Desk Review of Emergency Rental Assistance Payments, City of Houston and Harris County (OIG-CA-24-029)

Summary

A September 26, 2024 memorandum from Deborah L. Harker, Assistant Inspector General for Audit, to Jessica Milano of the Office of Capital Access reports a desk review of Emergency Rental Assistance payments made by the City of Houston, TX and Harris County, TX. The review identified 21,123 potential duplicative assistance payments and analyzed payments to 50 beneficiaries who received $456,150. It found 21 beneficiaries with $110,928 in overpayments, of which $98,242 is questioned as unallowable costs. The memorandum makes three recommendations to Office of Capital Access management.

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                                           DEPARTMENT OF THE TREASURY
                                                  W ASHINGTON, D.C. 20220




     OFFICE OF
INSPECTOR GENERAL




                                                  September 26, 2024




            MEMORANDUM FOR JESSICA MILANO
                           CHIEF PROGRAM OFFICER, OFFICE OF CAPITAL ACCESS


            FROM:                       Deborah L. Harker /s/
                                        Assistant Inspector General for Audit

            SUBJECT:            Desk Review of Emergency Rental Assistance Payments Made by
                                the City of Houston, TX and Harris County, TX (OIG-CA-24-029)

            This report notifies you of issues found during our desk review 1 of assistance
            payments made by the City of Houston, TX and Harris County, TX, two grantees
            with overlapping jurisdictions, and their Emergency Rental Assistance
            Program (ERA) 2 authorized under the Consolidated Appropriations Act, 2021 (the
            Act). 3 Section 501 of the Act established the first Emergency Rental Assistance
            Program (ERA1) and appropriated $25 billion to the Department of the
            Treasury (Treasury) to distribute the funds to eligible grantees. 4 Treasury created
            the Office of Capital Access (OCA), formerly the Office of Recovery Programs, to
            oversee the ERA1 Program and related compliance activities, in accordance with
            the Act. As reported on OCA’s webpage, Treasury distributed $24.98 billion of the
            $25 billion appropriated to eligible ERA1 grantees by February 2021. 5 All grantees
            were to use ERA1 funds to provide financial assistance and housing stability
            services to, or on behalf of, eligible renter households, referred to as beneficiaries,
            1
                The purpose of desk reviews is to evaluate selected grantee’s documentation supporting the uses
                of Emergency Rental Assistance (ERA1) funds and assess the risk of unallowable use of funds.
            2
                Houston and Harris County jointly ran their Emergency Rental Assistance Program; however, the
                grantees maintained separate funding and reporting functions.
            3
                P.L. 116-260, Division N, Title V, Subtitle A, Section 501 (December 27, 2020)
            4
                ERA1 eligible grantees include: states, including the District of Columbia; units of local
                government with more than 200,000 residents; five U.S. territories (the Commonwealth of
                Puerto Rico, the U.S. Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands,
                and American Samoa); and Indian tribes, defined to include Alaska native corporations and the
                Department of Hawaiian Home Lands, or the tribally designated housing entity of an Indian tribe,
                as applicable.
            5
                Department of the Treasury, “ERA Allocations and Payments,” https://home.treasury.gov/policy-
                issues/coronavirus/assistance-for-state-local-and-tribal-governments/emergency-rental-assistance-
                program/allocations-and-payments (accessed October 26, 2023)
who experienced a reduction in household income, incurred significant costs, or
experienced other financial hardship due to the impact of the Coronavirus Disease
2019 pandemic. Eligible beneficiaries include individual households, landlords,
utility providers, or vendors for other related housing expenses to whom grantees
pay ERA funds directly or indirectly. 6, 7 Treasury’s guidance does not allow ERA
funds from more than one grantee to cover the same period of rent, utilities, rental
arrears, or utility arrears, and when this occurs, it is referred to as duplicative
assistance. 8 Treasury encourages grantees with overlapping or contiguous
jurisdictions to coordinate and participate in joint administrative solutions to meet
the non-duplication requirement. 9 Treasury provides guidance on corrective actions
for grantees that discover duplicative assistance payments in its Frequently Asked
Questions.

