
            relative in another country.

Comment 8   Catholic Charities CYO - Client B8: The City's argument that the Section 8 rent
            computation sheet from the household's last annual recertification shows the son
            has no income is not acceptable. We do not agree that the grantee can rely on an
            assumption that income should have been verified by another agency that also
            provided assistance. Further, the Section 8 recertification in the HPRP case file
            was dated 14 months before participants' HPRP intake month. There is no
            indication in the client file to show the caseworker asked if the 21-year-old had
            any income at intake.

Comment 9   Catholic Charities CYO - Client B10: We questioned the $590 back rent payment
            in December, 2009, because the file, including case notes, did not show any
            indication the amount of back rent owed was verified. The only documentation in
            the file was two letters from a prospective landlord the first stating that back rent
            owed to a prior landlord was $248, the second stating the amount was $590.
            Through our own research, we found the judgment was for $248. We also found
            that the applicant did not move into the apartment that she had applied for,
            although she was approved for move-in. She was still “couch surfing” when she
            returned for additional assistance in May 2010. In addition, the file did not show
            that employment income was verified in December 2009. Shredding prior
            documentation when new documentation is obtained months later would not be an
            acceptable practice and it is not a practice we saw in any other files we reviewed
            or in the subgrantees procedures. Documentation can be provided to HUD during
            the clearance process.




                                             24
              We did not question the provision of a security deposit in May 2010.

Comment 10 Holy Family Day Home - Client A1: We reviewed the copy of the stipulated
           agreement and, as a result decreased the count of cases where risk of
           homelessness was not documented. However, this case is still unsupported
           because annual income was inadequately verified. The participant had two part-
           time jobs and provided pay stub covering a six-week period. Pay stubs were
           provided from 1 job for the first 2 weeks, 2 jobs for the second 2 weeks and 1 job
           for the third 2 weeks. There was no explanation in the file regarding the periods
           with documentation from only one job. Further, the recent bank statement in the
           file showed deposits for the month that significantly exceeded the documented
           income. If the bank deposits were a true indication of income, this participant
           would not be eligible for HPRP assistance.

Comment 11 Holy Family Day Home - Client A2: Participants were ongoing Section 8 tenants.
           The file did not indicate why they had to move or that they were at risk of
           homelessness. There were no case notes in the file. Under the 2009 HPRP
           Notice, grantees (or subgrantees) were responsible for verifying and documenting
           the individuals' risk of homelessness.

Comment 12 Holy Family Day Home - Client A3: We agree that this participant was low
           income; however, we did not see verification or documentation of risk of
           homelessness in the file. We did not see the landlord letter referred to in the
           City's response to the audit. The file also showed that the participant was
           approved in April 2009 for rental subsidy from the City through another program
           but had never received it. The case worker explained that the participant had not
           received the subsidy because he failed to come in for required case
           management/counseling sessions. As a result, at the end of October 2009, he was
           four months behind on his rent.

Comment 13 Holy Family Day Home - Client A5: Without looking at the bank statements, the
           grantee can only guess that the applicant does not have undisclosed income or
           assets. Verification and documentation is required.

Comment 14 Tenderloin Housing Clinic - Client D4: The letter from the employer was hand-
           carried by the participant and there is no way of knowing who filled it out and
           signed it. Nothing in the case notes or the file indicated that the caseworker
           contacted the employer directly. Therefore, income was inadequately verified.
           Regarding the letter in Spanish, the auditor translated it and agrees that the
           landlord wrote that she would evict if she did not receive the back rent.

Comment 15 Regarding Larkin Street Youth Services, City officials told us that they had
           reviewed 17 files during monitoring in July 2010, although only 13 of the cases
           had been submitted to the City for reimbursement. Regarding the eight cases the
           City said it has determined met eligibility and documentation requirements,
           support may be provided to HUD during the process of clearing the findings.

                                              25
Comment 16 We do not dispute any of the City's comments about it's HPRP monitoring
           procedures; however, the results of the audit show that subgrantees did not ensure
           that participants and assistance payments were eligible and supported.

