OIG-CA-25-008: Emergency Rental Assistance Program (ERA2) – Questioned Cost Finding, State of Washington

Summary

Treasury Office of Inspector General memorandum OIG-CA-25-008, dated November 13, 2024, Emergency Rental Assistance Program (ERA2) – Questioned Cost Finding, State of Washington, from Marla Freedman and Robert Taylor to Jessica Milano, Chief Program Officer, Office of Capital Access. The memo states that in August 2023 a Thurston County WA internal auditor informed OIG of three cases of suspected and confirmed fraudulent ERA2 financial assistance payments, and that OIG determined the State of Washington, through its subrecipient, paid a total of $74,160 in ERA2 funds to three ineligible households in violation of the Use of Funds statute. It states that the State did not dispute the determinations. OIG recommends that Treasury's Office of Capital Access disallow the costs and direct the State to reimburse its ERA2 program $74,160 from non-Federal funds, and states that Treasury agreed.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

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




     OFFICE OF
INSPECTOR GENERAL




                                                 November 13, 2024

            OIG-CA-25-008
            MEMORANDUM FOR JESSICA MILANO
                           CHIEF PROGRAM OFFICER, OFFICE OF CAPITAL ACCESS

            From:                     Marla Freedman /s/
                                      Executive Advisor, Office of Audit
                                      and
                                      Robert Taylor /s/
                                      Executive Advisor, Office of Audit

            Subject:                  Emergency Rental Assistance Program (ERA2) – Questioned
                                      Cost Finding, State of Washington



            During the coronavirus pandemic, Congress authorized and funded two Emergency
            Rental Assistance (ERA) programs administered by the Department of the Treasury
            (Treasury) to provide rental assistance to eligible households: (1) ERA1 - Division N,
            Title V, Subtitle A, § 501 of the Consolidated Appropriations Act, 2021 (Pub. L.
            No. 116-260), December 27, 2020, and codified at 15 USC § 9058a: and (2)
            ERA2 - Title III, Subtitle B, § 3201 of the American Rescue Plan Act (Pub. L. No.
            117-2), March 11, 2021, and codified as 15 USC § 9058c.
            In August 2023, a Thurston County WA internal auditor informed the Treasury
            Office of Inspector General (OIG) of three cases of suspected and confirmed
            fraudulent 1 ERA2 financial assistance payments made by Thurston County Public
            Health and Social Services, a subrecipient of ERA2 Federal financial assistance
            awards for the State of Washington. After assessing the results of the Thurston
            County WA internal auditor’s review, we determined that the State of Washington,
            through its subrecipient, paid a total of $74,160 in ERA2 funds to three ineligible

            1
              Pursuant to 2 CFR § 200.113, Mandatory disclosures, under the Uniform Administrative
            Requirements, Cost Principles, and Audit Requirements, grantees must disclose, in a timely manner,
            in writing to the Federal awarding agency all violations of Federal criminal law involving fraud
            potentially affecting the Federal award.

                                                            1

            This Notice may contain information protected under the Privacy Act, 5 USC 552a.
households in violation of the Use of Funds statute. Accordingly, we question
those costs. In response to a draft of this questioned cost finding, the State of
Washington did not dispute our determinations and had no additional
documentation to provide regarding the three subject cases that resulted in
ineligible payments. See Appendix 1. We are recommending that Treasury’s Office
of Capital Access disallow these costs and direct the State of Washington to
reimburse its ERA2 program $74,160 from non-Federal funds. 2 We also provided
Treasury with an opportunity to review a draft of this memorandum. In its written
response, Treasury agreed with our recommendation. See Appendix 2.
Background/Legal Authority
Under ERA2 section 3201(d), Use of Funds, an eligible grantee shall only use ERA2
funds to provide financial assistance and housing stability services to eligible
households. The financial assistance includes: the payment of rent; rent arrears;
utilities and home energy costs; utilities and home energy costs arrears; and other
expenses related to housing, as defined by Treasury. Such assistance shall be
provided for a period not to exceed 18 months.
ERA2 section 3201(f)(2) defines eligible household as a household of one or more
individuals who are obligated to pay rent on a residential dwelling and that (1) one
or more individuals within the household has qualified for unemployment benefits or
experienced a reduction in household income, incurred significant costs, or
experienced other financial hardship due, directly or indirectly, to the coronavirus
pandemic; (2) one or more individuals within the household can demonstrate a risk
of experiencing homelessness or housing instability; and (3) the household has a
household income that is not more than 80 percent of the area median income for
the household.
Facts and Analysis
On August 18, 2023, we received a bulk report 3 from a Thurston County internal
auditor of three cases of suspected and confirmed fraudulent ERA2 financial
assistance payments made by Thurston County Public Health and Social Services, a
subrecipient of the State of Washington. We agreed with the Thurston County
internal auditor’s conclusions on the three cases as follows:


2
  See Appendix 2, Schedule of Monetary Benefits, for more details regarding “questioned cost.”
3
  Treasury OIG defines a “bulk report” as a report of multiple suspected or confirmed fraudulent ERA
financial assistance payments made by a grantee or subrecipient; the bulk report may come directly
from the grantee, subrecipient, or from the Treasury OIG Office of Investigations (OI). There could
also be instances where, upon review of individually reported complaints, Treasury OIG determines
there to be a “common source” of reporting (e.g., from a grantee or subrecipient) and decides, for
purposes of efficiency, to work all the “common source” suspected or confirmed fraudulent ERA
financial assistance payments as a bulk report.

