oversight

City of Ironton Community Development Block Grant Program, Ironton, OH

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-11-16.

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

              AUDIT REPORT




                CITY OF IRONTON
       COMMUNITY DEVELOPMENT BLOCK GRANT
                   PROGRAM

                  IRONTON, OHIO

                  01-CH-243-1001

                NOVEMBER 16, 2000




               OFFICE OF AUDIT, MIDWEST
                   CHICAGO, ILLINOIS




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                                                                       Issue Date
                                                                          November 16, 2000
                                                                      Audit Case Number
                                                                          01-CH-243-1001




  TO:            Lana J. Vacha, Director of Community Planning and Development,
                   Ohio State Office

                      /signed/
  FROM:          Dale L. Chouteau, District Inspector General for Audit, Midwest

  SUBJECT:       City of Ironton
                 Community Development Block Grant Program
                 Ironton, Ohio

  We completed an audit of the City of Ironton’s Community Development Block Grant Program. The
  audit resulted from a complaint to our Hotline. The complainant’s allegations were that the City
  misused Community Development Block Grant funds and did not follow proper procurement
  practices when awarding contracts paid with Block Grant funds. The complainant based his
  allegation that Block Grant funds were misused on information from HUD’s 2020 Internet map
  which provides a general description and location of where HUD funds were spent. The
  objectives of our audit were to determine whether the complainant’s allegations were substantiated and
  whether HUD’s rules and regulations were properly followed.

  HUD’s 2020 map did not accurately show the locations where HUD funds were used in the City of
  Ironton. Nonetheless, we found that the City did not follow HUD’s, the State of Ohio’s, and/or the
  City’s own requirements regarding the use of HUD funds (Community Development Block Grant and
  HOME). We also found that the City and/or the Housing Standards Officer for the Ironton-
  Lawrence County Area Community Action Organization, which the City contracted with to
  administer its Community Development Block Grant Program, did not properly administer the
  City’s HUD funded rehabilitation activities.

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

  Should you or your staff have any questions, please contact me at (312) 353-7832.




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  Executive Summary
  We completed an audit of the City of Ironton’s Community Development Block Grant Program. The
  audit resulted from a complaint to our Hotline. The complainant’s allegations were that the City
  misused Community Development Block Grant funds and did not follow proper procurement
  practices when awarding contracts paid with Block Grant funds. The complainant based his
  allegation that Block Grant funds were misused on information from HUD’s 2020 Internet map
  which provides a general description and location of where HUD funds were spent. The
  objectives of our audit were to determine whether the complainant’s allegations were substantiated and
  whether HUD’s rules and regulations were properly followed.

  HUD’s 2020 map did not accurately show the locations where HUD funds were used in the City of
  Ironton. Nonetheless, we found that the City did not follow HUD’s, the State of Ohio’s, and/or the
  City’s own requirements regarding the use of HUD funds (Community Development Block Grant and
  HOME). We also found that the City and/or the Housing Standards Officer for the Ironton-
  Lawrence County Area Community Action Organization, which the City contracted with to
  administer its Community Development Block Grant Program, did not properly administer the
  City’s HUD funded rehabilitation activities.


                                         The City of Ironton did not follow HUD’s regulation, the State
   The City Did Not Ensure               of Ohio’s requirements, or the City’s Community Housing
   That Units Met                        Improvement Program policies to ensure assisted houses met
   Residential Rehabilitation            the State’s Residential Rehabilitation Standards. The City used
   Standards After Housing               $35,376 of HUD funds to pay for housing rehabilitation work
   Assistance                            that was improperly performed or that was not provided. The
                                         City also did not include housing rehabilitation work in
                                         specifications for five houses. The Housing Standard’s Officer
                                         for the Community Action Organization incorrectly certified
                                         that the housing rehabilitation services provided to seven
                                         houses met the State’s Standards when they did not.

                                         The City of Ironton did not follow HUD’s regulation, the State
   The City Provided                     of Ohio’s Grant Agreements, and/or the City’s requirements
   Housing Assistance To                 when it provided housing rehabilitation assistance to families
   Households That                       whose incomes exceeded the income guidelines. The City:
   Exceeded The Income                   used $38,934 to assist seven properties which were not
   Guidelines                            occupied by low or moderate income families; lacked
                                         documentation to show that $111,928 in housing assistance
                                         paid to 11 other households benefited low or moderate income
                                         individuals; and provided $145,995 in totally deferred
                                         assistance to nine households when they had the ability to repay
                                         part of their housing assistance. The City failed to obtain
                                         income and/or expense documentation for six other households
                                         to determine if they had the ability to repay their housing
                                         rehabilitation assistance.

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  Executive Summary


                              The City of Ironton did not follow its requirements or the State
   The City Did Not           of Ohio’s Grant Agreements to sufficiently protect the housing
   Sufficiently Safeguard     rehabilitation work provided to houses in the Community
   $58,353 In Housing         Housing Improvement Program. The City provided $58,353
   Rehabilitation Work        ($48,810 in Community Development Block Grant funds and
                              $9,543 of HOME funds) in housing assistance to four of 84
                              households reviewed without property hazard insurance and/or
                              without recording mortgage liens, deed restrictions, or
                              covenants on the assisted properties.

                              The City of Ironton did not establish procedures and
   The City Needs To          controls to prevent conflicts of interest in the award of
   Establish Procedures And   housing rehabilitation assistance. The City improperly
   Controls To Prevent        provided Community Development Block Grant funds for
   Conflicts Of Interest      housing rehabilitation assistance when conflicts of interest
                              existed.

                              The City of Ironton did not maintain an effective system of
   The City Needs To          controls over its contracting process. The City failed to follow
   Improve Its Contracting    HUD’s regulations, the State of Ohio’s requirements, and/or
   Process                    the City’s Charter for full and open competition regarding the
                              procurement of housing rehabilitation services, demolition
                              services, parks and recreation equipment, and administrative
                              services. The City did not ensure that the specifications for the
                              housing rehabilitation contracts showed the requested materials
                              and/or services.

                              We recommend that the HUD’s Ohio State Office Director of
   Recommendations            Community Planning and Development, in conjunction with
                              officials from the State of Ohio, assure that the City implements
                              controls to correct the weaknesses cited in this report. We also
                              recommend the Office of Community Planning and
                              Development ensures that the City takes appropriate action on
                              all other concerns addressed in this report.

                              We presented our draft findings to the City’s Mayor and
                              HUD’s staff during the audit. We held an exit conference with
                              the City on August 21, 2000. The City disagreed that some of
                              the cited housing rehabilitation work was improperly
                              performed or not provided. However, the City agreed to have
                              the housing rehabilitation corrected or indicated that the
                              applicable contractor repaired the deficient rehabilitation work.
                              The City pledged to provide documentation to support the use
                              of HUD funds. The City disagreed that: housing assistance
                              was provided to households that had the ability to repay their

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       assistance; it improperly provided assistance to units owned by
       the Ironton-Lawrence County Community Action Organization
       or relatives of a Community Action Organization’s employee;
       and it violated the City’s Charter regarding the award of the
       administration contracts to the Community Action
       Organization. The City indicated that a full response to the
       findings could not be made until a full review was completed.

       We included excerpts of the City’s comments with each
       finding (see Findings 1, 2, 3, 4, and 5). The complete text
       of the comments are in Appendix B with the exception of 25
       attachments that were not necessary for understanding the
       City’s comments. A complete copy of the City’s comments
       with the attachments were provided to HUD’s Ohio State
       Office Director of Community Planning and Development.




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  Management Memorandum                                                   i



  Executive Summary                                                     iii



  Introduction                                                           1



  Findings

  1    The City Did Not Ensure That Units Met Residential
       Rehabilitation Standards After Housing Assistance                 3


  2    The City Provide Housing Assistance To Households
       That Exceeded The Income Guidelines                              13


  3    The City Did Not Sufficiently Safeguard $58,353 In
       Housing Rehabilitation Work                                      21


  4    The City Needs To Establish Procedures and Controls
       To Prevent Conflicts of Interest                                 27


  5    The City Needs To Improve Its Contracting Process                33



  Management Controls                                                  45



  Follow Up On Prior Audits                                            49




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  Appendices
          A Schedule Of Questioned Costs    51

          B Auditee Comments                53

          C Distribution                    79




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  Introduction
  The Community Development Block Grant Program was established by Title I of the Housing and
  Community Development Act of 1974. The objective of the Program is to provide grants to carry
  out a wide range of community development activities directed toward neighborhood
  revitalization, economic development, and improved community facilities and services. Maximum
  priority is given to activities that will benefit low or moderate income families, or aid in the
  prevention or elimination of slums and blight. Block Grant funds may also be used to meet other
  community development needs that present a serious and immediate threat to the health and
  welfare of the community.

  The Housing and Community Development Act of 1974 was amended in 1981 to allow each
  State the option to administer Community Development Block Grant funds. If this option is
  exercised, HUD provides the State with Block Grant funds to be distributed to local governments
  that do not receive funds directly from HUD. Between October 1992 and June 2000, the City of
  Ironton received $3,694,600 in Block Grant funds from the State of Ohio.

