oversight

Houston Regional HIV/AIDS Resource Group, Inc. Supportive Housing Grant TX21B96-0617, Houston, Texas

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-09-27.

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 27, 2000                                           00-FW-251-1806


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.
         Supportive Housing Grant TX21B96-0617
         Houston, Texas


        As part of a nationwide review of HUD’s Continuum of Care Program, we audited the 1996
Supportive Housing Grant awarded to the Houston Regional HIV/AIDS Resource Group, Inc.
(Resource Group). The Resource Group implemented its grant activities through four subgrantees.1
During the audit period, Odyssey House did not perform any activities under the grant. During January
2000, the Resource Group requested and received HUD approval to replace two grantees.2

        To complete our audit, we performed audit work at the Resource Group and three subgrantees:
Trinity Life; Covenant House; and DePelchin. The majority of the findings related to one subgrantee,
Trinity Life. Based upon its own review, the Resource Group terminated its agreement with Trinity Life
in August 1999. Nonetheless, HUD’s agreement was with the Resource Group and therefore, we
recommend HUD take actions against the Resource Group.

          Our objectives included determining whether the Resource Group:

          • Implemented the grant in accordance with its application;
          • Expended funds for eligible activities under federal regulations and applicable cost
            principles;
          • Maintained evidence of measurable results;
1
    The original subgrantees included Odyssey House Texas, Inc.; Covenant House Texas; DePelchin Children’s
    Center; and Trinity Life Center (Trinity Life).
2
    Odyssey House and Trinity Life.
                                                                                                       2


        •   Adequately leveraged HUD funds;
        •   Expended funds timely;
        •   Expended funds for leasing in compliance with federal regulations;
        •   Met the federal requirements for supportive service costs; and
        •   Met the federal requirements for operating costs.

         To accomplish our objectives, we interviewed HUD, the Resource Group, and subgrantees’
officials; visited transitional housing locations; and reviewed the Resource Group’s policies and
procedures manual, grant application, grant agreement, technical submission, and annual progress
reports. We also reviewed applicable criteria including Office of Management and Budget Circular A-
122, “Cost Principles for Non-Profit Organizations” (Circular A-122). We analyzed the financial
records and participant files of three subgrantees.

         The audit concluded that the Resource Group generally implemented its activities consistent with
its application. The Resource Group provided technical assistance to its subgrantees. It also reviewed
its subgrantees’ single audit reports, monthly expense reports, and quarterly and annual progress
reports.

         However, the Resource Group paid for ineligible participants and did not document
homelessness as required by HUD. Two subgrantees did not maintain sufficient documentation to
support the eligibility of its participants. Further, the Resource Group did not maintain sufficient
documentation to determine whether it met the purpose of its grant. The Resource Group reported the
results to HUD in its Annual Progress Reports. We attribute the problems to staff not knowing HUD
requirements related to documenting homelessness despite the training and technical assistance provided
by HUD and the Resource Group. Also, the subgrantees did not obtain the needed information to
report its goals.

        Further, it inappropriately charged its grant the following amounts:

                                                                 Ineligible      Unsupported
        Description of Expenditure                                Amount           Amount
        Supportive Services Paid for Ineligible Participants                          $100,259
        Payroll Costs                                                $49,031             5,589
        Leasing Costs                                                 13,308
        Operating Costs                                                6,479              1,978
        Supportive Services                                            4,266              1,488

        Totals                                                      $73,084           $109,314

        Trinity Life incurred all the ineligible and unsupported costs. The Resource Group performed
reviews of Trinity Life and noted problems. After its reviews revealed problems, the Resource Group
terminated its grant with Trinity Life on August 1, 1999. Nevertheless, according to its grant agreement
                                                                                                           3


with HUD, the Resource Group agreed “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.”

        Trinity Life submitted ineligible and unsupported costs to the Resource Group, which it paid. In
addition, Trinity Life staff did not allocate salaries based upon the employees’ actual activities. The
Resource Group mistakenly relied upon Trinity Life’s billing and the Resource Group’s monitoring did
not detect the incorrect billings. As a result, the Resource Group did not comply with its grant
agreement and Circular A-122.

