Finding Text
United States Department of the Treasury
Reference Number: 2023-008
Program: 21.026 COVID-19 Homeowner Assistance Fund Program
Federal Award Number: HAF0034
Type of Finding: Noncompliance; Significant Deficiency in Internal Controls over Compliance
Compliance Requirement: Eligibility; Earmarking; Reporting
Condition: Audit testing of a statistical sample of 41 cases processed during the year ended June 30, 2023, revealed the following: Applicant income was calculated incorrectly for five cases sampled. Of these five cases, two applicants received more months of Future Payment Assistance than allowed by DSHA’s policy, resulting in overpayments totaling $9,799. One applicant received $51,341 in assistance, an overpayment of $1,341. Analysis of assistance for the period of July 1, 2022 through November 12, 2022, identified two homeowners that received in excess of $30,000 of mortgage assistance resulting in overpayments of assistance totaling $3,136. Context: The homeowner income verification process supports the following program functions: Determination of allowable homeowner eligibility for assistance. Determination of allowable Future Payment Assistance (starting in November 2022). Required reporting of assistance by income level. Compliance with the HAF Program Earmarking requirements. Criteria: Eligibility Criteria - DSHA submitted a HAF Grantee Plan to U.S. Department of the Treasury on May 31, 2022. DSHA’s HAF Grantee Plan specifies the following process for the determination of homeowner income: Eligibility Criteria - Continued - DSHA intends to accept written attestations from DE-HAF applicants to ascertain eligibility for the programs (100% of AMI or 150% of AMI depending on the program). DSHA does not anticipate allowing the use of geographic area or other criteria not linked directly to the homeowner’s individual determinants. In addition, while eligibility will be determined with a pass/fail income threshold, later in the application review process a more specific income verification process will be required to establish the amount of monthly mortgage obligation that will be affordable to the homeowner. This income verification process will need to rely on substantiated documentation. This process is consistent with United States Department of the Treasury Homeowner Assistance Fund Guidance issued on June 12, 2023. DSHA’s HAF program began to provide Future Payment Assistance on November 13, 2022 as follows: Applicants between 31.01% - 50% HDTI can be eligible for ‘Reinstatement’ plus up to 3 months of mortgage payments. Applicants with ‘No Income’ or a HDTI 50.01% and above can be eligible for ‘Reinstatement’ plus up to 6 months of mortgage payments. **If in addition to the assistance, applicants will be referred to a HUD-approved Housing Counseling Agency to assist with an action plan beyond the assistance. Earmarking Criteria - The United States Department of the Treasury issued Homeowner Assistance Fund Guidance June 12, 2023, requires that at least 60% of amounts made available to each HAF participant to be used for qualified expenses that assist homeowners having incomes equal to or less than 100% of the area median income or equal to or less than 100% of the median income for the United States, whichever is greater. Any amount not made available to homeowners that meet this income-targeting requirement must be prioritized for assistance to socially disadvantaged individuals, with funds remaining after such prioritization being made available for other eligible homeowners. Reporting Criteria - Homeowner Assistance Fund quarterly reporting requires the submission of Application Data disaggregated by Area Median Income. Maximum Allowed Assistance - DSHA’s program design included maximum assistance as follows: Period: July 1, 2022 - November 12, 2022. Assistance Limitations: Mortgage $30,000; Non-Mortgage $10,000; Total $40,000. Period: November 13, 2022 – June 30,2023. Assistance Limitations: Mortgage N/A; Non-Mortgage N/A; Total $50,000. Questioned Costs: $14,276 of overpayments. Effect: Federal program expenditures for assistance were overpaid. Applicant income determined by assistance calculation process was used for compliance with earmarking requirements and to support required reporting by applicant income level resulting in potential errors in reports submitted to the U.S. Treasury. Cause: Homeowner assistance application processing did not correctly determine verified homeowner income. Recommendation: We recommend DSHA enhance its policies and procedures for processing HAF assistance applications to ensure accurate calculation of verified homeowner income.