oversight

Houston Regional HIV/AIDS Resource Group, Inc., Houston, Texas, HOPWA 94 and SHP-95 Grants, Improper Use of Grant Funds

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-09-05.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                              U.S. Department of Housing and Urban Development
                                                              Southwest District Office of Inspector General
                                                              819 Taylor Street, Suite 13A09
                                                              Fritz G. Lanham Federal Building
                                                              Fort Worth, Texas 76102
                                                              (817)978-9309 FAX (817)978-9316
                                                              http://www.hud.gov/oig/oigindex.html




September 5, 2000                                              00-FW-251-1805


MEMORANDUM FOR:                     Katie Worsham
                                    Director
                                    Office of Community Planning and Development, 6AD


FROM:              D. Michael Beard
                   District Inspector General for Audit, 6AGA

SUBJECT:           Houston Regional HIV/AIDS Resource Group, Inc.
                   Houston, Texas
                   HOPWA 94 and SHP-95 Grants
                   Improper Use of Grant Funds


          During our audit of the Houston Regional HIV/AIDS Resource Group, Inc.’s (Resource
Group) 1996 Supportive Housing Program Grant, we received a complaint that Trinity Life Center
(Trinity Life), a subgrantee of the Resource Group, inappropriately used 1994 Housing Opportunities
for People With Aids (HOPWA) and 1995 Supportive Housing Program (SHP) grant funds to pay
unauthorized salaries. Due to Trinity Life being a subgrantee of the Resource Group, we direct our
findings at the Resource Group. Our audit of the Resource Group’s HOPWA and SHP funds covered
salaries paid from May 1, 1998, through February 15, 1999.1

          To accomplish our objectives, we interviewed the Resource Group management, Trinity Life
management, and Trinity Life’s former staff. We analyzed the payroll records of Trinity Life. Also, we
reviewed the HOPWA and SHP grant agreements and other applicable criteria including OMB Circular
A-122, “Cost Principles for Non-Profit Organizations.” The scope of our review did not include
whether the Resource Group or Trinity Life complied with other requirements of the grant agreements.

        Our review disclosed that the Resource Group reimbursed Trinity Life for $34,150 in ineligible
salary payments. The $34,150 included:



1
    The initial audit period covered salaries paid from the HOPWA 94 and SHP-95 grants from July 16 through
    November 15, 1998. For the employees involved, we extended our audit scope as needed.
                                                                                                              2


                Employees that worked on other programs                    $29,957
                Improper advances of employee raises                        $3,906
                Excess reimbursement over actual salary                       $287

         The Trinity Life staff responsible for billing the Resource Group did not allocate the salaries
based upon the employees’ time sheets. Further, it appears that Trinity Life wanted to expend grant
funds before grant termination. The grant agreements required the Resource Group to charge the grant
for the actual activity of the employees. The Resource Group mistakenly relied upon Trinity Life’s
allocations and its monitoring of Trinity Life did not detect the incorrect billings. As a result, Resource
Group charged the grant for ineligible expenditures.

         Prior to our audit, the Resource Group’s procedures noted problems with Trinity Life and
terminated its grants with Trinity Life. We noted during our audit that the Resource Group monitored
and provided technical assistance to its subgrantees. Although Trinity Life caused the conditions noted
in this memorandum, HUD has a grant agreement with the Resource Group. Therefore, we recommend
that your office seek reimbursement from the Resource Group for these ineligible expenditures.

         On July 31, 2000, we sent the Resource Group’s Executive Director a draft of this
memorandum. The Executive Director responded to the draft on August 4, 2000. We summarized
their response and amended the draft as needed.

         Within 60 days please give us, for each recommendation made in this audit memorandum, a
status report on: (1) corrective action taken; (2) proposed corrective action and date to be completed;
or (3) why action is considered unnecessary. Also, please furnish us copies of any correspondence or
directive issued because of this review.

        If you have any questions, please call William Nixon, Assistant District Inspector General for
Audit, at (817) 978-9309.
                                                                                                             3


Background.

         HUD designed the HOPWA Program to promote the development of supportive housing and
services for low-income persons with HIV/AIDS and their families, particularly those who are homeless
or at great risk of becoming homeless. Eligible activities include emergency shelter, single-room
occupancy, shared or group housing, and housing combined with supportive services.

         Title IV of the Stewart B. McKinney Homeless Assistance Act authorized the Supportive
Housing Program. The Program encourages the use of innovative approaches to assist homeless
persons and provides supportive housing to enable them to live as independently as possible. Eligible
activities include housing and supportive services.

         The Resource Group is a Texas nonprofit corporation. It was the primary administrative agency
for distributing government funding for HIV/AIDS in the Houston area. The Resource Group subgrants
with Trinity Life to accomplish tasks under the grant.

