Housing Assistance Programs: Administration, Eligibility, and Unintended Consequences 1
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More Than Just HUD Money HUD FCC DOE Housing Assistance ARRA CDBG Katrina and Rita
Various Programs Weatherization Public Housing Telephone Housing Assistance Rental Assistance Tax Credits Single-Family Loans
Sarah Aurich Jacob Wager Michelle Downie 5
Administration Eligibility Unintended Consequence Public Housing Rental Assistance Weatherization Housing Assistance Single- Family Loans Telephone Tax Credits
Colorado Office of the State Auditor (OSA) Legislative Audit Manager 16 Years of Experience Sarah Aurich CPA, BS Accounting University of Colorado at Denver Manages OSA staff as well as contract auditors Audited wide range of topics Reputation for knowledge of standards and understanding complex issues and making positive change in government
Weatherization Assistance Program Performance Audit Sarah Aurich Legislative Audit Manager Colorado Office of the State Auditor
OVERVIEW The Weatherization Assistance Program was created under Title IV of the federal Energy Conservation and Production Act of 1976. o Program Goal: Improve the energy efficiency of homes through installing insulation, sealing leaks around doors and windows, and modernizing heating equipment. o Program Administration: Overseen by the Governor s Energy Office in Colorado, which grants funds to local entities (service provider agencies) that determine eligibility for and provide the weatherization services. 9
OVERVIEW o Program Eligibility: 200 percent of federal poverty level, or eligibility for another assistance program o Program Funding: 100 percent federally funded One of the federal programs appropriated additional funding through the American Recovery and Reinvestment Act of 2009 (Recovery Act), including: Nationwide: $5 billion over a three-year period. Colorado: $79.5 million in Recovery Act funding for the Weatherization Program between June 2009 and March 2012. Average annual spending increased from about $11.5 million to $32.2 million per year. 10
AUDIT SCOPE AND METHODOLOGY Audit released in October 2010 Audit reviewed the following areas: o Compliance with federal and state laws o Compliance with federal grant requirements o Program activities and internal controls o Program Accountability o Financial Accountability 11
AUDIT OBJECTIVES Determine if service provider grants were awarded competitively and in accordance with federal requirements. Review controls over payments for services, and review compliance with grant requirements. Review program recipients eligibility for services and service provider s prioritization of service need. 12
AUDIT OBJECTIVES Determine if service providers are monitored to ensure cost effective service provision, quality of services, and compliance with federal grant requirements. Perform Single Audit compliance audit. 13
AUDIT FINDINGS We had audit findings related to two broad areas of the Governor s Energy Office operations: o Program Accountability o Financial Accountability 14
AUDIT FINDINGS PROGRAM ACCOUNTABILITY Grant awards to service provider agencies were not made in accordance with federal guidelines. o o Did not obtain public input prior to selecting service provider. Did not adequately document the bid evaluation and selection process. Recommendation: Make award decisions with complete information and keep accurate documentation to support award decisions. 15
AUDIT FINDINGS PROGRAM ACCOUNTABILITY Service providers do not prioritize services for neediest individuals. Recommendation: Ensure services are provided to the individuals most in need by requiring service provider agencies to submit an annual prioritization plan, and monitoring service provider implementation of that plan. 16
AUDIT FINDINGS PROGRAM ACCOUNTABILITY Adequate controls are not in place to ensure the quality of services. The same person performing the work often is also inspecting that work. Service provider agencies helped the State to select the sample of homes that the Energy Office reviews for quality assurance. Recommendation: Prohibit the same person at the service provider agency from both performing and inspecting the same work. Additionally, the State should establish a risk-based approach for selecting homes to review for quality assurance. 17
AUDIT FINDINGS PROGRAM ACCOUNTABILITY Providers may not be able to provide enough services to use all Recovery Act funds prior to the funds expiring. Recommendation: Continue to monitor expenditure for Recovery Act funds for weatherizing homes and if it does not appear the funding will be fully utilized, work with local agencies to explore alternatives for increasing productivity and maximizing the use of funds. 18
AUDIT FINDINGS FINANCIAL ACCOUNTABILITY Poor cash management practices: o Giving unnecessary cash advances and failing to recoup advances until the end of the contract period. o Not having appropriate controls over cash received for landlord contributions. Recommendation: o Require local agencies to apply for cash advances as needed, and recoup advances monthly. o Ensure appropriate controls are in place over assessing and collecting landlord contributions. 19
