King County Did Not Meet Shelter Plus Care Matching Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-07-28.

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

OFFICE OF AUDIT                                      DRAFT
   For Discussion and Comment Only - Subject to Review and Revision

                                           King County
                                           Seattle, WA

                            Shelter Plus Care Program

2014-SE-1005                                                          JULY 28, 2014
                                                                    Issue Date: July 28, 2014

                                                                    Audit Report Number: 2014-SE-1005

TO:            Jack Peters, Regional Director, Office of Community Planning and Development,

FROM:          Ronald J. Hosking, Regional Inspector General for Audit, 0AGA

SUBJECT:       King County Did Not Meet Shelter Plus Care Matching Requirements

    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our review of King County’s Shelter Plus Care

    HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.

    The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at

   If you have any questions or comments about this report, please do not hesitate to call me at

                                               Office of Audit Region 10
                                   909 First Avenue, Suite 126, Seattle, WA 98104
                                      Phone (206) 220-5360, Fax (206) 220-5162
                          Visit the Office of Inspector General Web site at www.hudoig.gov.
                                           July 28, 2014
                                           King County Did Not Meet Shelter Plus Care Matching

Audit Report 2014-SE-1005

 What We Audited and Why                    What We Found

We audited King County because it          While it was able to provide the necessary service
received the most Shelter Plus Care        match support for its 2011 sponsor-based grant, King
funding in the U.S. Department of          County was not able to provide enough support for its
Housing and Urban Development’s            two 2011 tenant-based Shelter Plus Care grants. As a
(HUD) Region 10 (Alaska, Idaho,            result, King County could be required to reimburse
Oregon, and Washington) under the          HUD up to nearly $921,000, depriving its Shelter Plus
2011 and 2012 notices of funding           Care clients of needed housing and supportive
availability. Its awards represented       services.
one-third of all Shelter Plus Care funds
awarded in Region 10. Our objective
was to determine whether King County
met the matching requirements for its
Shelter Plus Care grants.

 What We Recommend

We recommend that HUD require King
County to provide supporting
documentation for the nearly $921,000
in unsupported match or repay HUD
from non-Federal funds for any
remaining unmatched grant funds.

                           TABLE OF CONTENTS

Background and Objective                                          3

Results of Audit
      Finding:   King County Did Not Meet Matching Requirements   4

Scope and Methodology                                             6

Internal Controls                                                 7

A.    Schedule of Questioned Costs                                8
B.    Auditee Comments and OIG’s Evaluation                       9

                      BACKGROUND AND OBJECTIVE

Shelter Plus Care Program

The Shelter Plus Care program provides rental assistance alongside a range of supportive
services funded by other sources. The purpose of the Shelter Plus Care program is to provide
permanent housing in connection with supportive services to homeless people with disabilities
and their families. Local Shelter Plus Care programs are typically implemented through
partnerships that include a grantee, one or more nonprofit housing sponsors that own or
coordinate leasing of housing for program participants, and a network of supportive service
providers. In fiscal year 2011, the U.S. Department of Housing and Urban Development (HUD)
awarded more than $522 million to Shelter Plus Care programs across the country.

Shelter Plus Care program rules required grantees to match rental assistance with an equal
amount of supportive services from other sources. These rules did not exclude any source of
funding for the purposes of meeting the supportive services match requirement, except that
Shelter Plus Care grant funds may not have been used for supportive services in any event. To
qualify as match, the supportive service must have addressed the special needs of the client.
Supportive services may have been provided by a variety of entities, including Shelter Plus Care
sponsors, the grantee, or social service agencies in the community. We considered the services
provided by sponsor agencies to be “internal” match, while “external” referred to services
provided by local agencies that were not participating sponsors in the Shelter Plus Care program.

Beginning the year following our audit scope, these program rules were changed to require
grantees to match only 25 percent of the grant amount with supportive services.