  The City was organized under the laws of the State of Ohio. The City is governed by a Mayor
  and a seven-member City Council. The Mayor of the City is Robert Cleary. The City contracted
  with the Ironton-Lawrence County Community Action Organization to administer its Community
  Development Block Grant Program.

  The records for the City’s Block Grant Program are maintained at the City of Ironton’s City
  Center and the Community Action Organization’s office. The City Center is located at 301 South
  3rd Street, Ironton, Ohio. The Community Action Organization’s office is located at 305 North
  5th Street, Ironton, Ohio.


   Audit Objectives                   Our audit objectives were to determine whether the City of
                                      Ironton properly used Community Development Block
                                      Grant funds and followed proper procurement practices
                                      when awarding contracts paid with Block Grant funds.

                                      We conducted the audit at HUD’s Ohio State Office, the
   Audit Scope And                    State of Ohio’s Office of Housing and Community
   Methodology                        Partnerships, the City of Ironton’s City Center, and the
                                      Ironton-Lawrence County Area Community Action
                                      Organization’s office. We performed our on-site audit work
                                      between September 1999 and April 2000.

                                      To determine whether HUD’s rules and regulations were
                                      properly followed, we reviewed the City’s: Community
                                      Development Block Grant and HOME Program Grant
                                      Agreements with the State; Community Housing Improvement
                                      Program policies (formerly the Comprehensive Housing
                                      Program); Block Grant Program administration contracts;
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  Introduction


                   audited financial statements; Block Grant contracts for
                   demolition services and parks and recreation equipment; and
                   Community Housing Improvement Program participants’ files.
                   We also reviewed: HUD’s and the State’s files for the City;
                   Section 731 of the Ohio Revised Code; the State’s Handbooks
                   for the Community Development Block Grant Program; and
                   Title 24 of the Code of Federal Regulations Parts 85, 92, and
                   570.

                   We interviewed: HUD’s staff; State and City officials;
                   Community Action Organization’s employees; City
                   contractors; and Community Housing Improvement Program
                   participants and contractors. In addition, our inspector
                   inspected seven houses that received housing rehabilitation
                   assistance through the City’s Community Housing
                   Improvement Program to determine whether the houses met
                   the State’s Residential Rehabilitation Standards. The seven
                   houses were selected because the homeowners indicated in
                   their responses to our questionnaire or through interviews we
                   conducted, that their housing rehabilitation work was
                   performed incorrectly or was not provided.

                   The audit covered the period October 1, 1991 to August 31,
                   1999. We extended our audit period as necessary. We
                   conducted our audit in accordance with generally accepted
                   government auditing standards.

                   We provided a copy of this report to the City’s Mayor and
                   the State’s Deputy Director of Community Development for
                   the Department of Development.




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                                                                                                Finding 1


        The City Did Not Ensure That Units Met
        Residential Rehabilitation Standards After
                   Housing Assistance
  The City of Ironton did not follow HUD’s regulation, the State of Ohio’s requirements, or the City’s
  Community Housing Improvement Program policies to ensure assisted houses met the State’s
  Residential Rehabilitation Standards. The City used $35,376 of HUD funds (Community Development
  Block Grant and HOME) to pay for housing rehabilitation work that was improperly performed or that
  was not provided. The City also did not include housing rehabilitation work in specifications for five
  houses. The Housing Standard’s Officer for the Ironton-Lawrence County Area Community Action
  Organization, which the City contracted with to administer its Community Housing Improvement
  Program, incorrectly certified that the housing rehabilitation services provided to seven houses met the
  State’s Residential Rehabilitation Standards when they did not. The problems occurred because the
  Community Action Organization did not have sufficient procedures and controls over the Program to
  ensure houses met the State’s Standards after they received housing rehabilitation assistance. The City
  also did not monitor the Community Action Organization to ensure it administered the Program as
  required. As a result, HUD funds were not efficiently and effectively used. HUD also lacks assurance
  that houses met the State’s Standards after receiving housing rehabilitation assistance.


                                         24 CFR, Subpart F, Part 92.251 requires housing rehabilitated
   HUD’s Regulation                      with HOME funds to meet all applicable local codes,
                                         rehabilitation standards, ordinances, and zoning ordinances at
                                         the time of project completion.

                                         Page 6 of the State of Ohio’s Home Investment Partnership
   State’s Requirements                  Program Grant Agreement effective August 1, 1998 with the
                                         City of Ironton states all projects and units assisted with
                                         HOME funds must meet the requirements set forth in 24 CFR
                                         Part 92 Subpart F. Page 3 of Attachment B for the Grant
                                         Agreement requires all rehabilitation work paid for with
                                         HOME funds to meet or exceed the State’s Residential
                                         Rehabilitation Standards.

                                         The State’s Small Cities Community Development Block
                                         Grant Program Grant Agreement, page 4 of Attachment B,
                                         effective October 1, 1996 with the City of Ironton requires all
                                         rehabilitation work paid for with Block Grant funds to meet or
                                         exceed the State’s Residential Rehabilitation Standards.

                                         The State’s Non-Participating Jurisdiction Housing Handbook,
                                         page 29, requires the City of Ironton to ensure all rehabilitation

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  Finding 1


                               work be done in accordance with the State’s Residential
                               Rehabilitation Standards.

                               The City’s Fiscal Years 1996 and 1998 Community Housing
   City’s Policies And         Improvement Program’s Policies and Procedures, page 74,
   Procedures                  says the State’s Residential Rehabilitation Standards will be
                               utilized as the standards for repairs under the Homeowner
                               Rehabilitation Program.

                               We selected a sample of seven of the 41 housing units that
   Sample Selection And        received housing rehabilitation funds through the City’s
   Inspection Results          Community Housing Improvement Program. We selected the
                               seven houses to determine whether the City properly paid for
                               housing rehabilitation work.        Housing rehabilitation
                               contracts were executed for the seven houses between
                               October 1997 and January 1999. The seven houses were
                               selected because the homeowners indicated in their
                               responses to our questionnaire or through interviews we
                               conducted, that their housing rehabilitation work was
                               performed incorrectly or was not provided. The seven
                               houses were inspected by our inspector between November
                               18, 1999 and November 24, 1999. Our inspector was only
                               able to inspect the exterior of the house located at 3034
                               South 6th Street due to the homeowner being sick.

                               We provided the inspection results to HUD’s Ohio State
                               Office Director of Community Planning and Development
                               and the City’s Mayor.

                               The City used $35,376 of HUD funds to pay for housing
   HUD Funds Were Used         rehabilitation work that was improperly performed ($24,714)
   To Pay For Rehabilitation   or that was not provided ($10,662). The improper work
   Work That Was               and/or the work that was not provided occurred at all seven
   Improperly Performed Or     houses that we inspected. The City provided $105,196 in
   Not Provided                housing rehabilitation assistance to the seven houses. The
                               incomplete work or the work not provided was 34 percent of
                               the total HUD funding for the seven houses. The City
                               recorded property liens against five of the seven houses for the
                               housing rehabilitation that was incorrectly performed or not
                               provided.

                               The following table shows the amount of work that was
                               improperly performed or not provided for each house.




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                                                                Finding 1


                                             Work
                                          Improperly       Work Not
             Address of House             Performed        Provided
       520 Etna Street                      $9,795          $4,475
       609 Lawrence Street                   4,765             432
       914 Walnut Street                     4,125             525
       1114 South 10th Street                2,699               0
       3034 South 6th Street                 2,625             500
       305 Batham Lane                         525             100
       3024 South 4th Street                   180           4,630
                   Totals                  $24,714         $10,662

           The City of Ironton established its Community Housing
           Improvement Program to provide housing rehabilitation
           assistance to low or moderate income homeowners in the City.
           The housing assistance was intended to correct items that did
           not meet the State of Ohio’s Residential Rehabilitation
           Standards. The Housing Standards Officer for the Ironton-
           Lawrence County Area Community Action Organization,
           which the City contracted with to administer the Community
           Housing Improvement Program, was responsible for assuring
           that the housing rehabilitation work was provided in
           accordance with the housing rehabilitation contract and that it
           met the State’s Standards.

           Our inspector determined that the Community Action
           Organization’s Housing Standards Officer did not assure that
           the housing rehabilitation work was performed correctly or
           even provided. The housing work that was performed
           incorrectly or that was not provided related to such items as
           electrical outlets improperly grounded or not installed, floors
           not level, loose paneling, improper installation of siding and
           heating systems, and poor coverage of paint. The following
           pictures show examples of housing rehabilitation work that was
           improperly performed or not provided.




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  Finding 1


  There was a hole in the kitchen
  wall where the outlet was installed
  for the house at 914 Walnut Street.




   The base molding was not installed
   in the kitchen of the house at 520
   Etna Street.