AUDIT FINDINGS FINANCIAL ACCOUNTABILITY Errors in quarterly financial status reports submitted to the federal government. o o o o Did not reconcile federal status reports to state s financial accounting system Underreported expenditures Improperly recorded cash advances Inappropriate authorization of reports. Recommendation: Improve controls over the preparation and submission of quarterly status reports. 20
AUDIT FINDINGS FINANCIAL ACCOUNTABILITY Improper and inconsistent classification of administrative and operating expenses. Recommendation: Develop guidance that defines the costs that should be allocated to administrative versus those that should be allocated to program operations. 21
AUDIT FINDINGS FINANCIAL ACCOUNTABILITY CFDA number, program title, and applicable compliance requirements were not included on grant award contracts with service provider agencies. Recommendation: Comply with federal regulation by adding CFDA numbers, program title, and applicable compliance requirements on contracts with service providers agencies. 22
GOVERNOR S ENERGY OFFICE RESPONSE The Governor s Energy Office agreed to implement all 10 audit report recommendations. As of July 2011, the Governor s Energy Office reports that it has either implemented or partially implemented nearly all of the audit recommendations. As of June 30, 2011, the Governor s Energy Office has spent $43 million of the $80 million (54%) awarded to Colorado for the Weatherization Program. All funds must be spent by March 2012. 23
Weatherization Administration Public Housing Telephone Eligibility Unintended Consequence Rental Assistance Housing Assistance Tax Credits Single- Family Loans
Jacob Wager Colorado Office of the State Auditor (OSA) Legislative Audit Supervisor BA Political Science fro Colorado State University and Master of Public Policy from University of Denver Prior Colorado General Assembly as a Legislative Aid and Policy Analyst for the House Republicans Audited wide range of topic
Low-Income Telephone Assistance Program (LITAP) Performance Audit Jacob Wager Legislative Audit Supervisor Colorado Office of the State Auditor
LITAP PERFORMANCE AUDIT LITAP Overview Provides a monthly subsidy to low-income individuals to offset basic phone service Joint state and federal program or federal default state Colorado s LITAP o Administered by the Public Utilities Commission and Department of Human Services o Eligibility criteria 27
LITAP PERFORMANCE AUDIT Background of Audit Department of Human Services performs recertification of recipients Newspaper articles 28
LITAP PERFORMANCE AUDIT Monitoring Program Effectiveness Lack of monitoring of program effectiveness by the Public Utilities Commission o Lack of data, goals, and performance measures to monitor effectiveness o Only 5 percent of qualifying households participated in LITAP, while 96 percent of qualifying households had access to a telephone Recommendation: Establish goals and measures to evaluate program effectiveness 29
LITAP PERFORMANCE AUDIT Subsidy Amount Colorado portion of subsidy more than necessary to receive full federal subsidy o Public Utilities Commission had not evaluated the subsidy amount in 10 years o Total subsidy ($16.50) covered 100 percent of basic telephone service in Colorado Recommendation: Evaluate the subsidy amount and make necessary changes 30
LITAP PERFORMANCE AUDIT Program Outreach Limited outreach to potentially eligible individuals o Only 5 percent of eligible individuals participate in the program Recommendation: Develop a formal outreach plan and assess the effectiveness of outreach efforts 31
LITAP PERFORMANCE AUDIT Eligibility Determination Department of Human Services process did not ensure applicants met eligibility criteria o Allowed phone subscriber to be different than the eligible individual o Excluded individuals who qualified under statutory criteria Recommendation: Assess and seek change in eligibility statute as necessary and implement changes 32
LITAP PERFORMANCE AUDIT Eligibility Recertification Recertification process did not ensure only eligible individuals received subsidy o 49 percent of total LITAP participants were potentially ineligible o $2.3 million paid to ineligible recipients annually Recommendation: Develop a regular, standardized recertification process and verify ineligible individuals are removed 33
LITAP PERFORMANCE AUDIT Verification of Fee Collections and Subsidies Insufficient controls to verify phone carriers collect fees, pay subsidies to eligible individuals, and remit excess funds to the State o Relied on historical data and trends Recommendation: Verify numbers reported by phone carriers with Department of Human Services data and sample phone carriers to review documentation 34
LITAP PERFORMANCE AUDIT Access Line Fee Public Utilities Commission did not monitor program changes to ensure fee on telephone service was appropriate o Collected more than necessary in fees and exceeded statutory limits on reserves Recommendation: Actively monitor access line fee relative to fund balance, number of LITAP participants, and number of phone lines paying the fee 35
LITAP PERFORMANCE AUDIT Future of LITAP Overall, significant concerns and trends, lack of oversight and management, and insufficient resources led us to question the program Recommendation: The Public Utilities Commission and Department of Human Services work with the legislature to determine whether to continue or eliminate LITAP 36