Section 501 of the Act assigned our office the responsibility to conduct monitoring
and oversight of the receipt, disbursement, and use of ERA1 funds and the
authority to recoup funds used in violation of the Act and Treasury’s guidance.
Based on numerous complaints received through our Office of Investigations
hotline, we initiated desk reviews of Houston’s and Harris County’s (collectively,
the grantees) ERA1 Program. After the start of our desk reviews, we received a
request from the U.S. Government Accountability Office to review potential
duplicative assistance involving these grantees. This report focuses on potential
duplicative assistance, a specific subject within the scope of our overall desk
reviews of Houston and Harris County.

Summary Results

We identified 21,123 potential duplicative assistance payments related to
overlapping grantee jurisdictions for Houston and Harris County from Treasury’s
ERA1 database as of December 31, 2021. The grantees submitted participant
household payment data files (PHPDF) which included 148,428 transactions
totaling $134.9 million through December 31, 2021. We then compiled
6
    According to Title V, Subtitle A, Section 501 of the Consolidated Appropriations Act, 2021, if a
    landlord submits an application for rental assistance on behalf of their tenant, the landlord must
    obtain the tenant’s signature on the application; landlords can then receive funds directly from
    the grantee on behalf of their tenant.
7   Before a grantee can make a payment directly to a tenant, the grantee must make reasonable
    efforts to obtain the cooperation of landlords and utility providers to accept payments for ERA1.
    Department of the Treasury, “Emergency Rental Assistance Frequently Asked Questions”
    (May 7, 2021), https://home.treasury.gov/system/files/136/FAQs-05102023.pdf (accessed
    January 2, 2024) See question 12.
8
    Department of the Treasury, “Emergency Rental Assistance Frequently Asked Questions”
    (May 10, 2023), https://home.treasury.gov/system/files/136/FAQs-05102023.pdf (accessed
    January 2, 2024) See question 45.
9
    Department of the Treasury, “Emergency Rental Assistance Frequently Asked Questions”
    (May 10, 2023), https://home.treasury.gov/system/files/136/FAQs-05102023.pdf (accessed
    January 2, 2024) See questions 33 and 15.

                                                   2
1,797 matching address groupings with payments totaling approximately
$20 million within the data by combining address street number with street
name.10 We selected 29 address groupings for review based on the largest dollar
amounts paid. The selected address groupings received approximately $1.4 million
in household assistance collectively from the two grantees. From these 29 address
groupings, we then non-statistically selected and analyzed payments to
50 beneficiaries who received $456,150 in assistance payments from Houston
and/or Harris County.

Based on the non-statistical sample reviewed, we found 21 beneficiaries who
received $110,928 in overpayments. Of the $110,928 in overpayments, we are
questioning $98,242 as unallowable costs. We will pursue recoupment of these
unallowable costs from the grantees per our authority under Section 501 of the Act
unless the grantees can demonstrate with documentation that they have otherwise
resolved their responsibility for the ineligible expenses in accordance with Treasury
guidance. The grantees recharacterized11 the remaining $12,686 of overpayments
to other ERA1 eligible expenses or to the second ERA program, ERA2, 12 as
permitted by Treasury. The transactions we reviewed were a small portion of
approximately $20 million in payments identified as potential duplicative assistance
in the ERA1 program paid as of December 31, 2021. We note that there are likely
additional duplicate payments in the ERA1 and ERA2 programs in addition to the
small sample we selected for detailed review. The need for further review of the
entire universe of potential duplicate transactions is addressed in our
recommendations.