          We recommend that the Resource Group ensure that its subgrantees obtain and verify the
necessary information to determine participant eligibility and that it tracks goals achieved. The Resource
Group may want to develop a database to collect, analyze, and report the progress of its participants.
We also recommend that the Resource Group analyze its current operations and create measurable
criteria to accurately report grant results. The Resource Group should discuss any revised measurement
procedures with and obtain HUD approval.

        The Resource Group should revise its monitoring policies and procedures for programmatic and
financial site visits to include all grants. In addition, it should improve monitoring of the subgrantees by
documenting follow-up activities to resolve findings resulting from programmatic visits.

         The Resource Group should reimburse its grant for ineligible and unsupported expenses totaling
$182,398. Additionally, the Resource Group should revise its monitoring procedures to prevent the
future allocation of ineligible expenses to the grant. Specifically, require subgrantees to submit all
documentation for operating costs.

        On September 12, 2000, we sent the Resource Group’s Deputy Director a draft of this
memorandum to be forwarded to the Executive Director. The Executive Director responded to the
draft on September 20, 2000. We summarized his response and amended the draft as needed.

         Within 60 days please give us, for each recommendation made in this memorandum report, 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 audit.

        If you have any questions, please call William Nixon, Assistant District Inspector General for
Audit, at (817) 978-9309.
                                                                                                       4


Background.

         Title IV of the Stewart B. McKinney Homeless Assistance Act authorized the Supportive
Housing Program. The Program is designed to promote the development of supportive housing and
services. 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:

•     transitional housing;
•     permanent housing for homeless persons with disabilities;
•     innovative housing that meets the immediate and long-term needs of homeless persons; and
•     supportive services for homeless persons not provided in conjunction with supportive housing.

       The Resource Group is a Texas nonprofit corporation. The Resource Group is the primary
administrative agency for distributing government funding for HIV/AIDS programs in the Houston area.

       We audited the Resource Group’s 1996 $1,332,281 supportive housing grant (SHP-96).
HUD awarded the grant in May 1997. HUD also awarded the Resource Group supportive housing
program grants of $669,551 for 1995 and $1,321,469 for 1998. We issued an audit memorandum on
the Resource Group’s 1994 Housing Opportunities for People With Aids and 1995 Supportive
Housing Grant.3

Requirements of the Grant.

         The grant agreement incorporated the Resource Group’s application. The Resource Group’s
subgrantees performed most of the grant activities while the Resource Group acted as a pass-through
entity performing administrative duties. According to its application, the Resource Group’s subgrantees
agreed to provide transitional housing and supportive services to homeless adolescents and young
adults. The original grant lasted 3 years. However, in January 2000, HUD extended the grant 1 year
for a total of 4 years. HUD did not award any additional funds.




3
    Audit Memorandum number 00-FW-251-1805, issued on September 5, 2000.
                                                                                                               5


SUMMARY OF GRANT FUNDS AWARDED AND TYPE OF SERVICES

                                                             Number of                     Total Grant
Agency                         Type of Services              Participants Served4          Funds Awarded5
Trinity Life                   Transitional housing and                  137                    $    588,663
                               case management.
DePelchin                      Case management, child                     29                        328,387
                               care, and transportation.
Covenant House                 GED classes6, life skills,                753                        271,519
                               and transportation.
Odyssey House                  Substance abuse                             0                        105,647
                               assessment, education,
                               and treatment.
The Resource Group             Administration.                             0                        38,065
Totals                                                                   919                    $1,332,281

         Trinity Life reported it served 213 participants during the first 2 years. The Resource Group
relied on Trinity Life’s report when preparing the second annual progress report for the year ended
July 31, 1999. Following the Resource Group’s comprehensive review of Trinity Life participant files, it
determined that only 137 out of the 213 participants were eligible participants. Thus, it erroneously
reported 213 participants to HUD.