LITAP PERFORMANCE AUDIT Implementation of Audit Recommendations Legislative Audit Committee carried legislation revising eligibility criteria o Passed through the legislature and signed by the Governor Legislator carried a separate bill eliminating the program o Defeated in committee 37
LITAP PERFORMANCE AUDIT Implementation of Audit Recommendations Department of Human Services revised its eligibility determination and recertification processes Public Utilities Commission agreed with recommendations but with conditions No additional significant changes to oversight or administration of program 38
Weatherization Administration Public Housing Telephone Eligibility Unintended Consequences Rental Assistance Housing Assistance Tax Credits Single- Family Loans
Texas Sunset advisory Commission Policy Analyst Michelle Downie Master of Arts in Government from the University of Texas at Austin and Bachelors from Johns Hopkins University Prior worked for House Committee on Corrections during period of major criminal justice reform in Texas Worked on variety of reviews
SUNSET REVIEW OF THE TEXAS DEPARTMENT OF HOUSING A ND COMMUNITY A FFAIRS Community Input in Low Income Housing Tax Credit Allocation: Unintended Consequences of a Well-Intentioned Law
Overview What is Sunset? 42 Low Income Housing Tax Credits The problem staff found Staff recommendations Lessons learned
What is Sunset? 43 Regularly assesses Texas need for an agency and its functions Increases accountability for how and why agencies spend taxpayer dollars Provides a structure to make government smaller and smarter Offers an opportunity for public input into the mission and future of a state agency Texas Sunset Advisory Commission
Who Is Sunset? 44 12-Member Commission 5 Senators & 1 Public Member 4-year terms 2-year terms 5 Representatives & 1 Public Member Appointed by the Lieutenant Governor Appointed by the Speaker of the House Staff of 29 supports the Sunset Commission members Texas Sunset Advisory Commission
How Does Sunset Work? Legislature sets review schedule and agencies Sunset date Staff evaluates agencies under review using criteria outlined in the Texas Sunset Act Staff issues report on each agency with recommendations Sunset hearings offer a forum for public input Sunset Commission makes decisions Sunset bill must pass for agency to continue 45 Texas Sunset Advisory Commission
Low Income Housing Tax Credits U.S. Treasury Department allocates federal tax credits to each state to encourage private investment in affordable housing 46 Texas Department of Housing and Community Affairs awards credits for proposed affordable housing developments statewide In return for a 10-year, $ for $ tax credit, property owners restrict rents on a portion of units for low-income families and persons Texas Sunset Advisory Commission
Tax Credits by the Numbers Largest source of multifamily affordable housing in most states including Texas 47 Texas gets an allocation of about $51 million in tax credits annually Produces about 10,000 units of affordable housing per year, resulting in 11,000 jobs and $334 million in tax revenue Texas Sunset Advisory Commission
Statute on Tax Credit Applicant Scoring 48 Priority Criterion Max Points 1 Financial feasibility of the development 28 2 Quantifiable community participation based on letters from neighborhood organizations 3 Income levels of tenants 22 4 Size and quality of units 20 5 Commitment of local funding 18 6 Level of community support based on letters from state legislators 14 7 Rent levels of units 12 8 Cost of development by square foot 10 9 Services to be provided to tenants 8 10 Whether the development is located in a declared disaster area 7 11-30 20 criteria added by the Department (scores range from 1 to 6 points each) 77 24 Total Maximum Points 240 Texas Sunset Advisory Commission
Unintended Consequences Neighborhood organization = what exactly? Different all over the state May not represent views of broader community Bureaucratic nightmare High point value = highly contested Scoring takes 25% of staff s time spent on entire program 49
Comparison with Other States Common ways of quantifying local support: 50 Commitment of local funding Letters of support from locally elected officials Local governing body resolutions supporting planned affordable housing Texas Sunset Advisory Commission
A Workable Solution for Texas Voted resolutions from city councils or county commissioners courts take the place of letters from neighborhood organizations 51 Support letters from neighborhood groups become optional, not mandatory, scoring item Texas Sunset Advisory Commission
Lessons Learned 52 A well-intentioned law, even when it has negative consequences, is often difficult to repeal The best solution was inspired by other states approaches but customized to fit Texas Creative fixes can unify stakeholders Texas Sunset Advisory Commission
Questions? Visit Sunset on the Web: www.sunset.state.tx.us For additional information on the Sunset Review of the Texas Department of Housing and Community Affairs contact: Michelle Downie 512.463.1300 michelle.downie@sunset.state.tx.us 53