Comment 17 HUD provided guidance and tools for monitoring, but not comprehensive
           procedures, which are the grantee's responsibility. The City's monitoring did not
           result in any findings of unsupported or ineligible payments for the four
           subgrantees we visited and reviewed, and the City had no record of specific
           unsupported payments made by Larkin Street, although it deemed deficiencies to
           be significant and suspended intake of new clients. Therefore, we concluded that
           detailed procedures are needed to ensure that results of each individual case file
           review, including deficiencies, are documented and appropriate action is taken for
           ineligible or unsupported payments.




                                             26
Appendix C

SCHEDULE OF NONCOMPLIANT CASES PER SUBGRANTEE

                                                      Number of case Total
                                                      files per
                                                      subgrantee
     Deficiencies                                     A B C D
1    Assistance provided to undocumented                    1 1      2
     immigrants
2    Did not show imminent risk of becoming           3   3              6
     homeless
3    Participant was not at imminent risk of                       1     1
     becoming homeless
4    Participant exceeded the City‟s income limit     1                  1
5    Errors in calculating annual income              2   2              4
6    Lack of income verification for primary          1   1    1   1     4
     participant
7    Lack of income verification for other adult(s)   1   2              3
     in household
8    No verification of bank accounts for             1   4              5
     participants who had bank accounts
9    Amount of back rent not verified by landlord         1              1
10   No housing inspection                                1              1
11   Housing inspection was 9 months before                    1         1
     move-in
12   Did not show risk of utility shutoff                 1              1
13   Overpayment to landlord                              1              1
14   HPRP rental subsidy given for the same                    1         1
     period that rental subsidy was provided by
     the City through another program

KEY: A – Holy Family Day Home; B – Catholic Charities CYO; C – Hamilton Family
Center; D – Tenderloin Housing Clinic




                                         27
Appendix D

   SUMMARY OF EXPENDITURES FOR FILES REVIEWED
                                                               Amounts paid by the City as of 10/6/10
                                Amount         Paid by
  Subgrantee           Client   invoiced       the City           Eligible         Ineligible       Unsupported


  Subgrantee A         A1          2,440.40        Yes                  -                 -              2,440.40
                       A2          1,641.00        Yes                  -                 -              1,641.00
                       A3          1,807.56        Yes                  -                 -              1,807.56
                       A4          1,520.00        Yes                  -           1,520.00                   -
                       A5          9,300.00        Yes                  -                 -              9,300.00
                       A6            196.00        Yes              196.00                -                    -
                       A7          2,748.00        Yes            2,748.00                -                    -
                       A8            221.00        Yes              221.00                -                    -
  Total for subgrantee A         19,873.96       19,873.96        3,165.00          1,520.00            15,188.96


  Subgrantee B         B1          1,813.00        Yes            1,813.00                -                    -
                       B2          2,107.25        Yes            2,107.25                -                    -
                       B3          1,526.00        Yes            1,526.00                -                    -
                       B4          1,332.90        Yes                  -                 -              1,332.90
                       B5          6,521.31        Yes            6,521.31                -                    -
                       B6          1,823.00        Yes                  -                 -              1,823.00
                       B7          7,011.60        Yes                  -                 -              7,011.60
                       B8          2,226.00        Yes                  -                 -              2,226.00
                       B9          3,600.00        Yes                  -           3,600.00                   -
                       B10         1,790.00        Yes            1,200.00                -                590.00
                       B11         4,495.31        Yes            3,995.31            500.00                   -
  Total for subgrantee B         34,246.37       34,246.37      17,162.87           4,100.00            12,983.50


  Subgrantee C         C1          2,700.00       Partial         1,350.00                -                    -
                       C2          2,133.00         No                  -                 -                    -
                       C3          1,780.00         No                  -                 -                    -
                       C4          2,501.73         No                  -                 -                    -
  Total for subgrantee C           9,114.73       1,350.00        1,350.00                -                    -