         The Resource Group proposed that subgrantees would provide a 2- to 6-week assessment of
homeless youths’ housing and service needs at Arbor House. Arbor House was the primary point of
entry into the Houston Youth Network (HYN). Trinity Life operated Arbor House. Trinity Life would
arrange for the youths to stay in transitional housing and to receive supportive services as needed until
they could safely enter stable housing.

        HUD’s definition of homelessness included “…an individual or family who lacks a fixed, regular,
and adequate nighttime residence...” HUD required the Resource Group to document homelessness to
ensure that participants were “part of the specific population targeted in the approved grant application.”
At a start-up conference for grantees, HUD staff discussed the documentation requirements for
homelessness. Representatives from the Resource Group and all four subgrantees attended the
conference. Additionally, HUD provided grantees with brochures explaining the documentation
requirements according to the type of homeless participants served.

       Under the grant agreement7, the Resource Group agreed to meet the following performance
measures:


4
    For the period of May 1997 through April 1999.
5
    For the entire grant period of May 1997 through April 2001.
6
    General Educational Development.
7
    The grant agreement required adherence to Circular A-122, which specifies cost principles for nonprofit
    organizations to be used when disbursing grant funds.
                                                                                                                  6


•     25% of homeless youth entering Arbor House will proceed directly into permanent housing;
•     50% will continue in transitional housing in one of the longer-term facilities and will retain their own
      residence for 6 months upon completing the Program;
•     75% of the participants will increase skills in independent living, further their education, and obtain
      employment;
•     100% of the participants entering the transitional housing program will be involved in developing
      their own service contract;
•     10% will voluntarily enter substance abuse treatment; and
•     80% will demonstrate greater self-sufficiency as determined by other outcome measures.

The Resource Group paid $100,259 for ineligible participants and did not have documentation
of homelessness as required by HUD.

         Trinity Life and Covenant House, two subgrantees, did not have adequate documentation to
support that a sample of program participants met HUD’s homeless requirements. According to a
detail review by the Resource Group, Trinity Life served 48 ineligible participants and did not have files
for another 28 participants. By the results of the Resource Group’s review, HUD incorrectly paid the
Resource Group $100,259 for these 76 ineligible participants. It did not appear that Trinity Life knew
what documentation HUD required it to review and maintain.

        Neither Trinity Life nor Covenant House documented homelessness as required by HUD for 17
out of 17 participant files reviewed. 8 Of those 17 participants, 2 did not meet HUD’s definition of
homelessness. One person participated in Trinity Life’s HOME Program; therefore, was ineligible to
participate under the SHP-96 grant. Another participant cited leaving home because he “lacked
freedom.” In four instances, the files contained contradictory information on whether the participant was
homeless. For instance, one file contained a standard form stating that the person was “literally
homeless and residing in a place not meant for human habitation.” However, other information in the file
indicated that the person lived with friends.




8
    The sample included 24 out of 919 total files. (See the chart in the Background Section.) We reviewed seven
    participant files of DePelchin’s that met HUD’s requirements for homelessness.
                                                                                                             7


SUMMARY OF REVIEW OF PARTICIPANT FILES FOR ELIGIBILITY

                                                                                   Covenant
Description                                                     Trinity Life       House      DePelchin   Totals
Participant files reviewed.                                          7                10          7          24
Files contained HUD required documents.                              0                 0          7           7
Files did not contain HUD required documents.                        7                10          0          17
Participants clearly did not meet HUD’s definition of                1                 1          0           2
homelessness.
Files did not contain sufficient information to determine              6               0          0           6
eligibility. Four files contained conflicting information.
Files did not have documents required by HUD.                          0              9           0           9
However, files contained other information indicating
homelessness.

Resource Group’s Own Review Revealed Problems with Trinity Life.

          As a result of Trinity Life’s insufficient file documentation, the Resource Group cannot conclude
that it served the intended population. By April 2000, the Resource Group’s Housing Director had
completed his onsite inspection of Trinity Life’s participant files located at Arbor House. His
comprehensive review confirmed our sample results. The Housing Director found that Trinity Life did
not document participant homelessness as required by HUD. Of the 213 participants reported, 137
(64.32%) appeared to be homeless based on notes and other information in their files and 76 (35.68%)
were obviously ineligible. Based upon its own comprehensive review, the Resource Group used
$100,2599 of the grant funds to pay for ineligible participants.