King County, WA

King County’s Shelter Plus Care program serves homeless persons with disabilities in
approximately 850 households in more than 680 individual apartments and group homes
throughout King County. King County received three grants under the 2011 Shelter Plus Care
notice of funding availability totaling more than $6 million. These grants included two tenant-
based rental assistance grants and one sponsor-based rental assistance grant.

Plymouth Housing Group administers the County’s Shelter Plus Care program. There were 18
nonprofit organizations serving as sponsors under this program. These sponsors referred clients
to Plymouth Housing for rental assistance and provided case management and other services as
match for the Shelter Plus Care rental assistance funds expended under the grants.

Our objective was to determine whether King County met the matching requirements when
executing its Shelter Plus Care grants funded by the 2011 notice of funding availability.

                                RESULTS OF AUDIT

Finding:      King County Did Not Meet Matching Requirements
King County could not support the required amount of service match for its 2011 tenant-based
Shelter Plus Care grants. This condition occurred because King County relied on summary-level
data instead of detailed documentation. As a result, it could be required to reimburse HUD up to
$920,908, depriving its Shelter Plus Care clients of needed housing and supportive services.

 Unsupported Service Match

              King County could not support the required amount of service match for its 2011
              tenant-based Shelter Plus Care grants. The two tenant-based grants from HUD
              provided almost $5.2 million in rental assistance to King County. According to
              24 CFR (Code of Federal Regulations) 582.110, King County must match this
              rental assistance with an equal amount of supportive services to its clients assisted
              by these grants. King County was able to support only about $4.2 million in
              services provided to its tenant-based rental assistance clients. The following table
              shows how much supported match was provided by the sponsor agencies and lists
              a few examples of the service types observed.

              Provider       Service types                                         Match
              Sponsor        Case management, health care, mental health            $2,623,228
              agencies       services, chemical dependency services
              Other local    Transportation, housing placement, health care,        $1,606,804
              agencies       food, anonymous substance abuse meetings
              Total                                                                 $4,230,032

 Reliance on Summary Data

              King County relied on quarterly, summary-level data from its sponsor agencies.
              Sponsor agencies reported to Plymouth Housing how much service match each
              client received in various categories each quarter. Plymouth Housing would
              combine these numbers into programwide totals and forward this information to
              the County so it could include those figures in its annual progress report to HUD.
              King County could not quantify how much of the reported match was internally
              provided by the sponsor agencies. Consequently, we could not compare what we
              saw in the sponsors’ internal records to any part of the reported figures. By
              relying only on the summary data, King County could not make this comparison

           In addition, King County allowed sponsor agencies to use client certifications as
           support documentation for a wide range of services provided by nonsponsor
           agencies. Sponsor agencies had all clients complete a questionnaire asking how
           many times they received various services during the previous month or quarter.
           These services included medical appointments, support groups, and visits to local
           food banks. Additional documentation for anonymous substance abuse meetings
           and food bank visits was unlikely to exist, but King County and its sponsor
           agencies relied on the memory of clients instead of obtaining and maintaining
           detailed documentation for services that usually include a paper trail, such as
           medical and psychiatric billings.

Possible Repayment of Grant

           King County could be required to reimburse HUD up to nearly $921,000, which
           would deprive its Shelter Plus Care clients of needed housing and supportive
           services. As we were writing this report, King County was gathering support for
           additional match expenses, but this support was not provided during the five
           months we were performing our audit fieldwork.


           We recommend that the Director of Region X’s Office of Community Planning
           and Development require King County to

           1A.    Provide supporting documentation for the $920,908 in unsupported match
                  and repay any remaining unsupported match from non-Federal funds.

                         SCOPE AND METHODOLOGY

Our scope was the term of the 2011 Shelter Plus Care grants, which ran between May 1, 2012,
and April 30, 2013. We performed our onsite audit work between December 2013 and April
2014 at King County Housing and Community Development’s office located at 401 Fifth
Avenue, Suite 510, Seattle, WA; Plymouth Housing Group’s office at 1524 First Avenue,
Seattle, WA; and the sponsor agencies scattered across King County.