                                        The Community Action Organization’s Housing Standards
                                        Officer was responsible for performing the housing
                                        rehabilitation inspections and authorizing payment to the
                                        contractors. He said he must have overlooked those items that
                                        we found to be improperly performed or not provided when he
                                        inspected the houses.       The Housing Standards Officer
                                        incorrectly certified that the housing rehabilitation services
                                        provided to the seven houses through the City’s Program met
                                        the State’s Standards when they did not. The Director for the
                                        Community Action Organization’s Community Development
                                        Department said no one from the Community Action
                                        Organization monitored the Housing Standards Officer’s final
                                        inspections of the houses to ensure the housing rehabilitation
                                        work was completed according to the State’s Standards.

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                                                                                          Finding 1


                                    The City did not monitor the Community Action Organization
                                    to ensure it administered the City’s Community Housing
                                    Improvement Program as required. As a result, HUD funds
                                    were not efficiently and effectively used.

                                    The City did not include needed housing rehabilitation work in
   The City Did Not Include         the specifications for five houses. The rehabilitation work was
   Housing Rehabilitation           needed to correct items that did not meet the State’s
   Work In Contracts’               Residential Rehabilitation Standards. The five houses were
   Specifications                   assisted under the City’s Homeowner Rehabilitation Program.
                                    The following table shows the items that needed to be
                                    corrected for each house.

                             Address of House                Items Needing Correction
                          609 Lawrence Street      •   Severe rotting of front porch ceiling.
                                                   •   Gutters not installed on front porch.
                                                   •   Tripping hazard at rear patio.
                                                   •   Tuck pointing of foundation.
                          3034 South 6th Street    •   Large cracks in sidewalk at rear stairs that
                                                       pose a tripping hazard.
                          914 Walnut Street        •   Door trim not finished.
                          520 Etna Street          •   Kitchen floor coming up.
                                                   •   Missing corner molding in kitchen.
                                                   •   Closet floor in bedroom not level.
                          305 Batham Lane          •   Open and bad grounds for electrical
                                                       fixtures in living room, kitchen, and
                                                       bedrooms.

                                    The City had the necessary HUD funds to ensure the items that
                                    needed to be corrected to the State’s Standards were made.
                                    The following picture shows an example of the housing
                                    rehabilitation work that was not included in the contract
                                    specifications.




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  Finding 1


  The contract specifications for the
  house located at 609 Lawrence
  Street did not include gutters for
  the front porch.




                                        The Community Action Organization’s Housing Standards
                                        Officer said he must have overlooked the needed housing
                                        rehabilitation work when he was preparing the work write-ups
                                        for the five houses. The City also did not monitor the
                                        Community Action Organization to ensure it administered the
                                        Program as required. As a result, HUD lacks assurance that
                                        houses met the State’s Residential Rehabilitation Standards
                                        after receiving rehabilitation assistance.


    Auditee Comments                    [Excerpts paraphrased from the City’s comments on our
                                        draft finding follow. Appendix B, pages 53 to 62, contains
                                        the complete text of the comments for this finding.]

                                        The housing rehabilitation contracts are executed directly
                                        between the homeowners and the contractors. The City
                                        provides financial assistance to the homeowner through the
                                        Rehabilitation Loan/Grant Agreement.          Under the
                                        Agreement, the homeowner contracts for the rehabilitation
                                        work with the Community Housing Improvement Program
                                        staff providing technical assistance throughout the
                                        contracting process.

    OIG Evaluation Of                   While the homeowners contract for the housing
    Auditee Comments                    rehabilitation work, the City is required by HUD’s regulation
                                        and the State of Ohio’s requirements to ensure assisted houses
                                        meet the State’s Residential Rehabilitation Standards. The
                                        City should ensure that the housing rehabilitation work is
                                        completed correctly. If the City is unable to ensure the

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                       rehabilitation work is completed, then the City should
                       reimburse its Community Housing Improvement Program from
                       non-Federal funds the total amount of housing rehabilitation
                       assistance that was provided to the applicable houses.



   Auditee Comments    Two of the seven houses, 1114 South 10th Street and 3024
                       South 4th Street, were not provided rehabilitation assistance
                       but rather emergency repair assistance. As a result, the
                       repair work was intended to address emergency repairs in
                       accordance with the Community Housing Improvement
                       Program’s guidelines and was not intended to correct items
                       that did not meet the State's Residential Rehabilitation
                       Standards.

   OIG Evaluation Of   We agree that the houses at 1114 South 10th Street and
   Auditee Comments    3024 South 4th Street were provided rehabilitation
                       assistance to make emergency repairs. However, the City is
                       required to ensure those repairs meet the State’s Residential
                       Rehabilitation Standards. The rehabilitation assistance to
                       1114 South 10th Street included the installation of a new
                       furnace. The furnace was installed; however, the house was
                       not energy efficient because of holes in the exterior walls.
                       This allows cold air to enter the house. Thus, the City’s use
                       of HUD funds to install the furnace was not an efficient use
                       of HUD funds and the homeowner cannot realize the full
                       benefits of the housing assistance. In regards to the house
                       at 3024 South 4th Street, the housing rehabilitation services
                       were not provided as required by the rehabilitation contract.
                       For example, the City paid the contractor to replace 600
                       square feet of the house’s roof, but only 243 square feet of
                       the roof was replaced. Therefore, the City used HUD funds
                       to pay for housing rehabilitation work that was improperly
                       performed or not provided.


   Auditee Comments    The finding shows that the Director of the Community
                       Action     Organization's    Community         Development
                       Department said no one from the Organization monitored
                       the Housing Standards Officer's final inspection of houses to
                       ensure the housing rehabilitation work was completed
                       according to the State's Standards. The statement should
                       say that not all the housing rehabilitation work may be
                       subject to an additional inspection upon completion.
                       Houses are typically inspected during the course of the

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  Finding 1


                       work by other Community Action Organization staff as well
                       as City inspectors for compliance with the City’s Building
                       Code. In addition, units are randomly selected and
                       inspected by representatives from the State.

   OIG Evaluation Of   We agree that houses that receive rehabilitation assistance
   Auditee Comments    may be subject to inspections when the rehabilitation work
                       is being conducted. However, the issue is whether the
                       Community Action Organization monitored the Housing
                       Standards Officer’s final inspections of the houses to ensure the
                       housing rehabilitation work was completed according to the
                       State’s Standards. The Organization’s Director of Community
                       Development said this was not done.              Therefore, the
                       Community Action Organization did not have sufficient
                       procedures and controls over the Community Housing
                       Improvement Program to ensure houses met the State’s
                       Standards after they received housing rehabilitation assistance.
                       The City needs to establish procedures and controls to ensure
                       assisted houses meet the State’s Standards after receiving
                       housing rehabilitation assistance as required by HUD’s
                       regulation, the State of Ohio’s requirements, and the City’s
                       Program policies.


  Auditee Comments     Regarding the housing rehabilitation work that was performed
                       incorrectly or not provided, corrective work was completed
                       or is scheduled to be completed using non-Federal funds to
                       ensure the houses meet the State’s Residential
                       Rehabilitation Standards.

  OIG Evaluation Of    The actions taken or planned by the City should ensure the
  Auditee Comments     housing rehabilitation work cited in this finding is completed
                       correctly, if the work meets the State’s Standards when
                       completed.


  Auditee Comments     A full response to this finding cannot be made until the City
                       and the Community Action Organization conduct a full
                       investigation.

  OIG Evaluation Of    The City should: ensure that the housing rehabilitation work
  Auditee Comments     that was not included in the specifications for five houses is
                       performed using non-Federal funds; and establish
                       procedures and controls to monitor the applicable
                       contractor, who administers the City’s Community Housing

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                     Improvement Program, to ensure the contractor follows the
                     Program’s requirements.


   Recommendations   We recommend that the Ohio State Office Director of
                     Community Planning and Development, in conjunction with
                     officials from the State of Ohio, assures that the City of
                     Ironton:

                     1A.     Ensures that the $35,376 of housing rehabilitation
                             work cited in this finding is completed correctly. If the
                             City is unable to ensure the rehabilitation work is
                             completed, then the City should reimburse its
                             Community Housing Improvement Program from non-
                             Federal funds the total amount of housing rehabilitation
                             assistance that was provided to the applicable houses
                             and release the applicable liens against the properties.

                     1B.     Ensures that the housing rehabilitation work that was
                             not included in the specifications for five houses is
                             performed using non-Federal funds. If the City is
                             unable to ensure the rehabilitation work is completed,
                             then the City should reimburse its Community Housing
                             Improvement Program from non-Federal funds the
                             total amount of housing assistance that was provided to
                             the applicable houses.

                     1C.     Establishes procedures and controls to ensure
                             assisted houses meet the State’s Residential
                             Rehabilitation Standards after receiving housing
                             rehabilitation assistance as required by HUD’s
                             regulation, the State of Ohio’s requirements, and the
                             City’s Community Housing Improvement Program
                             Policies and Procedures.

                     1D.     Establishes procedures and controls to monitor the
                             applicable contractor, who administers the City’s
                             Community Housing Improvement Program, to
                             ensure the contractor follows the Program’s
                             requirements.