Although the $110,928 in overpayments were largely a result of duplicative
assistance payments, we also found overpayments due to assistance exceeding


10
   We used address groupings in our analysis because the grantee-submitted data sometimes
   excluded a necessary apartment number. For example, if there was an apartment complex at
   123 Main St, some entries related to that apartment complex only listed an address of 123 Main
   St while others included an apartment number. We grouped entries that excluded an apartment
   number together for our analysis and requested the underlying detail to select beneficiaries for
   review.
11
   According to Department of the Treasury, “Emergency Rental Assistance Frequently Asked
   Questions” (May 10, 2023), https://home.treasury.gov/system/files/136/FAQs-05102023.pdf
   (accessed October 26, 2023), question 45, there may be cases in which a grantee discovers that
   a household has received ERA assistance from multiple grantees intended to cover the same
   period of rent, utilities, rental arrears, or utility arrears. In such cases, assuming certain
   conditions are met, the grantee may decline to recover its payment and instead recharacterize it
   as assistance covering a different period of eligible rental or utility expenses.
12
   The American Rescue Plan Act of 2021 extended the monthly limit of total ERA that a
   beneficiary may receive from 15 months under ERA1 (see footnote 12) to no longer than
   18 months of combined ERA1 and ERA2 funding. 117th Congress, HR 1319, March 11, 2022,
   https://home.treasury.gov/system/files/136/era-2-program-statute-section-3201.pdf (accessed
   January 29, 2024)

                                                3
15 months, 13 payments for ineligible expenses to beneficiaries who did not provide
adequate proof of identification or proof of residence in accordance with grantees’
program policy, and a payment error. In addition, we identified a payment on behalf
of a beneficiary where the landlord and tenant may have had a familial relationship.

We are making three recommendations in this report. We recommend that OCA
management:

     1. Require Houston’s and Harris County’s management to take appropriate and
        timely corrective actions to (a) determine if payments related to the total
        population of 1,797 ERA1 household address groupings with potential
        duplicative assistance totaling approximately $20 million as of December 31,
        2021, from which we identified $98,242 in questioned costs from a sample,
        were made to eligible beneficiaries in the correct amounts, (b) identify
        whether additional ERA1 ineligible and duplicate payments occurred after
        December 31, 2021 and, if applicable, provide the amount of such
        payments, and (c) identify whether ineligible and duplicate payments were
        made during the entire ERA2 award period of performance and, if applicable,
        provide the amount of such payments. OCA should require corrected ERA1
        and ERA2 reports from Houston and Harris County based on the results of
        the review. For any ERA1 payments determined to be ineligible or
        duplicative, OCA should ensure that the grantees return funds to Treasury.
        For any ERA2 payments determined to be ineligible or duplicative, OCA
        should ensure that the grantees return funds to Treasury or reimburse the
        grantees’ ERA2 programs with non-Federal funds, as appropriate.

     2. Develop, document, and communicate to our office OCA’s processes to
        monitor grantees for overpayments and duplicate payments, track grantees’
        recharacterizations, and ensure data quality for household addresses
        provided by grantees.

     3. Provide technical advice and counsel to all grantees and our office about the
        use of funds in circumstances where a landlord and a tenant are related.

All work completed for this report complies with the Council of the Inspectors
General on Integrity and Efficiency’s Quality Standards for Federal Offices of
Inspectors General, which requires that the work adheres to the professional




13
     Title V, Subtitle A, Section 501 of the Consolidated Appropriations Act, 2021 requires that
     grantees are not to provide assistance for longer than 12 months unless the funds are necessary
     to ensure the housing stability for a household, in which case the grantee may provide assistance
     for 3 additional months (15 months in total) subject to the availability of funds.

                                                   4
standards of independence, due professional care, and quality assurance to ensure
the accuracy of the information presented. 14

Selection Methodology and Review Approach

We identified 21,123 potential duplicative assistance payments related to
overlapping grantee jurisdictions for Houston and Harris County from Treasury’s
ERA1 database. The grantees submitted PHPDF which included 148,428
transactions totaling $134.9 million through December 31, 2021. We then
compiled 1,797 matching address groupings with payments totaling approximately
$20 million within the data by combining address street number with street name.
We selected 29 address groupings for review based on the largest dollar amounts
paid. The selected address groupings received approximately $1.4 million in
household assistance collectively from the two grantees. We requested the
underlying household payment detail and documentation from the grantees to
examine the selected beneficiary information for overpayments.