        The Resource Group and all of its subgrantees received HUD training on program requirements
including participant eligibility and documentation of eligibility. Further, the Resource Group notified its
subgrantees of documentation requirements. Without such documentation, the Resource Group and
HUD have no tangible evidence that the subgrantees served the intended population.

The Resource Group did not reliably measure its Grant accomplishments.

         The Resource Group could not support the progress reported to HUD in its annual progress
reports. HUD requires grantees to submit annual progress reports on the goals listed in its application.
HUD can use this information to evaluate the successfulness of a grantee’s program. However, Trinity
Life did not maintain support for its accomplishments that it reported to the Resource Group and
subsequently to HUD. Furthermore, neither Trinity Life nor Covenant House obtained information from
participants once they left transitional housing. Therefore, neither agency could report on performance
measures relating to participant tracking. The Resource Group’s monitoring did not ensure that



9
    The Resource Group reimbursed Trinity Life $341,368 for supportive services.
                                                                                                                8


subgrantees kept accurate records for measuring performance. As a result, HUD could not rely on the
Resource Group’s progress reports when determining the program’s success.10

Trinity Life’s files inconsistent and unreliable.

        Trinity Life did not maintain its participant files to facilitate reconfirmation of its reports. In some
cases, Arbor House files contained information that directly contradicted Trinity Life’s record of goals
met. For instance, Trinity Life reported that a participant enrolled in GED classes. However, the file
contained a letter from the GED academy stating that the participant had not enrolled. The file
contained no other documentation supporting that the participant enrolled in GED classes or attended
such classes while at Arbor House.

         Trinity Life’s former Program Administrator stated that Trinity Life did not keep a list of
participants meeting its goals. Staff did not track participant progress anywhere besides the participant
files and a notebook detailing a partial list of participants meeting two of six goals. To report its
accomplishments to the Resource Group, Trinity Life staff manually went through the participant files
and counted the number of participants meeting program goals.

         According to one goal, Trinity Life intended to help each participant establish an individual plan
that outlined what the participant hoped to accomplish. Out of nine files reviewed, none supported that
the participants met their plan, even though Trinity Life reported six of the nine participants as obtaining
jobs, attending GED classes, or obtaining their GED diplomas.

       Trinity Life’s method of calculating and documenting its goals is woefully inadequate. The
Resource Group relied upon Trinity Life’s representations when it reported its results to HUD.

Subgrantees did not track participants after leaving Program.

        Trinity Life and Covenant House11 did not formally follow up on participants once they left the
program as required by two of its goals. One of the goals required that 25% of homeless youth entering
Arbor House would proceed directly into permanent housing. The Resource Group reported that it met
that goal. However, Trinity Life did not measure this goal. Due to the targeted population, the goal
appears to be unrealistic.

         The other goal required that 50% of participants “will continue in transitional housing in one of
the longer-term facilities of the HYN, and upon completing the program, retain their own residence for 6
months.” The Resource Group reported that it did not meet that goal. The Resource Group stated that
it was difficult to get information from participants once they left the program.


10
     The Resource Group resubmitted an annual progress report as a result of its monitoring of Trinity Life.
11
     Over a 2-year period, Covenant House had 753 participants as opposed to DePelchin’s 29 participants. Many of
     Covenant House’s participants received services for a few days as opposed to DePelchin’s participants who
     stayed for several months.
                                                                                                                    9


          The Resource Group’s progress reports to HUD support that it did not follow up with
participants once they left the program. In its second Annual Progress Report, the Resource Group
stated that 229 out of 309 (74%) of its participants moved into permanent housing and 442 out of 627
(70%) left without permanent housing and had an “unknown living situation.” Neither Trinity Life nor
Covenant House followed up with participants to determine whether it met either of these goals. As a
result, the Resource Group did not know how many participants obtained and remained in permanent
housing and could not accurately report whether the program was a success or not.