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        The City Provided Housing Assistance To
         Households That Exceeded The Income
                       Guidelines
  The City of Ironton did not follow HUD’s regulation, the State of Ohio’s Grant Agreements, and/or
  the City’s requirements when it provided housing rehabilitation assistance to families whose incomes
  exceeded the income guidelines. The City: used $38,934 to assist seven properties which were not
  occupied by low or moderate income families; lacked documentation to show that $111,928 in housing
  assistance paid to 11 other households benefited low or moderate income individuals; and provided
  $145,995 in totally deferred assistance to nine households when they had the ability to repay part of
  their housing assistance. The City failed to obtain income and/or expense documentation for six other
  households to determine if they had the ability to repay their housing rehabilitation assistance. The
  problems occurred because the Ironton-Lawrence County Area Community Action Organization,
  which the City contracted with to administer its Community Housing Improvement Program, lacked
  procedures and controls over the Program to ensure that only eligible individuals received housing
  rehabilitation services and that households repaid their housing assistance. Additionally, the City did
  not monitor the Community Action Organization to ensure it administered the Program as required.
  As a result, HUD funds were not used efficiently and effectively, and available funding assistance to
  eligible individuals was reduced.


                                         24 CFR Part 570.208(a)(3) requires that an eligible Community
    HUD’s Regulation                     Development Block Grant activity which provides or improves
                                         a permanent residential structure will, upon completion, be
                                         occupied by a low or moderate income household. If the
                                         structure contains two dwelling units, at least one is required to
                                         be occupied by a low or moderate income household. If the
                                         structure contains more than two dwelling units, at least 51
                                         percent of the units are required to be occupied by low or
                                         moderate income households.

                                         The State of Ohio’s Small Cities Community Development
    State’s Grant Agreements             Block Grant Program Grant Agreements with the City of
                                         Ironton, page 6, require that the City comply with all applicable
                                         Federal, State, and local laws, regulations, directives, and
                                         guidelines regarding the use of Block Grant funds.

                                         The City’s Fiscal Years 1994 to 1998 Community Housing
    City’s Requirements                  Improvement Program policies require that housing
                                         rehabilitation services assist low or moderate income
                                         homeowners or tenants of rental units.


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                                      The City’s Fiscal Year 1992 Comprehensive Housing Program
                                      policy says a totally deferred loan will be provided to
                                      homeowners with incomes less than the low income limit. A
                                      mixture of a deferred loan and a leveraged loan will be
                                      provided to households between the low and moderate income
                                      limits. The loan payment cannot exceed the difference between
                                      the household’s current monthly housing expenses and 35
                                      percent of their monthly income. For the Fiscal Years 1994 to
                                      1998 Community Housing Improvement Program, the City
                                      amended its policy so a homeowner’s monthly housing expense
                                      will not exceed 30 percent of their monthly income.

                                      Page 107 of the City’s Fiscal Year 1996 Community Housing
                                      Improvement Program policy requires a low income landlord
                                      requesting rental rehabilitation assistance that cannot afford
                                      additional debt service be provided a totally deferred loan. All
                                      other landlords will be expected to match the deferred loan on
                                      a dollar-for-dollar basis.

                                      The City provided $38,934 in Community Development
   The City Assisted                  Block Grant funds to assist seven properties with housing
   Properties That Were Not           rehabilitation services that were not occupied by low or
   Occupied By Low Or                 moderate income persons. All seven properties were rental
   Moderate Income                    properties. The following table shows: the property
   Individuals                        addresses; when the assistance was awarded; the amount of
                                      tenants’ income that exceeded the required income
                                      guidelines; the percentage that the tenants’ income
                                      exceeded the required guidelines; and the amount of
                                      housing assistance provided.

                                                                     Amount      Percent
                                                         Award        Over        Over     Assistance
                                Household Address         Date       Income      Income     Amount
                              1641 Bessemer Street      5/10/95     $ 1,923       10.1       $7,500
                              604 North 4th Street      6/28/95      14,244       85.3        7,515
                              604 ½ North 4th Street    6/28/95      22,615       123.2       6,484
                              2119 South 2nd Street     6/30/95         958        5.0        4,165
                              1724 South 6th Street     11/13/98     12,377       67.4        5,402
                              1912 South 7th Street     11/13/98     19,980       95.1        3,640
                              1912 ½ South 7th Street   11/13/98      2,106       11.5        4,228
                                       Total                                               $38,934

                                      Five of the seven properties were occupied when the City
                                      provided the housing rehabilitation services. The City’s
                                      files for the five properties contained documentation
                                      showing that the tenants’ incomes exceeded the required
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                                     guidelines. However, the City still assisted the five
                                     properties.  The City’s files did not contain similar
                                     documentation for the other two properties. Therefore, we
                                     obtained income documentation from the properties’ owner
                                     that showed the properties were not occupied by low or
                                     moderate income tenants as required.

                                     The City lacked documentation to show that $111,928
   The City Did Not Obtain           ($102,385 of Community Development Block Grant and
   Documentation To Show             $9,543 of HOME funds) of housing rehabilitation assistance
   Assisted Households Met           benefited low or moderate income individuals.          The
   The Income Requirements           following table shows: the addresses of the properties; the
                                     type of housing assistance provided; when the assistance
                                     was awarded; and the amount of housing assistance
                                     provided.

                                                         Type of         Award         Assistance
                          Property Address              Assistance       Date(s)        Amount
                     204 Chestnut Street                  Rental         11/8/95        $7,500
                                                                       5/30/95 and
                     401 and 403 Etna Street              Rental         7/10/95          9,868
                     306 ½ South 3rd Street               Rental         3/31/95         20,820
                     1113 South 3rd Street                Rental         6/19/95          6,478
                     1115 South 3rd Street                Rental         6/19/95          3,551
                     1825 South 4th Street              Homeowner        4/28/98          6,145
                                                                       2/22/98 and
                     3034 South 6th Street              Homeowner       11/24/98         23,620
                     515 Heplar Street                    Rental        11/13/98          6,751
                     2439 South 10th Street               Rental        11/13/98         10,700
                     1722 South 6th Street                Rental        11/13/98          7,305
                     2125 South 7th Street                Rental        11/13/98          9,190
                                 Total                                                 $111,928

                                     Five of the 11 properties were occupied when the City
                                     provided the housing rehabilitation services. However, the
                                     City provided the services without obtaining documentation
                                     to show the assistance benefited low or moderate income
                                     individuals. During the audit, we requested the owners of
                                     the 11 properties to provide documentation that they or
                                     their tenants were low or moderate income individuals.
                                     None of the owners could provide us with the requested
                                     documentation.

                                     The property located at 306 ½ South 3rd Street consisted of
                                     three rental apartments. Apartment one was occupied by a

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                                     low or moderate income individual. However, the income
                                     for the residents of apartment two exceeded the required
                                     income guidelines and the City lacked documentation to
                                     show that apartment three was occupied by a low or
                                     moderate income individual.

                                     The City provided $145,995 in totally deferred housing
   The City Provided                 rehabilitation assistance to nine households that had the ability
   Assistance To Households          to repay their housing assistance. The City’s Community
   That Had The Ability To           Housing Improvement Program policies required households
   Repay Their Assistance            to repay their housing assistance based upon their income and
                                     housing expenses. The following table shows: the addresses
                                     of the households; when the assistance was awarded; the
                                     monthly payments the households had the ability to repay;
                                     and the amount of housing assistance provided.

                                                                       Affordable
                                                          Award         Monthly         Assistance
                                 Household Address         Date         Payment          Amount
                              516 South 7th Street       9/30/93          $314              $16,950
                              1203 South 7th Street      4/19/94           249                21,240
                              625 South 9th Street       3/10/94           135                18,800
                              626 South 10th Street      11/2/93           154                18,465
                              916 South 10th Street      6/20/94           246                18,430
                              924 Walnut Street          1/11/94            97                 9,543
                              118 North 6th Street       2/17/95            30                13,145
                              713 South 10th Street      2/17/95            39                19,275
                              616 Lawrence Street        10/31/97          116                10,147
                                       Total                                               $145,995

                                     All nine homes were occupied when the City provided the
                                     housing rehabilitation services. The City’s files for the nine
                                     households contained income and expense documentation
                                     that showed the households had the ability to repay their
                                     housing assistance. However, the City provided the totally
                                     deferred housing rehabilitation assistance without requiring
                                     the households to repay the assistance they received.

                                     The City provided totally deferred housing rehabilitation
   The City Did Not Have             assistance to six properties without obtaining income and/or
   Documentation To                  expense documentation to determine whether the
   Determine Whether                 properties’ owners had the ability to repay the housing
   Households Could Repay            assistance. The City’s Community Housing Improvement
   Their Assistance                  Program policies required homeowners and landlords to repay
                                     their housing assistance based upon their income and housing
                                     expenses.     The following table shows: the property

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                                       addresses; the type of housing assistance provided; when
                                       the assistance was awarded; and the amount of housing
                                       assistance provided.