  Subgrantee D         D1          1,880.00        Yes            1,880.00                -                    -
                       D2            778.00        Yes              778.00                -                    -
                       D3          3,200.00        Yes                  -           3,200.00                   -
                       D4          3,000.00        Yes                  -                 -              3,000.00
                       D5          2,956.98         No                  -                 -                    -
                       D6            586.41        Yes              586.41                -                    -
                       D7          1,083.00        Yes            1,083.00                -                    -
                       D8                  -        No                  -                 -                    -
  Total for subgrantee D         13,484.39       10,527.41        4,327.41          3,200.00             3,000.00


  Total dollars reviewed for
  the four subgrantees           76,719.45       65,997.74      26,005.28           8,820.00            31,172.46




                                                          28
Appendix E

                                     CRITERIA
  A. The Recovery Act became Public Law 111-5 on February 17, 2009. The Recovery Act
     establishes the Homelessness Prevention Fund. The homelessness prevention portion of
     the Recovery Act falls under Title XII – Transportation and Housing and Urban
     Development, and Related Agencies.

  B. HUD Federal Register Notice FR-5307-N-01 advised the public of the allocation formula
     and allocation amounts, the list of grantees, and requirements for the Homelessness
     Prevention Fund, hereafter referred to as the “Homelessness Prevention and Rapid Re-
     Housing Program (HPRP),” under Title XII of the Recovery Act.

     The notice included the following:

            Grantees are responsible for verifying and documenting the individuals‟ risk of
            homelessness that qualifies them for receiving rental assistance. HUD requires
            grantees and/or subgrantees to evaluate and certify the eligibility of program
            participants at least once every 3 months for all persons receiving medium-term
            rental assistance.

            Grantees and subgrantees should carefully assess a household‟s need and
            appropriateness for HPRP. If the household needs more intensive supportive
            services or long-term assistance or if a household is not at risk of homelessness,
            grantees and subgrantees should work to link them to other appropriate available
            resources.

            In order to receive financial assistance or services funded by HPRP, individuals
            and families must at least meet the following minimum criteria:

                Have at least an initial consultation with a case manager or other authorized
                representative who can determine the appropriate type of assistance to meet
                their needs. HUD encourages communities to have a process in place to refer
                persons ineligible for HPRP to the appropriate resources or service provider
                that can assist them.

                Be at or below 50 percent of area median income.

                Be either homeless or at risk of losing their housing and meet both of the
                following circumstances: (1) no appropriate subsequent housing options have
                been identified and (2) the household lacks the financial resources and support
                networks needed to obtain immediate housing or remain in its existing
                housing.


                                             29
          Grantees are responsible for ensuring that HPRP amounts are administered in
          accordance with the requirements of this notice and other applicable laws. Each
          grantee is responsible for ensuring that its subgrantees carry out the HPRP eligible
          activities in compliance with all applicable requirements.

          Each grantee and subgrantee must keep any records and make any reports
          (including those pertaining to race, ethnicity, gender, and disability status data)
          that HUD may require within the timeframe required.

          Grantees are responsible for monitoring all HPRP activities, including activities
          that are carried out by a subgrantee, to ensure that the program requirements
          established by this notice and any subsequent guidance are met.

          Organizations providing rental assistance with HPRP funds will be required to
          conduct initial and any appropriate follow-up inspections of housing units into
          which a program participant will be moving.

C. HUD‟s Web site (HUDHRE.info) provided guidance for HPRP grantees. Regarding
   assistance to undocumented immigrants, HUD wrote: “Can HPRP funds be used to assist
   illegal immigrants?” HUD then provided the following answer:

   “In accordance with Title IV of the Personal Responsibility and Work Opportunity
   Reconciliation Act of 1996, an alien (a person who is not a U.S. citizen or national) may
   be eligible for assistance under HPRP only if he or she is a „qualified alien‟ (defined in 8
   U.S.C. [United States Code] 1641). This means that no entity that receives funds under
   HPRP may knowingly provide HPRP assistance to an alien who is not a qualified alien.

   “The law requires all state and local governments that directly administer HPRP
   assistance to first verify that an alien is a qualified alien before using HPRP funds to
   assist him or her. Nonprofit organizations that administer HPRP assistance are not
   required, but may, verify that an alien is a qualified alien in order to provide him or her
   with HPRP assistance.”




                                            30