         In an apparent contradiction, the Resource Group’s subgrantees accepted into the Program
individuals who cited themselves homeless when living with family and friends.12 The Resource Group
then reported participants obtained permanent housing when they moved in with family and friends. The
Resource Group reported that 513 out of 975 (53%) program participants previously resided with
family and friends. Out of the 309 participants that moved into permanent housing, 266 (86%) moved
in with family and friends. The Resource Group did not have any clear guidelines of when it considered
living with family and friends homelessness or permanent housing.

        The program’s success depended upon the participants meeting the goals set during the initial
assessment at Arbor House. The Resource Group and its subgrantees proposed to help participants
increase their living skills, such as attending life skills training, obtaining substance abuse treatment,
attending GED classes, and obtaining jobs. Without documentation on the participants, the Resource
Group does not know how effective its program is.

        The Resource Group should ensure subgrantees keep accurate records for following up with
participants and measuring performance. The Resource Group should analyze its current operations
and create measurable criteria to accurately measure grant activities. The Resource Group should
discuss the revised measurement procedures with and obtain approval from HUD. Furthermore, the
Resource Group should consider centralizing participant data files.

The Resource Group reimbursed Trinity Life for ineligible and unsupported payroll, leasing,
operating, and supportive service costs.

        The Resource Group paid Trinity Life $82,139 for ineligible and unsupported payroll, leasing,
operating, and supportive service costs. Trinity Life submitted inaccurate reports to the Resource
Group, which based its grant draw downs on those reports. As a result, HUD spent funds on costs that
did not benefit homeless youths.




12
     HUD has strict requirements when the individual lived with family and friends. As stated elsewhere in the report,
     the Resource Group did not adhere to HUD’s requirements.
                                                                                                            10


                                                                       Ineligible Unsupported
                  Description of Expenditure                           Amount     Amount
                  Payroll Costs                                          $49,031       $5,589
                  Leasing Costs                                            13,308
                  Operating Costs                                           6,479        1,978
                  Supportive Service Costs                                  4,266        1,488
                  Totals                                                 $73,084       $9,055

The Resource Group paid Trinity Life $49,031 for ineligible payroll costs.13

        Of the 23 employees reviewed, Trinity Life inappropriately paid $49,031 to 12 employees with
grant funds.14 The ineligible costs included payments of $35,742 for nine employees for time spent
working on unrelated programs; $11,230 for two administrative employees inappropriately charged to
the supportive service line item; $1,369 paid to a GED Rebound Program Manager while working for
the GED preparation program not funded by the grant, and $690 for two employees for a week prior to
them beginning work at the organization.

        Circular A-122 required the Resource Group to charge grants only for “documented payrolls”
and include only those costs “…incurred specifically for the award…” It also prohibited the Resource
Group from charging costs to the grant that did not benefit the grant. Furthermore, Circular A-122
required Trinity Life to keep activity reports that “represent a reasonable estimate of the actual work
performed by the employee.” Either the employee or a responsible supervisory official who has a “first
hand knowledge of the activities performed by the employee” must sign the activity reports.

Trinity Life Paid $35,742 for employees who did not work on the grant.

         The Resource Group used $35,742 in grant funds to reimburse Trinity Life for nine employees’
salaries for time they spent working on unrelated programs. The employees involved and amounts
included:




13
     This includes 15% ($6,395) fringe benefits.
14
     Two employees are included in two different categories of ineligibility. The amounts do not overlap.
                                                                                                                   11