                                                 Type of                                  Assistance
                       Property Address         Assistance          Award Date(s)          Amount
                  614 Lawrence Street           Homeowner              10/31/97            $11,435
                  614 ½ Lawrence Street           Rental               10/31/97              4,872
                  1825 South 4th Street         Homeowner              4/28/98               6,145
                  3034 South 6th Street         Homeowner        2/22/98 and 11/24/98       23,620
                  2125 South 7th Street           Rental               11/13/98              4,595
                  2439 South 10th Street          Rental               11/13/98              5,350
                            Total                                                          $56,017

                                       The six properties were occupied when the City provided
                                       the totally deferred housing rehabilitation assistance.
                                       During the audit, we requested the owners of the six
                                       properties to provide documentation to show their income
                                       and/or housing expenses. None of the owners could
                                       provide us with the requested documentation.

                                       The Ironton-Lawrence County Area Community Action
   The Administering Entity            Organization, which the City contracted with to administer its
   Was Not Aware Of                    Community Housing Improvement Program, lacked
   HUD’s And The City’s                procedures and controls over the Program to ensure that only
   Requirements                        eligible individuals received housing rehabilitation services and
                                       that households repaid their housing assistance when necessary.
                                       The Director of the Community Action Organization’s
                                       Community Development Department was not aware of
                                       HUD’s and the City’s requirements regarding income eligibility
                                       and the repayment of housing assistance. The City also did not
                                       monitor the Community Action Organization to ensure it
                                       administered the Program as required. As a result, HUD funds
                                       were not used efficiently and effectively, and available funding
                                       assistance to eligible individuals was reduced.


   Auditee Comments                    [Excerpts paraphrased from the City’s comments on our
                                       draft finding follow. Appendix B, pages 63 to 65, contains
                                       the complete text of the comments for this finding.]

                                       The Community Action Organization reviewed a sample of
                                       Community Housing Improvement Program files to
                                       determine whether they had income documentation to show
                                       the assisted households met the required income guidelines.

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                           Income documentation was found for either the owners
                           and/or the tenant of 614, 614 ½, and 616 Lawrence Street
                           and 3034 South 6th Street. The Organization will review the
                           remaining Program files for income documentation and will
                           obtain documentation from the households, if necessary.

       OIG Evaluation Of   We did not question the City’s use of HUD funds to
       Auditee Comments    provide housing assistance to 614, 614 ½, and 616 Lawrence
                           Street due to a lack of income documentation. Instead, we
                           questioned the City’s use of HUD funds to these properties
                           because the City lacked documentation to determine
                           whether the properties’ owner had the ability to repay their
                           housing assistance. The income documentation provided
                           for the homeowner of 3034 South 6th Street was dated July
                           30, 1997. However, the homeowner’s housing assistance
                           application to the City was dated October 14, 1998. The
                           timing difference between the income documentation
                           provided by the Community Action Organization and the
                           application date to the City was more than fourteen months.
                           Therefore, the City lacks assurance that the income
                           documentation accurately reflects the Program participant’s
                           income at the time she received the housing assistance. The
                           City should provide documentation to show the income of
                           the homeowner at the time of application. The City should
                           also provide documentation to support the housing
                           rehabilitation assistance provided to the remaining
                           properties benefited low or moderate income individuals. If
                           the City cannot provide the necessary documentation, then
                           the City should reimburse its Program from non-Federal
                           funds for the applicable amount.


   Auditee Comments        Some of the households that received housing rehabilitation
                           assistance through the City’s Community Housing
                           Improvement Program were low income households. The
                           City’s policy was that low income households were not
                           required to repay their housing assistance except upon the sale
                           of the property.

   OIG Evaluation Of       The City provided $145,995 in totally deferred housing
   Auditee Comments        rehabilitation assistance to nine households that had the ability
                           to repay their housing assistance. The City’s Community
                           Housing Improvement Program policies required households
                           to repay their housing assistance based upon their income and
                           housing expenses. Specifically, page 79 of the City’s Fiscal

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                       Years 1996 and 1998 Community Housing Improvement
                       Program policies say the type of assistance for the Homeowner
                       Rehabilitation Program depends on the affordability of the
                       household. The City defines affordability when less than 30
                       percent of the household income is spent on housing expenses.
                       Page 84 of the City’s policy also says the primary
                       determination as to the type of financial assistance to be
                       received is the affordability of additional debt service that can
                       be undertaken by the applicant while still being affordable to
                       that household. Page 107 of the City’s Fiscal Year 1996
                       Program policy requires a low income landlord requesting
                       rental rehabilitation assistance that can afford additional debt
                       service is expected to match the deferred loan on a dollar-for-
                       dollar basis. Therefore, the City used HUD’s funds and needs
                       to reimburses its Program $145,995 from non-Federal funds
                       for the housing rehabilitation assistance provided to the nine
                       households that had the ability to repay their assistance.



   Auditee Comments    A full response to this finding cannot be made until the City
                       and the Community Action Organization conduct a full
                       investigation.

   OIG Evaluation Of   The City should establish procedures and controls to ensure
   Auditee Comments    HUD’s regulation, the State of Ohio’s Grant Agreements,
                       and/or the City’s Program policies regarding income
                       guidelines and the repayment of assistance based upon
                       household income and housing expenses are followed. The
                       City should also provide the necessary documentation to
                       support the use of HUD funds or reimburse its Program
                       from non-Federal funds.


   Recommendations     We recommend that the Ohio State Office Director of
                       Community Planning and Development, in conjunction with
                       officials from the State of Ohio, assures that the City of
                       Ironton:

                       2A.     Establishes procedures and controls to ensure
                               households that receive housing rehabilitation
                               assistance meet HUD’s regulation, the State of
                               Ohio’s Grant Agreements, and/or the City’s
                               Community Housing Improvement Program policies
                               regarding the income guidelines and the repayment


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                           of assistance based upon their income and housing
                           expenses.

                   2B.     Reimburses its Community Housing Improvement
                           Program $38,934 from non-Federal funds for the
                           housing rehabilitation assistance improperly
                           provided to the seven households that were not low
                           or moderate income.

                   2C.     Provides documentation to support the $111,928 in
                           housing rehabilitation assistance provided to the 11
                           properties benefited low or moderate income
                           individuals. If the City cannot provide the necessary
                           documentation, then the City should reimburse its
                           Community Housing Improvement Program from
                           non-Federal funds for the applicable portion of the
                           $111,928 amount.

                   2D.     Reimburses its Community Housing Improvement
                           Program $145,995 from non-Federal funds for the
                           housing rehabilitation assistance improperly
                           provided to the nine households that had the ability
                           to repay their assistance.

                   2E.     Provides income and/or expense documentation to
                           support the $56,017 in housing rehabilitation
                           assistance provided to the six properties. If the City
                           cannot provide the documentation to show the
                           owners of the six properties lacked the ability to
                           repay their assistance, the City should reimburse its
                           Community Housing Improvement Program from
                           non-Federal funds for the applicable portion of the
                           $56,017 amount.




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            The City Did Not Sufficiently Safeguard
            $58,353 In Housing Rehabilitation Work
  The City of Ironton provided $58,353 ($48,810 in Community Development Block Grant funds and
  $9,543 of HOME funds) in housing assistance to four of 84 households reviewed without property
  hazard insurance and/or without recording mortgage liens, deed restrictions, or covenants on the
  assisted properties. The problems occurred because the Ironton-Lawrence County Area Community
  Action Organization, which the City contracted with to administer its Community Housing
  Improvement Program, lacked procedures and controls over the Program to ensure property hazard
  insurance and/or mortgage liens, deed restrictions, or covenants were placed on the assisted properties.
  Additionally, the City did not monitor the Community Action Organization to ensure it administered
  the Program as required. As a result, HUD’s funds were not used efficiently and effectively.


                                         The Fiscal Years 1996 and 1998 Community Housing
       City’s Requirements               Improvement Program’s policies require that when the City
                                         awards a deferred loan under the Program, the City will record
                                         a lien to ensure the intent of the housing assistance. The
                                         purpose of the lien is to ensure the benefit of the assistance is
                                         not transferred to the monetary benefit of the applicant.

                                         The Fiscal Years 1994 to 1998 Terms and Conditions for
                                         Owners Accepting Housing Rehabilitation Assistance through
                                         the Community Housing Improvement Program require that
                                         the owner obtain hazard insurance on the property to be
                                         rehabilitated.   The owner must maintain the insurance
                                         throughout the term of the housing rehabilitation loan.

                                         The State of Ohio’s Home Investment Partnership Program
       State’s Grant Agreements          Grant Agreement, effective August 1, 1998, with the City of
                                         Ironton, page 5 of Attachment B, requires that the City be able
                                         to enforce the terms of the assistance through an agreement
                                         which may include a lien on the real property, deed restriction,
                                         or covenant on the land. In addition, the agreement must
                                         specify remedies for breach of the provisions of the agreement.
                                         Page 6 of the Agreement also requires that the City comply
                                         with all applicable Federal, State, and local laws, regulations,
                                         directives, and guidelines regarding the use of HOME funds.

                                         The State’s Small Cities Community Development Block
                                         Grant Program Grant Agreements with the City of Ironton,
                                         page 6, require that the City comply with all applicable Federal,


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                                            State, and local laws, regulations, directives, and guidelines
                                            regarding the use of Block Grant funds.