To accomplish our objective, we studied applicable agreements and HUD requirements,
interviewed HUD and King County staff, reviewed King County’s Shelter Plus Care
administrative plan, analyzed the service logs for the participating supportive service agencies,
and conducted site visits to the various service agencies to review case files and confirm the
information in the service logs.

Review Methodology

We requested all of the internal match data for services provided by each of the sponsor
agencies, as well as the value of those services. We also requested documentation of external
match services provided by the nonsponsor agencies in the community. We reviewed everything
King County provided to us and used that information to calculate the allowable match. We
excluded some service data from our calculations for a variety of reasons, such as when the
service type was unsupported by clinical records and when activities occurred outside the client’s
period of participation in the Shelter Plus Care program that were not outreach activities.

We relied on computer-generated data to support our audit conclusions; accordingly, we
conducted onsite reviews to strengthen our understanding of the data controls in place. We
performed sufficient tests of the service log data using data analysis techniques, and based on the
assessments and testing, we concluded that the data were sufficiently reliable to support our

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(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.

                              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

                     Policies and procedures implemented to ensure that matching contributions
                      were eligible and supported.

               We assessed the relevant controls 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:

                     King County did not have controls in place to ensure that service match
                      contributed for its 2011 tenant-based Shelter Plus Care grants was
                      supported (finding 1).


Appendix A


                             Recommendation       Unsupported
                                 number               1/
                                   1A                $920,908

1/   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.

Appendix B


Ref to OIG Evaluation                                                                Auditee Comments

                                 Department of Community and Human Services
                             Formal Comments to Shelter Plus Care Draft Audit Report
                                                 June 26, 2014

             King County respectfully disagrees that we were not able to support the required amount of
             service match for our 2011 tenant-based Shelter Plus Care grants. As part of the audit process,
             King County presented over $5.2 million in eligible, supported match to meet this

             Reliance on Summary-Level Data
             Further, we disagree that King County relied solely on quarterly, summary-level data from our
             sponsor agencies to report required match on annual progress reports submitted to HUD. All
             data reported on annual progress reports is generated from detailed source documentation
Comment 1
             consisting of sponsor agencies’ records and individual participant files, then substantiated
             through a robust subrecipient monitoring process. These internal controls have been put in
Comment 2
             place to ensure that matching services, including services provided by sponsor agencies
             (“internal match”) and community-based services provided by other local agencies (“external
             match”), are eligible and properly supported.

             Data collected from each sponsor agency is reported on a per participant per activity basis.
             Documentation for this data is maintained in each of the individual client files. The number of
             activities and related values are then reviewed on a sample basis as part of regular site visits
             with each of the sponsoring agencies completed by Plymouth Housing Group (PHG), the
             agency managing the SPC program under a sub-contract with King County.

             The Use of Client Certifications
             We agree that part of the required match documentation relies on client certifications as
             support for a wide range of services provided by nonsponsor agencies. Case managers and
             their SPC participants report on a regular basis the services that participants receive in the
             community to support their special needs (e.g. AA groups, childcare, medical services), and
             these are recorded on forms that are kept in each participant’s file. These services have a
             standard valuation that is used by all sponsor agencies for externally provided services.

             King County asserts that the current process for the valuation and documentation of these
Comment 3    community resources meets the applicable SPC requirements. In fact, the HUD Office of
             Community Planning and Development monitored King County SPC in 2010, and this
             included a review of supportive service match. Although CPD included a concern regarding

Ref to OIG Evaluation                                                                 Auditee Comments

             the standardization of valuation for these services, their report did not include a concern or
             finding regarding the eligibility or documentation of these services. They noted that:

                      As part of the case management, the sponsors also refer the program participants to
                      community resources for other needed services. The sponsors submit specific reports
                      to PHG on the supportive services provided to the program participants. These
                      reports are used for providing the supportive services match information in the
                      APRs. PHG conducts periodic site reviews to verify the supportive services match
                      amounts reported by the sponsors.