                                                                             EMPLOYEE’S
                                                                           DESCRIPTION OF
                                                                               ACTIVITY
       EMPLOYEE TITLE/DATES                                              REPORTED ON TIME TOTALS
                                                                                SHEET
       Maintenance Program Manager                                       Maintenance; Trinity Life $15,237
       1998 8/16 - 9/15; 10/16 – 12/31                                   Emergency Shelter
       1999 1/1 – 1/15
       Street Wise Case Manager                                          Street Wise                          8,050
       1998 2/1 - 4/30; 6/1 – 6/15; 7/1 – 7/15
       GED Rebound Program Manager                                       Street Wise                          4,140
       1999 1/1 – 1/15; 2/1 – 2/15; 3/1 – 3/15;
               4/1 – 4/15; 5/16 – 5/31
       Sand Dollar Emergency Shelter Case Manager                        Sand Dollar                          4,047
       1998 4/16 - 7/31; 8/16 - 10/15
       Youth Worker                                                      HOME                                 1,474
       1998 6/1 – 6/15; 7/16 – 7/31; 11/1 – 11/15
       Street Wise Youth Worker                                           Street Wise                         1,014
       1998 5/1 - 6/15
       Arbor House Outreach Worker                                       HOME                                  958
       1998 5/16 – 5/31
       Arbor House Youth Worker                                          The Ranch; Sand Dollar                483
       1998 4/16 – 4/30; 5/16 –5/31
       Director of Finance                                               Trinity Life Shelter,                 339
       Executive Director’s daughter                                     Rosenberg
       1998 7/16 – 7/31; 9/16 - 9/30
       Total                                                                                              $35,742

         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. They made those allocations
after the employees and their immediate supervisors signed the time cards. The employees reported
working on other programs.15 Also, the employees’ titles suggest Trinity Life inappropriately allocated
their salaries.

        For instance, Trinity Life paid the Street Wise Case Manager from SHP-96 funds. Ryan White
grant funds paid for Street Wise, a day program for homeless persons.16 The SHP-96 grant did not
include Street Wise. According to the Case Manager, he only serviced Street Wise participants during
those periods listed. Similarly, Trinity Life inappropriately used grant funds to pay the Sand Dollar
Emergency Shelter Case Manager. The Texas Youth Commission and Child Protective Services paid
for Sand Dollar. Trinity Life should not have paid either of these salaries from SHP-96 funds.



15
     The employees reported either the facility or the program in the upper right-hand corners of their time cards. We
     also interviewed employees to determine exactly what program they assisted.
16
     The Department of Health and Human Services administers Ryan White grants.
                                                                                                      12


        The Arbor House Outreach Worker worked for the HOME Program. The HOME Program
included a 1995 SHP grant and a 1994 Housing Opportunities for People With Aids grant.17 During
the time period that Trinity Life used grant funds to pay the Outreach Worker, three programs operated
out of Arbor House.

Other ineligible salary costs.

        Trinity Life inappropriately charged $11,230 for two administrative employees under supportive
services. Trinity Life and ultimately the Resource Group should have included these salaries as an
administrative cost. Trinity Life charged its grant $9,329 for the corporate office's secretary. Further,
Trinity Life allocated to its grant $1,901 for the salary of another employee who performed general
administrative duties for all of Trinity Life’s grants and programs.

         Trinity Life charged its grant $9,125 for a GED Rebound Program Manager (Manager).
According to Trinity Life staff, the Manager prepared youths for the GED class. Trinity Life conducted
the program at Street Wise. Trinity Life did not include either the Rebound Program or Street Wise in
the SHP-96 grant. Trinity Life did not limit the Rebound Program to only Arbor House participants. If
Trinity Life wanted to pay any of the Manager’s salary with grant funds, it should have allocated the
costs to various programs served. Additionally, the Manager stated that she spent approximately 85%
of her time on Arbor House activities in the capacity of a youth worker. At a minimum, the Resource
Group should reimburse HUD for 15% of the Manager’s salary or $1,369.18

        Also, Trinity Life paid two employees $690 for a week prior to them beginning employment at
the organization.19

The Resource Group paid $5,589 for unsupported payroll costs for three employees.20

         Trinity Life inappropriately charged the grant $4,025 for the Maintenance Program Manager’s
       21
salary. The grant application between the Resource Group and HUD authorized Trinity Life to hire
one Project Coordinator, two Case Managers, one Unit Manager, three Center Workers, and one
Youth Worker. It did not authorize a “Maintenance Program Manager.” Trinity Life claimed the
employee worked at Arbor House in the capacity of Program Administrator. The employee’s file
indicated that his title changed to Program Administrator 2 months after Trinity Life began charging his
salary to the grant. Further, the employee’s salary of $3,500 per month appears to be unreasonably
high compared to $2,000 per month paid to Project Coordinators immediately preceding and following
his tenure.