                                                 2

This Notice may contain information protected under the Privacy Act, 5 USC 552a.
   1. For application #                     , the landlord identified on the
      application was different from the property owner identified in Thurston
      County’s assessor records at the time of the application. The Thurston
      County internal auditor spoke with the property owner on August 16, 2022,
      who stated that she did not know the tenant or landlord identified on the
      application. Furthermore, she did not authorize any third-party to collect rent
      on her behalf. The rental arrears financial assistance paid out by Thurston
      County Public Health and Social Services’ ERA2 program for this application
      totaled $38,700.
   2. For application #                      , the landlord identified on the
      application was different from the property owner identified in Thurston
      County’s assessor records at the time of the application. The Thurston
      County internal auditor spoke with the property owner’s representative on
      September 9, 2022, who stated that the property owner sold the home in
      April 2022, and that the home had been vacant for 6 years at the time of
      the sale. The rental arrears financial assistance paid out by Thurston County
      Public Health and Social Services’ ERA2 program for this application totaled
      $19,800, and was for the period March 2021 through February 2022, during
      which the property owner’s representative stated the home was vacant.
   3. For application #                      , the landlord identified on the
      application was different from the property owner identified in Thurston
      County’s assessor records at the time of the application. On August 15,
      2022, the property owner left the Thurston County internal auditor a
      voicemail stating that she bought the property in 2020 and never rented it
      out. The rental arrears financial assistance paid out by Thurston County
      Public Health and Social Services’ ERA2 program for this application totaled
      $15,660.
These three cases are summarized as follows:
                         Thurston County            Ineligible ERA2
                         Public Health and Social   Financial Assistance
                 Case    Services Application No.   Payments
                 1                                               $38,700
                 2                                                19,800
                 3                                                15,660
                 Total                                           $74,160

Based on the information provided, we determined that the State of Washington,
through its subrecipient Thurston County Public Health and Social Services’ ERA2
program, paid out ERA2 funds in violation of the Use of Funds statute because the
funds were disbursed to ineligible households. Accordingly, OIG questioned the
cost of $74,160 for the ERA2 financial assistance paid for these three cases.


                                           3

This Notice may contain information protected under the Privacy Act, 5 USC 552a.
State of Washington’s Response
We provided the State of Washington an opportunity to respond to a draft of this
questioned cost finding. Its written response, dated June 5, 2024, is included in
Appendix 1 to this memorandum.
In that response, the State of Washington stated that (1) its subrecipients used
self-attestations as a tool to assist in expedient delivery of services during the
health crises as Treasury’s program guidance allowed self-attestation to confirm
eligibility; and (2) it had to comply with spending deadlines to ensure all federal
funds available to Washington State residents were utilized. Furthermore, the State
did not fully deploy its subrecipient monitoring process until after spending
deadlines were met, due to the urgent need of timely assistance.
The State of Washington also stated that it did not dispute Thurston County’s
findings or the actions it took regarding the findings. The State’s planned resolution
for the ERA2 questioned cost amount of $74,160 is to await further instructions
from Treasury on the next steps.
OIG Evaluation
We considered the State of Washington’s response in finalizing this memorandum.
The State of Washington did not provide any additional evidence to demonstrate
that the financial assistance provided for the subject applications were eligible
households. As the grantee, the State of Washington is responsible for ensuring the
eligible use of ERA2 funds.
In its response, the State of Washington stated: “Commerce [the State of
Washington, Department of Commerce] provided these awards during a state of
emergency in which program guidance from Treasury allowed the use of self-
attestation to confirm eligibility.” However, in this case, that statement is not
contextually accurate. Specifically, with regard to guidance on when self-
attestation is encouraged to be relied upon, Treasury states:
      When housing stability services represent the only ERA1 assistance a
      household will receive (i.e., no payments using ERA1 funds will be made
      either to the household, to the landlord, or to a utility provider), grantees are
      encouraged to rely on a household’s self-attestations for purposes of
      confirming eligibility…
      In all cases, grantees must document their policies and procedures for
      determining a household’s eligibility to include policies and procedures for
      determining the prioritization of households in compliance with the statute
      and maintain records of their determinations. Grantees must also have
      controls in place to ensure compliance with their policies and procedures and
      prevent fraud. Grantees must specify in their policies and procedures under