                      From our review, we determined that the participants are receiving appropriate
                      supportive services, and that the overall value of those services at least equals the
                      amount of SPC funding used for rental assistance under each grant.

Comment 4    It is the exclusion of these services which results in the unsupported match outlined in this
             report. Since King County relies on its partnership with CPD to ensure the continued
             compliance of this critical program and their most recent review did not indicate the process
             being inadequate or non-compliant, we respectfully request that the value of services
Comment 5
             substantiated through client certifications be counted towards our match requirement, thereby
             clearing this finding.

                         OIG Evaluation of Auditee Comments

Comment 1   We disagree that the data in the summary reports are backed by detailed source
            documentation. The summary reports include the client-reported match amounts
            discussed below in Comment 3, which are based on the client’s memory and not
            on detailed source documentation.

            To demonstrate this, the following is a portion of a monthly client questionnaire
            used by one of the sponsor agencies as support for more than $27,000 in childcare

            Figure 1   Example of monthly match questionnaire completed by a Shelter Plus Care client

            King County’s Shelter Plus Care program valued therapeutic childcare at $60 per
            child per day. For the year, the client reported a total of 453 child-days (42 of
            these occurred in the month shown in the example above) worth $27,180. The
            sponsor agency used these monthly questionnaires as support instead of
            maintaining source documents from the childcare provider. The level of
            documentation shown above would not be sufficient support for costs borne by a
            Federal grant, and, as such, would not be considered verifiable documentation of
            service match.

Comment 2   We disagree that King County’s monitoring procedures were an adequate control.
            The effectiveness of monitoring is limited by the reviewer’s understanding of
            program rules and requirements. King County and Plymouth Housing Group
            personnel believed that client questionnaires were sufficient support to document
            service match. If the reviewer does not know that this documentation is
            insufficient, then monitoring becomes a less effective control.

Comment 3   We disagree that the client-reported services were properly documented. Federal
            cost principles at 2 CFR 225, appendix B, indicate that match services and
            expenses must be supported in the same manner as those claimed as allowable
            costs under Federal awards, and to be allowable under Federal awards, costs must
            be adequately documented. [see 2 CFR 225, appendix A(C)(1)(j)] Therefore,
            HUD should not pay out reimbursement funds for products or services based
            solely on a client’s memory. Instead, source documentation from the product or
            service provider would be necessary to prove the existence of the transaction and
            the value of it.

Comment 3     As we mention in the Results of Audit section, many nonsponsor agencies could
(continued)   provide clients with physical documentation of their services. For example, a
              paper trail of invoices and insurance billing information exists when visiting a
              doctor’s office. Similarly, a childcare provider could also provide documentation
              as discussed in Comment 1. Absent documents like these, King County could at
              least require clients to obtain a signed note from the service provider as proof of
              their visit. We understand that group substance abuse meetings and food bank
              visits tend to be anonymous, so we accepted the client-reported figures for these
              services. Other services, however, are not anonymous and require verifiable
              support to be considered match.

Comment 4     We do not know how much unsupported match is due to the exclusion of client-
              reported services. For the reasons noted above, we did not count the client-
              reported data provided by King County. Our methodology involved looking at all
              the records provided by King County and its sponsor agencies and adding all of
              the match that was adequately supported. It is possible that the client-reported
              services we excluded made up the difference between the required match and
              what we counted, but we cannot confirm that based on the work we performed.

Comment 5     The absence of an issue from a monitoring report does not indicate that HUD
              considers a practice to be compliant. The CPD report mentions the use of
              community resources, which includes services supported by invoices. Some of
              the external services we reviewed, such as invoices for kidney dialysis, were
              adequately documented. Without explicit permission from HUD for the use of
              client-reported services, we hold the auditee responsible for its actions.