Audit of Housing First, Community Assistance Program, and Hale Mauliola Homeless Programs

From Honolulu Auditor,Report 17-05, September, 2017 (excerpts)

The City and County of Honolulu has taken laudable steps to address the homelessness crisis on Oahu over the last few years. The city committed over $7.5 million in general fund dollars to support Housing First (Increment 1 ), Community Assistance Program, and Hale Mauliola homeless programs. Advocates note that programs such as these, despite their costs, are far less expensive than the cost to provide homeless with emergency medical care and other government services. However, there was a lack of data to support this contention and was difficult to quantify and prove actual cost savings to the public.  (During the audit, in May 2017, the University of Hawai'i completed a study that quantified emergency room costs related to homeless individuals, which the department can use to evaluate cost-effectiveness of its homeless programs.)  Going forward, the cost to support Housing First, Community Assistance Program, and Hale Mauliola beyond the first two years is substantial. Sustaining these programs with general funds is questionable.

The Department of Community Services, which Is responsible for administering homeless-related program contracts, lacks sufficient resources and contract administration infrastructure to effectively manage homeless contracts. The lack of formal policies and procedures, which were echoed in prior audits and reports, placed $140,152 in security deposits at risk for fraud, waste, and abuse. Insufficient internal controls led to questionable reimbursement requests. Late invoice submittal from contractors and insufficient DCS staff invoice reviews caused delays in contractor reimbursement. The department's Homeless Initiatives Group does not fully complete job requirements and has seen its responsibility grow to manage over $14 million in homeless-related programs. The group does not have adequate resources, training, or an effective back office to provide administrative support. As a result, homeless programs and funding may be at risk.

The city and state lack a strategic plan for homelessness that establishes specific timelines, performance benchmarks, allocation of resources and other quantitative objects that can measure success. Opportunities to leverage or pool resources, or build on the other's efforts are lost. As a result, the city and state offer similar homeless programs. As an example, the state and city support Housing First programs, but the city's program costs 48% more. A comprehensive plan, with measurable objectives and better coordination, could maximize resources and reach more homeless individuals.

…

The Department of Community Services, which is responsible for administering homeless-related program contracts, lacks sufficient resources and contract administration infrastructure to effectively manage homeless contracts. The lack of formal policies and procedures, which were echoed in prior audits and reports, placed $140,152 in security deposits at risk for fraud, waste, and abuse.

Insufficient internal controls led to questionable reimbursement requests. Late invoice submittal from contractors and insufficient DCS staff invoice reviews caused delays in contractor reimbursement. The department’s Homeless Initiatives Group does not consistently complete job requirements and has seen its responsibility grow to manage over $14 million in homeless-related programs. The group does not have adequate resources, training, or an effective back office to provide administrative support. As a result, homeless programs and funding may be at risk.

…

Both Housing First and Hale Mauliola allocate program funds to pay for housing rental security and utility deposits on behalf of their clients. If the client exits the program or vacates the property (assuming the property is left in acceptable condition), the security deposit may be returned. We found that there were no formal policies or procedures or controls for tracking and accounting for returned security deposits. As a result, the return of security deposit funds were at risk for fraud, waste, abuse, misappropriation, or lost.

In Year 1 of the Housing First program, the contractor expended $140,152 in city funds for security and utility deposits. We sought to calculate how much, if any, of these deposit funds were returned to the contractor, and the disposition of the funds. We were unable to identify the disposition of the funds because DCS had no policies or procedures for the return of security deposits, nor did it monitor the disposition of those funds. Exhibit 3.1 shows the breakdown of security and utility deposits for Year 1. According to DCS staff, the department relies on the contractor to maintain, account for, and accurately monitor the disposition of security deposit funds. Staff from the contractor explained that security deposits are retained in a payable account and used to pay for rental expenses for the same service (if the grant continues) or similar service (if the grant ends). The contractor staff stated that a good portion of the security deposits are kept by the landlord to pay for repairs or damages, and the balance, if any, is returned to the contractor. We found several instances where BFS fiscal staff, in its review of invoices related to homeless contract payments requested the status of security deposits. DCS and BFS staff were unable to provide a full accounting of the funds used for security and utility deposits….

Exhibit 3.2: Prior Audit and Report Findings on DCS’ Grant Management

U.S. Department of Housing and Urban Development Follow Up on A 133 Single Audit Finding FY 2014 (June 1, 2016)

• Inadequate on site subrecipient monitoring performed
• Untimely report submission

Financial Audit of the City and County of Honolulu, FY 2016

• Non compliance and material weakness for subrecipient monitoring; city should follow its procedures to monitor subrecipients
• Non compliance and material weakness for reporting; city should create uniform policies and procedures related to federal awards and provide training to city employees regarding overall federal and program specific requirements

U.S. Department of Housing and Urban Development Annual Community Assessment (ACA) Report, Program Year 2015 Community Development Block Grant:

• City deemed a high risk grantee due to recent history of unsatisfactory performance; lack of effective management systems in place to ensure program compliance; failure to timely resolve open findings, and concerns about the city’s on going capacity to manage its CBDG funds
• Recommended that the city develop citywide written policies and procedures that govern Community Planning and Development programs and ensure compliance with requirements

Financial Audit of the City and County of Honolulu, FY 2015

• Non compliance and material weakness for subrecipient monitoring; city should follow procedures to monitor subrecipients
• Non compliance and material weakness for inadequate reporting; city should establish controls to gather required reporting information

U.S. Department of Housing and Urban Development Community Development Block Grant On Site Monitoring Program (June 3, 2013)

Regarding the Opportunities and Resources, Inc. (ORI) program:

• City took no action to enforce its written requirements and allowed the program to operate facilities in non compliance with CDBG requirements
• Insufficient documentation or records to demonstrate program compliance with objectives
• Inadequate project oversight that impaired accountability and raised the likelihood of duplicate/overlapping payments

Audit of the Leeward Coast Community Benefits Program, Report No. 11-02 (December 2010)

Office of the City Auditor report found that DCS had:

• Inadequate policies, procedures, guidelines, and training
• Inadequate reporting by grantees
• Reduced grantee accountability and transparency and increased the risk for fraud, waste, and abuse

read … Auditor’s Report

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