17
     HUD funded both of these grants.
18
     This amount does not include the amounts we noted where the Manager worked at Street Wise.
19
     Both of these employees were related to Trinity Life’s Chief Administrator.
20
     This includes 15% ($729) fringe benefits.
21
     This employee was the son of the Executive Director.
                                                                                                        13


         Two employees charged to the SHP-96 grant did not report where they worked on their time
sheets. On other time sheets, they reported that they worked at either Street Wise or Sand Dollar. The
employees’ files confirm that Trinity Life did not hire them to work at Arbor House on SHP-96 grant
activities.22 The Resource Group should either provide documentation as to how these employees
benefited the grant or reimburse its grant for the $1,564 expended for their salaries.

Resource Group aware of problems.

         The Resource Group noted problems with Trinity Life’s allocation of salaries during its desk
monitoring of monthly expense reports. The Resource Group determined that Trinity Life did not
allocate the time sheets by grant. Trinity Life’s Finance Director assured the Resource Group that it
would correct the problem. However, Trinity Life did not correct the problem, and the Resource
Group continued to reimburse it based upon incorrect time sheets.

       The Resource Group should reimburse its grant $49,031 and $5,589 for the ineligible and
unsupported salary costs charged to the grant.

The Resource Group paid $13,308 for ineligible leasing costs.

        Contrary to its grant application, Trinity Life utilized three bedrooms, instead of five, for its
participants. The application required Trinity Life, the Resource Group’s subgrantees, to use no less
than five bedrooms for its participants. According to the application, each participant (up to ten
participants) would have a private bedroom. However, another part of the application reported that ten
beds would be in five bedrooms. Despite these contradictions, HUD approved the grant application.

        Trinity Life did not seek or obtain either the Resource Group’s or HUD’s approval for the
decrease in bedrooms. As a result, each youth shared bedroom facilities with as many as three other
people instead of having a private bedroom or sharing with a roommate. The Resource Group did not
become aware that Trinity Life decreased the number of bedrooms until just prior to terminating its
subgrant. Management contends the youth and program benefited from its decision. Nonetheless,
Trinity Life should not charge HUD for five bedrooms when it utilized only three. Additionally, the
Resource Group did not submit information to HUD to support that Arbor House’s rent was reasonable
when compared to similar houses in the same area. HUD required this information prior to approving
programs for grant funds. Based upon our calculations, the Resource Group should reimburse its grant
$13,308 for additional rooms not utilized.23




22
     The files listed their titles as Street Wise Youth Worker and Sand Dollar Case Manager.
23
     40% of total paid leasing costs of $33,271.
                                                                                                          14


The Resource Group paid Trinity Life $6,479 and $1,978 for ineligible and unsupported
operating costs.

        Trinity Life incorrectly included ineligible and unsupported expenses in its computation of
operating costs. HUD authorized grant funds to pay for a portion of Arbor House’s operating costs.
Operating costs included utilities and supplies in connection with Arbor House. During the first 2 years
of the grant, HUD agreed to pay 75% of the grant’s operating costs. During the remaining term of the
grant, HUD agreed to pay 50% of the operating costs. According to the HUD-approved operating
budget, HUD agreed to pay for electricity, water, garbage, telephone, and supplies. HUD did not
agree to pay for other costs, including maintenance, staff, insurance, furnishings, and food. Trinity Life
agreed to match the operating costs with $15,000 for household furnishings and $5,000 for food.

        Circular A-122 allowed the Resource Group to allocate costs to the grant “in reasonable
proportion to the relative benefits received.” Specifically, the costs should: be “incurred specifically for
the award;” benefit “the award and other work and can be distributed in reasonable proportion to the
benefits received;” or “is necessary to the overall operation of the organization.” Also, Circular A-122
required the Resource Group to adequately document costs.

