Audit: Major lack of oversight in city financial assistance program


Highlights

Audit found little oversight in a program that gave government money to encourage better financial habits.

Staffers said supporting documentation for some applications existed but wasn’t attached to the file.

Participants who saved $500 on their own got up to $4,000 from the program, an 8-to-1 match.

A grant program that divvied up hundreds of thousands of dollars to low-income Austinites to help them buy homes, invest in their businesses or further their education suffered from a severe lack of oversight that created a potential for fraud, a recent city audit found.

The audit of the city’s matched savings account program found that in some cases, a single staff worker approved doling out money in $4,000 increments with little to no documentation of how the money would be spent.

Additionally, the audit found that the staff at the city’s Neighborhood Housing and Community Development department appeared to eschew any responsibility for determining whether an applicant was being honest or whether a purchase was appropriate.

“I found this disappointing and disturbing on a lot of levels,” Austin City Council Member Alison Alter said during a recent meeting of the city’s Audit and Finance Committee, which reviewed the audit first reported by the Austin Monitor.

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The idea behind the program was to encourage low-income residents to become “financially empowered” through money from the city and federal grants. Participants would get an 8-to-1 match on funds, meaning they would personally save $500 before the city would give them $4,000.

The $600,000 given to the program was evenly split between the city’s housing trust fund and a federal grant. The program has been in existence since 2011. It still has $100,000 left with 22 remaining participants.

The program is now in limbo. The federal government canceled it for all participating cities last year and gave Austin until March to spend any remaining federal funds or forfeit them.

It was in that context that the Neighborhood Housing and Community Development department opted to increase the dollar match from 4-to-1 to 8-to-1. The audit also notes that city staff prioritized spending the money rather than “safeguarding” those funds.

In an examination of 126 cases, the audit found documentation problems with 72 percent. The staff later clarified that some documentation did exist but wasn’t always with the file. Sometimes verification that a purchase authorized under the program was legitimate could take the form of an email or phone call that was never logged into participants’ files.

For instance, the audit questioned the purchase of a $2,172 “gaming computer” with top-of-the-line hardware for one participant. The program’s manager, Letitia Brown, said the city did email the participant’s professor, who said that was an appropriate level computer for an engineering student.

“That is not in the documentation, so it looks questionable to us on paper,” said Mary Dory, the auditor in charge of the audit.

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Another focus was what appeared to be about $20,000 given to a group of artists who seemed to know one another. Each provided a business plan indicating an upcoming album or other work. However, the audit found, nothing was produced.

“It is possible that one individual found that it was relatively easy to receive $4,000 from the city and informed their colleagues of the opportunity,” the audit said.

The audit found no evidence of fraud committed by city staffers. But it noted that some questionable practices created a potential for fraud.

Management at the department in charge agreed with all recommendations made in the audit.

“With audit findings of this magnitude we greatly understand and appreciate them,” said Neighborhood Housing Director Rosie Truelove, who joined the department in 2016. “I like to think that when we undergo audits, I try to see these as opportunities for us to see things brought forward that I might not necessarily be able to realize otherwise.”



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