We analyzed the grantee-provided information for the 29 address groupings, from
which we non-statistically selected 50 beneficiaries that received $456,150 in
assistance payments for review. We selected beneficiaries based on our
observations including, but not limited to, beneficiaries who may have received
duplicative assistance, household addresses with multiple associated names, or
multiple payments to beneficiaries with the same or similar surnames. For the
selected beneficiaries, we requested relevant applications and all documentation
that the grantees used to approve assistance. We reviewed documentation
supporting payments made to, or on behalf of, the beneficiaries.

Our testing of the payments to the 50 beneficiaries included:

     •   Comparing the approved and paid amounts for each beneficiary and
         investigating any differences.
     •   Comparing the supporting documentation to the payment file address. 15
     •   Identifying duplicate payments to a household address (duplicative
         assistance).
     •   Determining whether a beneficiary received more than 15 months of ERA1
         assistance for a household address.
     •   Researching the grantee data to identify additional payments to the same
         household address. Frequently, the beneficiaries’ supporting documentation

14
   Council of the Inspectors General on Integrity and Efficiency, Quality Standard for Federal Offices
   of Inspector General, August 2012,
   https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf
   (accessed March 29, 2024)
15
   We reviewed the supporting documentation in accordance with Houston and Harris County ERA
   Program Eligibility Policies and Procedures related to proof of residence.

                                                  5
        contained additional detail not included within the data submitted to OCA,
        such as apartment numbers or other parties/tenants living within the
        household.

Review Results of ERA1 Payments by Houston and Harris County

We identified $110,928 of overpayments associated with 21 of the 50 beneficiary
files reviewed. Of the $110,928, there is $98,242 in questioned cost, and the
remaining $12,686 was recharacterized by the grantee to other ERA eligible
expenses under the ERA1 or ERA2 programs. We provide additional information on
the $110,928 of overpayments associated with 21 beneficiaries in Table 1.

Table 1. Results by Error Description, Overpayment Amounts, and Beneficiary
         Count
                                               Total        Total
           Payment Error Description      Overpayments Beneficiaries
           Two Grantees
             - Duplicative Assistance        $54,709          8
             - More than 15 months           16,294           4
             - Ineligible Applications       30,000           1

              One Grantee
                - Duplicative Assistance                 8,334                   7
                - More than 15 Months                     1,591                  1
              Total                                     $110,928                 21
              Source: Treasury Office of Inspector General Analysis

We found that most of the overpayments were due to the grantees having
overlapping jurisdictions and both grantees providing assistance to beneficiaries
within the same household for the same eligible expense. Specifically, 8 of the
50 selected beneficiaries received a total of $54,709 of duplicative assistance
overpayments from both grantees. In addition, we determined that 1 of the
8 beneficiaries receiving duplicative assistance was also an ineligible beneficiary
because they did not submit adequate proof of residency documentation. 16 The
beneficiary in question received $20,000 in assistance.17



16
   The grantees’ program guidance defines proof of residence at a rental unit as a current photo
   identification with address of rental unit; a current utility bill; a lease; or mail from a government
   office, financial institution, or utility provider to the applicant at the rental unit address.
17
   This beneficiary, and the $20,000 they received in assistance, was associated with multiple
   grantee errors. We determined that this beneficiary was both ineligible to receive ERA and
   received duplicative assistance. In Table 1, we grouped this with duplicative assistance to
   highlight the number of errors specific to the grantees’ overlapping jurisdictions.

                                                    6
Also, 4 of the 50 selected beneficiaries received $16,294 of overpayments that
exceeded the 15-month limitation for ERA1 assistance. In addition, there was a
payment error when 1 of these 4 selected beneficiaries received 17 months of
assistance but was only approved for 14 months.

One (1) of the 50 selected beneficiaries had an ineligible application, but still
received $30,000 of overpayments. We determined that the application was
ineligible because the beneficiary did not provide adequate proof of identification.