                                          4

This Notice may contain information protected under the Privacy Act, 5 USC 552a.
       what circumstances they will accept written attestations from the applicant
       without further documentation to determine any aspect of eligibility or the
       amount of assistance, and in such cases, grantees must have in place
       reasonable validation or fraud-prevention procedures to prevent abuse. 4
Recommendation
We recommend that Treasury’s Office of Capital Access disallow the questioned
cost amount of $74,160 and instruct the State of Washington to refund that
amount to its ERA2 program from non-Federal funds.
Treasury’s Response
We provided Treasury with an opportunity to review a draft of this memorandum
on September 30, 2024. In its written response, Treasury management agreed that
any improper use of ERA2 funds should be reimbursed, and that the State of
Washington should refund the questioned costs in the amount of $74,160 to its
ERA2 program using non-Federal funds. Treasury’s written response is included as
Appendix 2 of this memorandum. Treasury management will need to record an
estimated completion date for taking action on this recommendation in the Joint
Audit Management Enterprise System (JAMES). See Appendix 3, Schedule of
Monetary Benefits, for more details regarding “questioned cost.”
Methodology
We conducted our review of these ERA cases from December 2023 to November
2024. We inquired of the grantee and other relevant parties, reviewed related
documentation, and performed other appropriate procedures. We believe the
evidence obtained is sufficient and appropriate to provide a reasonable basis for our
findings and conclusions in this Questioned Cost Finding.
In conducting our review, we followed the OIG’s system of quality management for
ensuring that the information in this Questioned Cost Finding is accurate. We also
followed the Council of the Inspectors General on Integrity and Efficiency (CIGIE)
Quality Standards for Federal Offices of Inspector General which require that our
work adheres to its general standards for integrity to include objectivity,
independence, professional judgment, and confidentiality as well as its general
standard for receiving and reviewing allegations.



4
  A full discussion of Treasury’s ERA guidance on self-attestation is found in its ERA Frequently
Asked Questions (FAQs), Question 1, available at FAQs | U.S. Department of the Treasury
(https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-
governments/emergency-rental-assistance-program/faqs).

                                                  5

This Notice may contain information protected under the Privacy Act, 5 USC 552a.
                                                                     Appendix 1

                               Grantee Response




                                       6

This Notice may contain information protected under the Privacy Act, 5 USC 552a.
                                                                     Appendix 1

                               Grantee Response




                                       7

This Notice may contain information protected under the Privacy Act, 5 USC 552a.
                                                                     Appendix 2

                               Treasury Response




                                       8

This Notice may contain information protected under the Privacy Act, 5 USC 552a.
                                                                     Appendix 2

                               Treasury Response




                                       9

This Notice may contain information protected under the Privacy Act, 5 USC 552a.
                                                                           Appendix 3




Schedule of Monetary Benefits
According to the Code of Federal Regulations, a “questioned cost” is a cost that is
questioned by the auditor because of a finding:
   (a) which resulted from a violation or possible violation of a statute, regulation,
       or the terms and conditions of a Federal award, including for funds used to
       match Federal funds;
   (b) where the costs, at the time of the review, are not supported by adequate
       documentation; or
   (c) where the costs incurred appear unreasonable and do not reflect the actions
       a prudent person would take in the circumstances.
Questioned costs will be recorded in Treasury’s Joint Audit Management Enterprise
System (JAMES). The amount will also be included in the OIG Semiannual Report
to Congress. It is Treasury management’s responsibility to report to Congress on
the status of the agreed to recommendations with monetary benefits in accordance
with 5 USC § 405:
Recommendation                                       Questioned Costs
Recommendation No. 1                                 $74,160
The questioned costs represent ERA2 amounts provided by Treasury under the
American Rescue Plan Act of 2021 that were paid by the State of Washington to
ineligible households in violation of ERA2 Section 3201(d), Use of Funds.




                                          10

This Notice may contain information protected under the Privacy Act, 5 USC 552a.
Distribution
   Department of the Treasury
          Gregory Till, Chief Operating Officer, Office of Capital Access
          Danielle Christensen, Deputy Chief Program Officer for State & Local
          Programs, Office of Capital Access
          Michelle Dickerman, Deputy Assistant General Counsel, Office of the
          General Counsel
          Stephen Milligan, Deputy Assistant General Counsel, Office of the
          General Counsel
          Carolyn Appel, Attorney-Advisor, Office of the General Counsel
          Blossom Butcher-Sumner, Attorney-Advisor, Office of the General
          Counsel
   State of Washington
          Temporary Federal Programs Manager
          Internal Control Officer




                                         11

This Notice may contain information protected under the Privacy Act, 5 USC 552a.


File and source

File

OIG-CA-25-008-emergency-rental-assistance-program-era2-questioned-cost-finding-state.pdf

Size

1,819,386 bytes

SHA-256

45e56a24aa01aac506b4bf350d541118228411085be4b33fbd577f68449e6f0e

Our copy

OIG-CA-25-008-emergency-rental-assistance-program-era2-questioned-cost-finding-state.pdf

Original

oig.treasury.gov