                                            The City provided $48,810 in Community Development Block
       The City Did Not                     Grant funds and $9,543 of HOME funds to four households
       Sufficiently Protect                 without evidence of property hazard insurance and/or without
       $58,353 In Assistance                recording mortgage liens, deed restrictions, or covenants on the
                                            assisted properties.

                                            The City did not ensure that three households had hazard
                                            insurance or that two households had mortgage liens, deed
                                            restrictions, or covenants recorded for the full amount of
                                            the housing assistance against the assisted properties. These
                                            omissions applied to a total of four households. The four
                                            households were:

                                                                        Property            Lien, Restriction,
                                     Assistance Fiscal Year              Hazard               Or Covenant
           Household Address          Amount         Awarded           Insurance?              Recorded?
        520 Maple Avenue               16,968          1994                No                      Yes
        918 Adams Street               16,665          1994                No                      Yes
        520 Etna Street                 1,100          1996               Yes                      No
                      th
        3034 South 6 Street            23,620        1996/1998             No                     No(1)
                  Total               $58,353
        (1)-$2,990 in housing assistance not secured by a lien, restriction, or covenant.

                                            We contacted the three homeowners to determine whether
                                            they had hazard insurance. The homeowners of 918 Adams
                                            Street and 3034 South 6th Street said they did not have
                                            hazard insurance at the time of the housing assistance. As
                                            of February 10, 2000, the two homeowners also lacked
                                            hazard insurance on the assisted properties.           The
                                            homeowner of 520 Maple Avenue was unable to provide
                                            documentation as of February 7, 2000 that she had hazard
                                            insurance or that she had insurance when she received the
                                            housing assistance.

                                            The City did not record a mortgage lien, deed restriction, or
                                            covenant for the rehabilitation assistance provided to two
                                            households. Liens, restrictions, or covenants were not
                                            obtained for change orders totaling more than $1,000 for the
                                            houses provided rehabilitation assistance through the Fiscal
                                            Years 1996 and 1998 Program. The City’s requirements and
                                            the State of Ohio’s Grant Agreements required the City to

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                       record a property lien, deed restriction, or covenant to ensure
                       the intent of the assistance.

                       The problems occurred because the Ironton-Lawrence County
                       Area Community Action Organization, which the City
                       contracted with to administer its Community Housing
                       Improvement Program, lacked procedures and controls over
                       the Program to ensure hazard insurance and/or mortgage liens,
                       deed restrictions, or covenants were placed on the assisted
                       properties.    The Director of the Community Action
                       Organization’s Department of Community Development said
                       he was not aware that the City required homeowners to obtain
                       hazard insurance. The Director also said the Community
                       Action Organization did not have procedures to require
                       homeowners to sign a lien for the full amount of the housing
                       assistance. The City did not monitor the Community Action
                       Organization to ensure it administered the Program as required.
                       As a result, HUD’s funds were not used efficiently and
                       effectively.


   Auditee Comments    [Excerpts paraphrased from the City’s comments on our
                       draft finding follow. Appendix B, pages 66 to 69, contains
                       the complete text of the comments for this finding.]

                       The Community Action Organization discussed with legal
                       counsel the fact that mortgages filed at the loan closings did
                       not include change orders which occur during the housing
                       rehabilitation process. Counsel provided an open-ended
                       mortgage for execution at the time of the initial contract
                       signing that is being used to secure future housing
                       rehabilitation assistance. The mortgages will be placed for
                       the maximum assistance amount allowed under the
                       Community Housing Improvement Program. Therefore,
                       any future change orders should be secured under the
                       mortgage.

   OIG Evaluation Of   The implementation of an open-ended mortgage to secure
   Auditee Comments    the additional housing rehabilitation assistance should
                       ensure that the full amount of housing assistance provided
                       to Program participants is sufficiently secured. However,
                       the City needs to ensure that the mortgages accurately
                       reflect the housing assistance provided, not the maximum
                       amount of assistance allowed by the Program.


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   Auditee Comments    If required by HUD or the State of Ohio, the City will ensure
                       hazard insurance is secured for properties that receive housing
                       rehabilitation assistance under the Community Housing
                       Improvement Program. However, this action would likely
                       eliminate some of the lowest income individuals from
                       receiving assistance because those individuals will not be
                       able to afford the necessary hazard insurance.

   OIG Evaluation Of   The City is required by the State’s Grant Agreements to
   Auditee Comments    follow all local laws, regulations, directives, and guidelines
                       regarding the use of HOME and/or Block Grant funds. The
                       City’s Terms and Conditions for Owners Accepting Housing
                       Rehabilitation Assistance through the Community Housing
                       Improvement Program require that the owner obtain hazard
                       insurance on the property to be rehabilitated. The owner must
                       maintain the insurance throughout the term of the housing
                       rehabilitation loan. The City did not ensure that three
                       households had hazard insurance placed on the assisted
                       properties. The City should ensure properties that receive
                       housing rehabilitation assistance under the Program have the
                       necessary insurance. The City can amend its Program
                       requirement to eliminate the need for owners to obtain hazard
                       insurance; however, such action could expose owners to
                       financial hardship in the event of a fire or natural disaster. For
                       owners who may not be able to afford the required hazard
                       insurance, the City should consider providing financial
                       assistance to cover the cost of the insurance.


   Auditee Comments    The Community Action Organization filed additional
                       mortgages to reflect the change orders to: 514 South 10th
                       Street; 802 South 7th Street; 609, 614, 614 ½, and 616
                       Lawrence Street; 2439 South 10th Street; 914 Walnut Street;
                       and 305 Batham Lane. The Organization will pursue the
                       remaining properties that lack a mortgage lien, deed restriction,
                       or covenant to secure the mortgage assistance.

                       The Community Action Organization searched the Community
                       Housing Improvement Program files and made inquiries of the
                       property owners to determine whether the assisted properties
                       had hazard insurance. To date, the Organization determined
                       that 512 South 8th Street, 918 Adams Street, and 1825 South
                       4th Street had insurance.


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   OIG Evaluation Of   Based upon the documentation provided by the City, we
   Auditee Comments    adjusted our finding to reflect the assisted properties that
                       lacked hazard insurance and/or a mortgage lien, deed
                       restriction, or covenant for the full amount of the housing
                       assistance. However, the documentation regarding the
                       hazard insurance for 918 Adams Street showed that the
                       insurance was terminated. The City needs to provide
                       documentation that the property has active hazard insurance
                       during the term of the housing rehabilitation loan as
                       required.


   Auditee Comments    The City is unable to respond to the remaining properties that
                       lack hazard insurance and/or a mortgage lien, deed restriction,
                       or covenant on the assisted properties until a full investigation
                       is conducted. A formal response will be developed at a later
                       date.

   OIG Evaluation Of   The City should ensure the assisted properties cited in this
   Auditee Comments    finding have the required hazard insurance and/or mortgage
                       liens, deed restrictions, or covenants for the full amount of
                       the housing assistance or reimburse its Program from non-
                       Federal funds for the applicable amount.


   Recommendations     We recommend that the Ohio State Office Director of
                       Community Planning and Development, in conjunction with
                       officials from the State of Ohio, assures that City of Ironton:

                       3A.     Establishes procedures and controls to ensure
                               households that receive housing rehabilitation
                               assistance meet its requirements and the State of
                               Ohio’s Grant Agreements regarding hazard
                               insurance, mortgage liens, deed restrictions, or
                               covenants on the land.

                       3B.     Records mortgage liens, deed restrictions, or
                               covenants for the full amount of the housing
                               assistance on the two properties as required by its
                               requirements and the State of Ohio’s Grant
                               Agreements. If the City is unable to record a
                               mortgage lien, deed restriction, or covenant on any
                               of the two properties, the City should reimburse its
                               Community Housing Improvement Program from


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                           non-Federal funds for the applicable portion of the
                           $4,090 amount.

                   3C.     Requires the three properties that received housing
                           rehabilitation assistance without property hazard
                           insurance to obtain the necessary property hazard
                           insurance as required by its requirements and the
                           State of Ohio’s Grant Agreements. If any of the three
                           properties cannot obtain property hazard insurance, the
                           City should reimburse its Community Housing
                           Improvement Program from non-Federal funds for the
                           applicable portion of the $57,253 amount.




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        The City Needs To Establish Procedures And
         Controls To Prevent Conflicts Of Interest
  The City of Ironton did not establish procedures and controls to prevent conflicts of interest in the
  award of housing rehabilitation assistance. The City used Community Development Block Grant
  funds for housing rehabilitation assistance when conflicts of interest existed. The Department of
  Community Development’s Director for the Ironton-Lawrence County Area Community Action
  Organization, which the City contracted with to administer its Community Housing Improvement
  Program (formerly the Comprehensive Housing Program), said he was not aware of HUD’s conflict of
  interest requirements. Additionally, the City did not monitor the Community Action Organization to
  ensure it administered the Program as required. As a result, HUD funds were not used efficiently and
  effectively, and available housing assistance to eligible individuals was reduced.


