2022-026 Oregon Housing and Community Services Department Implement program monitoring over client assistance payments to ensure compliance Federal Awarding Agency: U.S. Department of the Treasury Assistance Listing Number and Name: 21.023 Emergency Rental Assistance Program (COVID-19) Federal Aw...
2022-026 Oregon Housing and Community Services Department Implement program monitoring over client assistance payments to ensure compliance Federal Awarding Agency: U.S. Department of the Treasury Assistance Listing Number and Name: 21.023 Emergency Rental Assistance Program (COVID-19) Federal Award Numbers and Years: ERA 1, 2021; ERA 2, 2021 (COVID-19) Compliance Requirement: Activities Allowed or Unallowed; Eligibility Type of Finding: Material Weakness; Material Noncompliance Prior Year Finding: N/A Questioned Costs: $21,624 (known); $11,067,350 (likely) (COVID-19) Criteria: 2 CFR 200.332(d); 2 CFR 200.501(g) Department management is responsible for monitoring the activities of subrecipients to ensure subawards are used for authorized purposes and are compliant with federal requirements. Additionally, department management is responsible for ensuring compliance when a contractor is responsible for program compliance or the contractor?s records must be reviewed to determine program compliance. The department provided $140 million and $46 million of phase one program funds to community action agencies (subrecipients) and a third-party vendor (contractor) to provide program delivery, respectively; and $132 million phase two program funds to only the contractor. Program delivery included determining client eligibility and making payments for direct client assistance for rent, utilities, internet, and other housing related costs. During implementation of the program, the department provided program manuals to the subrecipients and contractor. Due to the department?s limited staff, they focused on updating policies and procedures to address systemic issues identified; however, if a particularly challenging application required the department?s review, they were available to provide direct assistance. The department did not implement any predefined, systemic program monitoring of the subrecipients or contractor to ensure direct client assistance payments were paid to only eligible clients for only allowable and supported amounts. Therefore, auditors performed additional procedures at the subrecipient and contractor level to determine whether direct client assistance payments were paid to eligible clients for allowable activities. We tested a total of 62 randomly selected direct client assistance payments at 16 subrecipients totaling $183,515, and found the following: One subrecipient did not respond to audit requests for documentation, resulting in an inability to test one transaction in the amount of $360. One subrecipient did not obtain documentation to support that there was a lease agreement in place, resulting in questioned costs of $5,775. When extrapolated to the total population, these errors result in over $2.3 million in likely questioned costs. We tested 61 randomly selected contractor direct client assistance payments totaling $374,274, and found the following: One payment where an incorrect landlord was paid in the amount of $2,700. Attempts to recover the funds have been unsuccessful as of the date of the finding. Two payments where the rental amount was doubled, resulting in overpayments totaling $5,910. Seven payments where amounts already paid were not accurately reflected in the calculation of assistance provided, resulting in overpayments totaling $4,191. Three payments where amounts did not agree to supporting documentation, resulting in overpayments of $2,181. Three payments where there was insufficient documentation for amounts paid, resulting in overpayments of $432. One payment where costs were paid for the same household on alternate applications, resulting in an overpayment of $73. When extrapolated to the total population, these errors result in over $8.7 million in likely questioned costs. We recommend department management implement predefined, systemic program monitoring to ensure the subrecipients and contractor are administering program funds in accordance with program requirements. MANAGEMENT RESPONSE: We agree with this recommendation. OHCS agrees and had we not been operating during a global health pandemic and had we had adequate time and staffing, we would have addressed this issue more carefully as we have in previous years. However, given that this was a new program that lacked sufficient time and resources to design, launch and operate to meet the pressing needs of Oregonians facing eviction and homelessness, the work required unprecedented action that sometimes fell short of our usual standards for client assistance payment compliance. OHCS will use these lessons moving forward should we operate future emergency programs to move towards best practices. Corrective action plan: Lack of staff significantly limited our ability to perform the necessary monitoring. An additional contractor was brought on to monitor the work of our vendor in February of 2022. The contractor continued to provide program compliance support to OHCS through the end of January 2023. This contractor was also engaged in other projects and activities as needed during their contract term. The largest workload was investigating payments or cases that were identified as potentially non-compliant. All these cases were researched extensively, and findings were identified, and corrective action and collection activities were started if needed. Out of concern for the lack of administrative dollars associated with ERA staff knew an internal compliance effort would also be required. Since the summer of 2022 OHCS staff have been conducting internal random samples of applications and payments in addition to the work of our hired contractor. Additionally, this spring the program compliance team has engaged in a formalized review process focused on specific agencies administering ERA funds. Anticipated Completion Date: December 31, 2023 Contact: Jill Smith, Director of Housing Stabilization Division