        In September 1994, HUD awarded the Resource Group $1 million in HOPWA funds. The
grant agreement incorporated the Resource Group’s application. The application proposed to provide
long term housing, supportive services, and behavior modification support for at least 60 homeless
HIV/AIDS youths over a 3-year period. HUD extended the grant through February 28, 1999.

         In December 1995, HUD awarded the Resource Group $669,551 in SHP funds to provide
transitional housing and supportive services to homeless adolescents at risk of acquiring HIV. The
Resource Group signed the grant agreement on December 27, 1995. The grant period ended on
December 31, 1998.

         The grant agreements required the Resource Group to adhere to Office of Management and
Budget Circular A-122 (Circular A-122). Circular A-122 establishes principles for determining costs
of grants with nonprofit organizations. Circular A-122 required the Resource Group, or its subgrantees,
to keep activity reports for employees paid with grant funds. The reports must disclose total activities
related to each employee’s salary. Further, it required someone with “first hand knowledge” of the
activities, i.e., the employee or a responsible supervisor, to sign the reports. Circular A-122 states the
activity reports: “…must reflect an after-the-fact determination of the actual activity of each employee.”
It also required the Resource Group, or its project sponsors, to charge grants only for documented
payrolls.

        Circular A-122 also required the Resource Group to limit any: “…change in an organization’s
compensation policy resulting in a substantial increase in the organization’s level of compensation,
particularly when it was concurrent with an increase in the ratio of Federal awards to other activities of
the organization…”
                                                                                                         4


The Resource Group Reimbursed Trinity Life for Ineligible Payroll Costs.

        The Resource Group used grant funds to reimburse Trinity Life $34,1502 for ineligible salaries
under its 1994 HOPWA and 1995 SHP grants. The ineligible salary payments include $29,957 for
four employees who worked on unrelated programs and $3,906 in raises given in advance to two
employees. Also, the Resource Group incorrectly reimbursed Trinity Life $287 more than the claimed
salary.

Trinity Life Obtained Reimbursement of $29,957 for Employees Who Worked on Other
Programs.

       The Resource Group used $17,102 in HOPWA 94 and $12,855 in SHP 95 grant funds to
reimburse Trinity Life for four employees’ salaries for time they spent working on unrelated programs.
The employees involved and amounts included:

         Employee Title / Dates Charged to Grant                       HOPWA 94 SHP -95
         Street Wise Case Manager                                         $ 8,553 $ 6,541
         May 1, 1998 through May 15, 1998
         July 17, 1998 through February 15, 1999
         Star Program Clinical Director                                          4,668     6,314
         August 16, 1998 through October 15, 1998
         HOME Project Case Manager                                               2,444
         January 14, 1999 through February 15, 1999
         Arbor House and Street Wise Midtown Director                            1,437
         October 1, 1998 through October 15, 1998
         Totals                                                              $17,102     $12,855

         Trinity Life’s corporate staff, which had no first hand knowledge of the actual employees’
activities, erroneously allocated the employees’ time on their time cards prior to submitting the time
sheets to the Resource Group for reimbursement. Staff made the allocations on the time sheets after the
employees and their immediate supervisors signed them. Trinity Life could not provide documentation,
as required, to support these allocations. Further, the allocations contradicted employee annotations on
the time sheets and employee statements when interviewed. Also, by the employee’s title it appears that
Trinity Life inappropriately allocated these employees to the grants.

        For instance, Ryan White3 grant funds paid for Trinity Life’s Street Wise program, a day
program for homeless persons. The HOPWA and SHP grants did not include Street Wise. According
to the Street Wise case manager, he serviced only Street Wise clients. Yet, the Resource Group
reimbursed Trinity Life $8,553 and $6,541 for his salary from the HOPWA 94 and SHP 95 grants,
respectively.

2
    This amount includes fringe benefits estimated at 15%.
3
    The Department of Health and Human Services administers Ryan White grants.
                                                                                                          5



        In another instance, the Texas Department of Human Services funded the STAR Program, not
HUD. Therefore, the Resource Group should not have reimbursed Trinity Life for STAR’s Clinical
Director’s salary from HUD grants. Trinity Life claimed that the Clinical Director provided clinical
support to “everyone.” Trinity Life could not support (for example, sign-in sheets) its assertion that this
employee served HOPWA and SHP clients.4

        For the HOME Project Case Manager, Trinity Life moved this employee to the position of
Executive Administrative Assistant on January 14, 1999. Yet, it continued to obtain reimbursement for
her salary under HOPWA 94 grant for two pay periods. Trinity Life provided no documentation to
support that the employee worked on the program during these pay periods.