                                        24 CFR Part 570.611 states no employee of the recipient, or of
    HUD’s Regulation                    any designated public agencies, or subrecipients that receive
                                        funds, who exercise or have exercised any functions or
                                        responsibilities with respect to Community Development Block
                                        Grant activities may obtain a personal or financial interest or
                                        benefit from a Block Grant assisted activity, or have an interest
                                        in any contract or subcontract either for themselves or those
                                        they have family or business ties, during their tenure or for one
                                        year thereafter. HUD may grant an exception only after the
                                        recipient provides the following: (1) a disclosure of the nature
                                        of the conflict, accompanied by an assurance that there was
                                        public disclosure of the conflict and a description of how the
                                        public disclosure was made; and (2) an opinion from the
                                        recipient’s attorney that the exception would not violate State
                                        or local law.

                                        Page 5 of the State of Ohio’s Small Cities Community
       State’s Grant Agreements         Development Block Grant Program Agreements, effective July
                                        1, 1994 and October 1, 1996, with the City require that no
                                        subcontractor who exercises any functions or responsibilities in
                                        connection with the review or approval of the work completed
                                        will acquire any personal interest, direct or indirect, which is
                                        incompatible or in conflict with the discharge or fulfillment of
                                        the functions or responsibilities with respect to the completion
                                        of the housing rehabilitation work.




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                                The City provided $43,941 in Community Development
       The City Improperly      Block Grant funds for housing rehabilitation assistance to
       Provided Assistance To   two rental properties owned by the Community Action
       Units Owned By           Organization. The two properties received rehabilitation
       Community Action         assistance through the City’s Community Housing
       Organization             Improvement Program. The following table shows the
                                addresses of the properties, when the assistance was
                                awarded, and the housing assistance provided.

                                                                                   Assistance
                                     Property Address          Award Date(s)       Provided
                                 863 and 863 ½ North 5th       11/27/95 and
                                 Street                          11/13/98               $21,475
                                                               10/30/95 and
                                 318 Elm Street                  11/13/98                22,466
                                         Total                                          $43,941

                                The City awarded $15,000 in housing rehabilitation
                                assistance for 863 and 863 ½ North 5th Street in November
                                1995. In October 1995, the City awarded $7,500 in
                                rehabilitation assistance for 318 Elm Street. The City
                                awarded additional housing rehabilitation contracts for the
                                properties in November 1998 since it did not have sufficient
                                funds in 1995 to complete the rehabilitation work at the two
                                properties.

                                The City’s use of Community Development Block Grant
                                funds to rehabilitate the two rental properties was improper
                                because the Community Action Organization administered
                                the City’s Community Housing Improvement Program, thus
                                creating an identity-of-interest. The State of Ohio’s Grant
                                Agreements prohibit the use of Block Grant funds when
                                conflicts of interest exist.       Therefore, the housing
                                rehabilitation assistance to the Community Action
                                Organization’s properties violated the Grant Agreements.

                                The Director of the Community Action Organization’s
                                Department of Community Development said he did not
                                believe the rehabilitation of the rental properties was a conflict
                                of interest. He believed the Community Action Organization
                                was maintaining and operating the properties for the City.
                                However, the Community Action Organization owned the
                                units and received the benefits from the rental proceeds.



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                                         The City awarded housing assistance when conflicts of
       The City Improperly               interest existed. The City provided $41,006 in Community
       Provided Housing                  Development Block Grant funds for housing rehabilitation
       Assistance To Relatives           assistance to three houses owned by relatives of the
       Of A Community Action             Housing Specialist for the Community Action Organization.
       Organization Employee             The rehabilitation assistance was provided through the
                                         City’s Comprehensive Housing Program (now the
                                         Community Housing Improvement Program).                 The
                                         following table shows the addresses of the three houses, the
                                         relationship to the Housing Specialist, when the assistance
                                         was awarded, and the housing assistance provided.

                                                     Relationship
                                                     To Housing        Award           Assistance
                            House Address             Specialist        Date           Provided
                        720 South 9th Street            Sister         5/13/91              $14,466
                        1012 South 9th Street          Mother          3/12/91               14,025
                        615 South 7th Street        Mother-In-Law      7/17/91               12,515
                                Total                                                       $41,006

                                         When the three households received their assistance, the
                                         Housing Specialist was the Program Operations Officer who
                                         took applications for the Program. In this capacity, the
                                         Housing Specialist had control over who received the
                                         benefits of the Program by accepting or rejecting
                                         applications submitted. HUD’s regulation 24 CFR Part
                                         570.611 prohibits relatives of individuals who exercise any
                                         function over an activity from receiving assistance without
                                         an exception from HUD. As of June 20, 2000, the Housing
                                         Specialist is involved in the administration of the City’s
                                         Community Development Block Grant funds.

                                         The Director of the Community Action Organization’s
                                         Community Development Department said an exception
                                         was not obtained from HUD, the conflicts were not publicly
                                         disclosed, and he was not sure whether a legal opinion was
                                         obtained.     The Director was unable to provide
                                         documentation of a legal opinion regarding the conflicts of
                                         interest.

                                         The problems occurred because the Ironton-Lawrence County
       Conflicts Of Interest             Area Community Action Organization, which the City
       Existed Because The City          contracted with to administer its Community Housing
       Lacked Procedures And             Improvement Program, lacked procedures and controls over
       Controls Over The                 the Program to ensure conflict of interest requirements were
       Program
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                       followed.      The Director of the Community Action
                       Organization’s Department of Community Development said
                       he was not aware of HUD’s regulation. Additionally, the City
                       did not monitor the Community Action Organization to ensure
                       it administered the Program as required. As a result, HUD
                       funds were not used efficiently and effectively, and available
                       housing assistance to eligible individuals was reduced.


   Auditee Comments    [Excerpts paraphrased from the City’s comments on our
                       draft finding follow. Appendix B, pages 70 to 73, contains
                       the complete text of the comments for this finding.]

                       The City disagrees that the use of housing rehabilitation
                       assistance to the properties owned by the Community
                       Action Organization was improper. The properties were
                       acquired, owned, operated, and maintained for the City to
                       benefit low and moderate income tenants. Thus, the tenants
                       benefited from the housing assistance. The Community
                       Action Organization is a non-profit corporation; therefore,
                       there was not a personal interest with respect to the
                       completion of the housing rehabilitation work. The work
                       was completed in accordance with the Community Housing
                       Improvement Program’s requirements.

   OIG Evaluation Of   The use of Block Grant funds to rehabilitate the rental
   Auditee Comments    properties owned by the Community Action Organization
                       was improper because the Organization administered the
                       City’s Community Housing Improvement Program, thus
                       creating a conflict of interest.      The State’s Grant
                       Agreements prohibit the use of Block Grant funds when
                       conflicts of interest exist.      Therefore, the housing
                       rehabilitation assistance to the Community Action
                       Organization’s properties violated the Grant Agreements.
                       The City should reimburse its Program from non-Federal
                       funds for the housing rehabilitation assistance that was
                       misused as required by the State.


   Auditee Comments    The City disagrees that housing assistance was improperly
                       provided to relatives of a Community Action Organization
                       employee. The assistance was provided after consulting
                       with the State who directed us to check with our attorney.
                       Based upon our recollection, the attorney determined that
                       the employee did not act in a decision making capacity and

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                           an exception could be made to any potential conflict of
                           interest. Therefore, providing assistance to the employee’s
                           relatives would be considered as an exception to the conflict
                           of interest requirements. The biggest problem regarding
                           this situation is the availability of documentation. It does
                           not appear that we have all the necessary documentation
                           showing the actions taken regarding this matter.

                           We provided the Office of Inspector General with a June
                           28, 1993 letter from the State of Ohio to HUD’s Ohio State
                           Office (formerly the Columbus Area Office) showing that
                           the matter was previously investigated by the State. The
                           State determined that neither the employee nor the
                           Community Action Organization acted improperly in this
                           matter. Therefore, it appears the City took proper steps
                           when providing assistance to the three households in
                           question.

   OIG Evaluation Of       Relatives of the Housing Specialist for the Community
   Auditee Comments        Action Organization owned the three houses. When the
                           households received their assistance, the Specialist took
                           applications for the Program. In this capacity, the Housing
                           Specialist had control over who received the benefits of the
                           Program by accepting or rejecting applications submitted.
                           HUD’s regulation 24 CFR Part 570.611 prohibits relatives
                           of individuals who exercise any function over an activity
                           from receiving assistance.

                           We agree that the City provided the State’s June 1993
                           letter. However, the State did not approve the City’s use of
                           Community Development Block Grant funds to provide
                           rehabilitation assistance to the Housing Specialist’s
                           relatives. The City is required to ensure that Block Grant
                           funds are used according to all Program requirements.


   Auditee Comments        A full response to the conflict of interest deficiencies cannot
                           be made until the City and the Community Action
                           Organization conduct a full investigation.

       OIG Evaluation Of   The City should establish procedures and controls to ensure
       Auditee Comments    that HUD’s regulation and the State of Ohio’s Grant
                           Agreements regarding conflicts of interest are followed.