Finally, the grantees made overpayments not related to or caused by overlapping
jurisdictions. We found that 7 of the 50 selected beneficiaries received $8,334 of
overpayments because of duplicative assistance,18 and 1 of 50 selected
beneficiaries received $1,591 in payments that exceeded the 15-month limitation
for ERA1 assistance from a single grantee.

Other Observations

Grantee-reported data did not accurately capture information from the
beneficiary-provided supporting documentation. Specifically, we observed:

     •   Incorrect data entry of household information (incorrect, invalid, or
         incomplete entry of a household address, apartment number, etc.) within the
         household payment file submitted by the grantees to OCA.
     •   Beneficiary names or addresses associated with applications in the
         grantee-provided data did not match supporting documentation.

These differences complicated our review, may have led to overpayments, and
affect the reliability of the grantee-reported household file.

We also observed that one beneficiary’s application package (not included in the
$110,928 of overpayments) appears to have a familial tenant/landlord relationship.
The grantee was unable to provide supporting documentation that the tenancy was
an arm’s-length transaction. The grantee stated that there was no OCA or grantee
requirement to gather additional documentation based on tenant-landlord familial
relationships or suspected familial relationships if the tenant and landlord did not
reside in the same household.

Grantee Coordination

We communicated our results and observations to the grantees relating to the
$110,928 in overpayments we identified. In response, grantee management
informed us that they are pursuing recoupment of overpayments from the payees,

18
     For example, a single grantee paid two different beneficiaries from the same household address
     for the same eligible expense for the same month, such as rent for October 2021.

                                                  7
recharacterizing payments when the grantee determined it was appropriate, and
initiating an internal review of supporting eligibility documentation. 19 Specifically
related to our questioned costs, the grantees identified $12,686 to recharacterize.
As a result, $98,242 remains as questioned costs from our review. We will pursue
recoupment of unresolved questioned costs from the grantees.

Grantee Management Response

As part of our reporting process, we provided Houston’s and Harris County’s
management an opportunity to comment on a draft of this report. Houston
management provided a formal response to our report; Harris County management
declined to formally respond to this report.

Houston Management Response

In its written response, Houston management acknowledged the exceptions we
identified. However, Houston management believes the error rate of its ERA
program is likely less than what our sample indicates due to our use of a
specifically targeted method of selecting transactions for review. Houston
management stated that it independently discovered payment issues, and has
taken steps to address them, including reclassifying ERA1 payments to ERA2 to
comply with the maximum allowable assistance per beneficiary. They believe these
actions should be considered when evaluating any observations. Houston
management also asserted that ERA1 was still an active project at the time of the
desk review, noted that it implemented multiple processes for identification and
correction of duplicate payments, and requested that we recognize its
de-duplication approach to managing duplicate payments. Finally, Houston
management requested an opportunity to review the final sample and payment data
from our review to further determine whether Houston or Harris County funds were
used, or if the alleged duplication issues had already been resolved.

Houston’s management response is included in its entirety in Appendix 1.

OIG Comment on Houston’s Management Response

Our report identifies questioned costs based on specific payments reviewed but
does not extrapolate those exceptions to any broader population of payments. Due
to the ineligible costs we identified and the likelihood of additional ineligible
payments, we are recommending analysis of the $20 million of potential duplicate


19
     On June 1, 2022, the grantees launched a joint recharacterization process following guidance
     from Treasury about the recharacterization of duplicate assistance. Pursuant to the guidance, the
     grantees formulated their own joint funding recapture and recharacterization policies and
     procedures.

                                                   8
payments identified by us that were made by the grantees through December
2021, as well as a review of subsequent ERA1 and ERA2 payments.

We agree that any grantee-discovered payment issues which have been corrected
should be considered when evaluating remaining duplicate payments from the
grantees; however, recharacterizing already-ineligible payments from ERA1 to ERA2
is not an acceptable resolution.

While we initiated the desk review during the ERA1 award period of performance,
our review of duplicate payments, identification of errors, and subsequent
communication occurred after the end of the ERA1 award period of performance.
Further, the grantees have not provided evidence to us that they have resolved all
the exceptions we identified. During our duplicate payments review, the grantees
did inform us that they had implemented a process to identify and correct duplicate
payments in April 2021. Regardless, we identified $110,928 of overpayments
associated with 21 of the 50 beneficiary files reviewed.