         During the desk monitoring of Trinity Life’s monthly expense reports, the Resource Group
noted problems with Trinity Life’s administration of the grants. As a result of an October 1, 1998 site
visit, the Resource Group stated Trinity Life’s time sheets did not allocate employee’s time amongst the
grants. Trinity Life’s Finance Director assured the Resource Group that it would correct this in the
future. However, it appears Trinity Life allocated the time sheets based upon how it wanted the
Resource Group to reimburse it and not whether the employees worked on grant activities or benefited
the program.

        During an April 1997 financial site visit, the Resource Group discovered that Trinity Life did not
have an effective accounting system for separating different grant activities. Throughout the period that
the Resource Group paid Trinity Life from grant funds, the general ledger did not agree with the time
sheets submitted to the Resource Group. To correct the problems, Trinity Life assured the Resource
Group that it would install a new accounting system. The new system would report the grant expenses
in accordance with HUD requirements. While waiting for Trinity Life to correct its accounting system,
the Resource Group mistakenly relied upon Trinity Life’s employee allocation. The Resource Group
did not detect Trinity Life’s inappropriate allocations during its reviews.

Trinity Life Overcharged Its HOPWA 94 Grant $3,906 for Advance Raises.

         The Resource Group reimbursed Trinity Life $3,906 in HOPWA 94 grant funds for raises
covering a period after the grant expiration. The ineligible payments included $1,318 for the Midtown
Director of Arbor House and Street Wise (Midtown Director) and $2,588 for the HOME Project Case
Manager. Trinity Life paid the employees their total annual salary raises over a 2 -3 month period
rather than prorating the raise over the year. The raise should have covered the period August 1998
through July 1999.5 However, the HOPWA 94 grant expired on February 28, 1999. Therefore,
Trinity Life overcharged its HOPWA 94 grant for annual salary increases relating to the period March




4
    We will be issuing a memorandum on our audit of Supportive Housing Program Grant #TX21B960617.
5
    For one employee, the annual raise should have covered July 16, 1998, through July 15, 1999.
                                                                                                                 6


1999 through July 19996. It appears that Trinity Life did this to expend grant funds before grant
expiration rather than to enhance the grant activities.

Resource Group Inadvertently Overpaid $287 in Salary Costs.

        Additionally, the Resource Group reimbursed Trinity Life $287 more than one employee’s
actual paycheck. The Resource Group should only reimburse actual costs.

Trinity Life Maintained Poor Payroll And Personnel Files.

         Trinity Life needed to maintain better files to support payroll costs. In two instances, the
amount that Trinity Life paid employees differed from the amount listed in the employee personnel file.
In some cases, the personnel file stated the employee worked on one grant while the allocations from
payroll stated the employee worked on other grants. Trinity Life could not provide reasonable
explanations for these discrepancies. Furthermore, the Resource Group reported in November 1998
that Trinity Life’s personnel files were in “complete disarray.” In addition to other reasons cited, the
poor maintenance and inconsistencies of files and reports caused many of the ineligible costs cited in this
report. As a result of the Resource Group terminating its grant with Trinity Life, we have not made a
recommendation to ensure the accuracy and consistency of payroll and personnel information.

Resource Group’s Response and OIG Evaluation.

        The Executive Director for the Resource Group maintained that Trinity Life and not the
Resource Group violated the grant agreement. The Executive Director believed that the memorandum
unfairly punishes the Resource Group even though the Resource Group monitored Trinity Life and
terminated its relationship with Trinity Life when it discovered problems. Further, the Executive
Director did not believe HUD should hold the Resource Group accountable, especially since it obtained
supporting documentation from Trinity Life and relied on that documentation when submitting
reimbursement requests to HUD.

         We revised our memorandum to better differentiate between the Resource Group and Trinity
Life. We agree that the Resource Group took appropriate action when terminating its funding to Trinity
Life. However, the Resource Group accepted responsibility for compliance with all grant requirements
when it signed the grant agreement. Specifically, the grant agreement states: “The Recipient agrees to
comply with all requirements of this Grant Agreement and to accept responsibility for such compliance
by any entities to which it makes grant funds available.” As a result, it was accountable for Trinity Life’s
actions.




6
    For the HOME Project Case Manager, this period begins in January 1999 when Trinity Life transferred her to
    corporate staff.
                                                                                           7


Recommendations:

We recommend that HUD require the Resource Group to:

       1A. Reimburse HUD for the ineligible $21,295 expended under its 1994 HOPWA grant.

       1B. Reimburse HUD for the ineligible $12,855 expended under its 1995 SHP grant.
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Houston Regional HIV/AIDS Resource Group, Inc.