        Trinity Life repeatedly included ineligible and unsupported costs in its computation of total
operating costs. The audit noted $9,140 of ineligible and $2,790 of unsupported costs included in
Trinity Life’s computation.

         For instance, Trinity Life charged $2,067 for the purchase of a truck. Trinity Life contended
that it used the truck to deliver supplies and food to Arbor House. Nonetheless, HUD did not approve
the truck in the grant budget. The remaining ineligible operating costs included supplies shipped to other
locations besides Arbor House, the electricity bill for another project, and ineligible telephone calls.
These costs did not benefit program participants as required by Circular A-122.

        More than half of the unsupported costs consisted of food ($1,165) and contract labor ($700).
Trinity Life sometimes wrote checks for flat amounts so that its staff could purchase food and put the
change in petty cash for future use. Trinity Life did not have receipts for funds spent in excess of actual
food purchases. Trinity Life could not provide contracts or invoices for $650 paid to a relative of
Trinity Life’s Chief Administrator and $50 paid to another individual.

         For the term of its subgrant, Trinity Life submitted to the Resource Group a monthly claim for
HUD’s portion of operating costs. The Resource Group did not require Trinity Life to submit support
for its portion of the operating costs. The Resource Group did not comply with Circular A-122.

        The Resource Group should reimburse the grant $6,479 for ineligible costs and either provide
supporting documentation or reimburse the grant $1,978 for unsupported costs.24 Further, the


24
     The Resource Group’s matching amount should be factored in the calculation.
                                                                                                        15


Resource Group should revise its monitoring to improve its detection of ineligible and unsupported costs
submitted by its subgrantees.

The Resource Group paid Trinity Life $4,266 and $1,488 for ineligible and unsupported
supportive service costs.

         In its monthly expense reports, Trinity Life incorrectly requested reimbursement of $4,266
ineligible and $1,488 unsupported costs. The ineligible costs included: copier maintenance beyond the
term of the grant ($1,665); supplies sent to facilities not funded by the grant ($1,428); mileage and
miscellaneous charges not approved by HUD ($614); and copier rental and supplies not approved by
HUD ($559). The unsupported costs included: supplies ($809); metro bus tokens ($296); contract
labor ($250); office supplies ($127); and mileage for staff not working on the grant ($6).

        Trinity Life contended that supplies sent to other locations were actually used for grant
participants. Management stated that it saved on shipping costs for the supplier to deliver the entire
order to one place. However, the vendors did not charge shipping costs on the ineligible invoices. This
resulted in HUD overpaying $5,754 for supportive service costs.

        The Resource Group should reimburse the grant $4,266 for ineligible costs and either provide
supporting documentation or reimburse the grant $1,488 for unsupported costs.

The Resource Group monitored Trinity Life.

         The Resource Group’s reviews noted similar conditions. Due to the problems it noted, the
Resource Group terminated its agreements with Trinity Life. Unfortunately, the Resource Group signed
a grant agreement with HUD taking responsibility for the actions of its subgrantees.

Resource Group’s Response and OIG Evaluation.

         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 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 stated “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 is
accountable for its subgrantee’s actions.
                                                                                                          16


Recommendations:

We recommend that HUD require the Resource Group to:

1A. Ensure that its subgrantees obtain and verify the necessary information to determine participant
    eligibility and that it tracks goals achieved.

1B. Analyze its current operations and create measurable criteria to accurately report grant results.

1C. Revise its monitoring policies and procedures for programmatic and financial site visits to include
    all grants.

1D. Improve monitoring of the subgrantees by documenting follow-up actions resulting from
    programmatic visits’ findings.

1E. Reimburse its grant for $73,084 ineligible costs paid from grant funds.

1F. Provide supporting documentation or reimburse its grant for $109,314 unsupported costs paid
    from grant funds documentation.

1G. Revise its monitoring procedures to prevent the future allocation of ineligible costs to the grant.
                                                                                                17


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