We disagree with Houston’s assertion that its management has not reviewed the
details of the cases in question. We could not have confirmed the existence of
duplicate payment transactions without continued coordination with the grantees.
We communicated every potential exception to the grantees during our review as
we identified them. Throughout our review, we provided detailed conclusions on all
transactions to both Houston and Harris County, concurrently. During our review,
the grantees provided written confirmation of the issues we identified and stated
that the grantees (a) planned to investigate the issue, (b) planned to recover the
funds in question, or (c) had already taken corrective action, such as
recharacterization of the payment from their ERA1 award to ERA2 award or to
another ERA1 eligible expenses incurred during the ERA1 award period of
performance.

In all instances where we identified duplicative payments or payments exceeding
the allowable 15-month threshold for ERA1 assistance, we obtained supporting
documentation that the payment either (a) was booked in the receivable report by
the responsible funding grantee with an intent to recover or (b) had been
recharacterized. Due to our coordination, we reduced the total identified
overpayments by $12,686 to account for eligible recharacterizations. The
remaining $98,242 represent questioned costs that violate the use of funds
requirements in the ERA1 statute regardless of recharacterization status.

In addition to the coordination between our office and the grantees during our
review, we provided a summary of all impacted case numbers and our detailed
analysis to the grantees for review on July 18, 2024. Houston management did not
provide any further comment or additional information related to the questioned
costs or an update on the status of its cases.

                                         9
Coordination with OCA

In advance of our report, we communicated our results and observations to OCA
informing them that we are questioning $98,242 of Houston and Harris County
ERA1 payments as unallowable costs.

OCA Management Response

As part of our reporting process, we provided OCA management an opportunity to
comment on a draft of this report. In its written response, OCA management
concurred with our recommendations and stated that it has reached out to the
grantees to ensure each has access to the data needed to address the potential
duplicative payments. OCA management also stated that it will require both
grantees to submit corrective action plans within 90 days of this report and
continue to work with both grantees to ensure their ERA1 and ERA2 reports are
accurate. In addition, OCA management emphasized its requirement for grantees to
submit complete and accurate reports, and agreed to update grantee monitoring
procedures for ERA2 within the calendar year. Furthermore, OCA management
acknowledged that current guidance does not address familial tenant/landlord
relationships. OCA management stated it will reach out to federal agency partners
and review other federal program guidance to determine how best to address this
issue. OCA’s management response is included in its entirety in Appendix 2.

OIG Comment on OCA’s Management Response

While OCA concurred with our recommendations and its planned corrective actions
meet the intent of our recommendations, management did not provide an
implementation date for its planned corrective action for our third recommendation
regarding familial tenant/landlord relationships. OCA management should include
the specific corrective actions and timeframes for completion in Treasury’s Joint
Audit Management Enterprise System.

If you would like to discuss this report, please contact Deborah L. Harker, Assistant
Inspector General for Audit, at (202) 486-1420 or John N. Tomasetti, Audit
Director, Housing Assistance, at (202) 927-2665.

cc:   Blossom Butcher-Sumner, Attorney-Advisor (Finance), Department of the
        Treasury
      Carolyn Appel, Attorney-Advisor (Finance), Department of the Treasury
      Janet Gonzalez, Director, Budget and Performance, Harris County, TX
      Paul Wilden, Manager, Grants Accounting, Harris County, TX
      Jennifer Bell, Rental Assistance Program Manager, Harris County, TX
      Michael Nichols, Director, City of Houston, TX



                                         10
Kennisha London, Deputy Director Compliance and Grant Administration,
  City of Houston, TX
Melody Barr, Deputy Assistant Director, Public Services, City of Houston, TX




                                 11
Appendix 1: City of Houston Management Response




                               12
13
Appendix 2: Office of Capital Access Management Response




                               14
15


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