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       Recommendations   We recommend that the Ohio State Office Director of
                         Community Planning and Development, in conjunction with
                         officials from the State of Ohio, assures that the City of
                         Ironton:

                         4A.     Establishes procedures and controls to ensure that
                                 HUD’s regulation and the State of Ohio’s Grant
                                 Agreements regarding conflicts of interest are
                                 followed.

                         4B.     Reimburses its Community Housing Improvement
                                 Program from non-Federal funds for the $84,947 in
                                 housing rehabilitation assistance that was improperly
                                 provided to the properties with conflicts of interest
                                 as required by 24 CFR Part 85.51 or the State of
                                 Ohio’s Grant Agreements.




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         The City Needs To Improve Its Contracting
                         Process
  The City of Ironton did not maintain an effective system of controls over its contracting process. The
  City failed to follow HUD’s regulations, the State of Ohio’s requirements, and/or the City’s Charter for
  full and open competition regarding the procurement of housing rehabilitation services, demolition
  services, parks and recreation equipment, and administrative services. The City did not ensure that the
  specifications for the housing rehabilitation contracts showed the requested materials and/or services.
  The problems occurred because the City’s Council and top management did not exercise their
  responsibilities to implement effective contracting controls. As a result, HUD lacks assurance that its
  funds were used efficiently and effectively, and the City’s procurement transactions were not subject to
  full and open competition.


                                         24 CFR Part 85.36(b)(9) requires grantees and subgrantees to
       HUD’s Regulations                 maintain records sufficient to detail the significant history of a
                                         procurement, such as the rationale for the method of
                                         procurement and the basis for the contract price. Part
                                         85.36(c)(1) requires that all procurement transactions be
                                         conducted in a manner providing full and open competition.

                                         24 CFR Part 85.36(d)(1) requires that when procurement by
                                         small purchase is used, price or rate quotations will be obtained
                                         from a sufficient number of qualified sources.

                                         24 CFR Part 85.36(d)(2) requires that when the sealed bid
                                         method is used, bids are to be publicly solicited and a firm-
                                         fixed-price contract awarded to the responsible bidder whose
                                         bid, conforming with all the material terms and conditions of
                                         the invitation for bids, is the lowest price. The sealed bid
                                         method is the preferred method for procuring construction
                                         services.

                                         24 CFR Part 85.36(d)(3) says the technique of competitive
                                         proposals is normally conducted with more than one source
                                         submitting an offer, and either a fixed-price or cost-
                                         reimbursement type contract is awarded. If this method is
                                         used: requests for proposals will be publicized; proposals will
                                         be solicited from a sufficient number of qualified sources; and
                                         awards will be made to the responsible firm whose proposal is
                                         most advantageous to the program, with price and other
                                         factors considered.


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                         24 CFR Part 85.36(b)(3) states no employee, officer, or
                         agent of the grantee or subgrantee will participate in the
                         selection, or in the award or administration of a contract
                         supported by Federal funds if a conflict of interest, real or
                         apparent, would be involved. Such a conflict would arise
                         when: the employee, officer, or agent, any member of his
                         immediate family, his or her partner, or an organization
                         which he is employed by, or is about to be employed, has a
                         financial or other interest in the firm selected for award.

                         Prior to March 30, 1999, Section 731.14 of the Ohio
       State Of Ohio’s   Revised Code required city contracts in excess of $10,000
       Requirements      to be awarded through competitive bidding.              When
                         competitive bidding is required, notice shall be published for
                         not less than two consecutive weeks in a newspaper of
                         general circulation within the city. The bids will be opened
                         and read publicly by the city’s clerk at the time, date, and
                         place specified in the advertisement to bidders or
                         specifications.

                         The State’s Grant Agreements with the City of Ironton
                         required the City to comply with 24 CFR Part 85.

                         The State’s Non-Participating Jurisdiction Housing Handbook,
                         page 3, required the City to ensure that housing rehabilitation
                         specifications contain a detailed scope of work, quantity of
                         materials or area to be treated, quality of materials, and method
                         of installation. Page 4 of the Handbook required the City to
                         ensure that at least three bids or cost estimates were requested
                         and obtained on all rehabilitation work. In limited instances,
                         acceptance of a single bid is permitted, if it is determined that
                         the bid is reasonable (within 10 percent of the staff’s cost
                         estimate). Page 16 of the Handbook says when the City
                         procures the rehabilitation contractor, the procedures set forth
                         in 24 CFR Part 85.36 will apply.

                         Page 10, Chapter 12, of the State’s Community
                         Development Block Grant Small Cities Program Handbook
                         required that fair and open competition be met in the award
                         of administrative services contracts. Open-ended contracts
                         are not permissible. Page 11 of the Handbook says to
                         ensure that competition will continue and the work under
                         the contract reflects market and competitive prices, requests
                         for proposals will be prepared and distributed by the City


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                              and multi-year contracts will be limited to a three-year
                              duration.

                              Article II of the City’s Charter prohibits members of the City
       City’s Requirements    Council from being interested in the profits or compensation of
                              any contract, job, work, or service for the City. Any contract
                              in which a member is or becomes interested in will be voided.

                              The City did not follow the State of Ohio’s Non-Participating
   The City Did Not Ensure    Jurisdiction Housing Handbook regarding the award of
   Three Bids Were Obtained   housing rehabilitation services. The City’s Community
   For The Award Of           Housing       Improvement      Program      (formerly     the
   Housing Rehabilitation     Comprehensive Housing Program) participants awarded 87
   Contracts                  rehabilitation contracts for 82 households between March
                              1993 and January 1999. Of the 87 contracts, the City used
                              $930,074 in HUD funds (Community Development Block
                              Grant and HOME) to pay for the housing rehabilitation
                              services. The State’s Housing Handbook required the City
                              to ensure the award of the rehabilitation contracts were
                              conducted through full and open competion. However, the
                              contract awards were not subject to full and open
                              competion.

                              The City did not ensure that three bids were received for 63
                              of the 87 (72 percent) housing rehabilitation contracts
                              awarded. The 63 contracts totaled $667,030 and were
                              awarded between March 1993 and November 1998. The
                              State’s Non-Participating Jurisdiction Housing Handbook
                              required the City to ensure three bids were received for all
                              housing rehabilitation services contracts awarded.
                              However, the City’s Community Housing Improvement
                              Program participants only solicited bids from at least three
                              contractors for 27 of the 63 contracts. The City allowed
                              Program particpants to request and receive only one bid for
                              the remaining 36 contracts.

                              In addition, 20 of the 36 single bid contracts lacked a cost
                              estimate from the Housing Standards Officer for the
                              Ironton-Lawrence County Area Community Action
                              Organization, which the City contracted with to administer its
                              Community Housing Improvement Program. Cost estimates
                              are a necessary tool for the City to ensure that bids for
                              housing rehabilitation services are reasonable. Without a
                              cost estimate, HUD and the City lack assurance that the
                              costs of the services were reasonable.

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                                  The City should assure a sufficient number of bids are
                                  solicited to reasonably expect responses from at least three
                                  bidders. This would normally entail the solicitation of bids
                                  from more than three contractors. If fewer than three bids
                                  are received, the City should check the bids against the cost
                                  estimate and if the bids are within reason, award the housing
                                  rehabilitation contract. If the bids are not within reason, the
                                  City should rebid for the housing rehabilitation services.

                                  The City did not follow HUD’s or the State’s requirements to
       The City’s Procurement     publicly advertise the procurement of services and equipment.
       Of Services And            The City awarded 32 contracts totaling $168,886 between
       Equipment Was Not          January 1993 and November 1998. The contracts related to
       Subject To Full and Open   housing rehabilitation services, demolition services, and
       Competition                parks and recreation equipment. HUD’s regulation and the
                                  State’s requirements required the City to award the contracts
                                  through full and open competition. However, the contract
                                  awards were not subject to full and open competition.

                                  The City awarded four housing rehabilitation services
                                  contracts, 27 demolition contracts, and one parks and
                                  recreation equipment contract using sealed bids and firm-
                                  fixed-price contracts. Since the City procured the services
                                  and equipment and used the sealed bid method to award the
                                  contracts, the City was required by HUD’s regulation and
                                  the State’s requirements to publicly advertise the 32
                                  contracts. However, the City did not publicly advertise the
                                  contracts.

                                  The City did not publicly advertise five contracts that
       The City Did Not Follow    exceeded $10,000 each. The City awarded four housing
       The State Law Regarding    rehabilitation services contracts and a recreation equipment
       The Procurement Of         contract. The five contracts totaled $101,526 and were
       Services And Equipment     awarded between April 1993 and November 1998. The
                                  City was required by State law to publicly advertise the five
                                  contracts since they exceed $10,000. The advertisement
                                  was to occur for not less than two consecutive weeks in a
                                  newspaper of general circulation within the City.

                                  The City obtained services and equipment through small
       The City’s Small           purchase procedures without obtaining quotations from a
       Purchases Did Not Meet     sufficient number of qualified sources as required by HUD’s
       HUD’s Regulation           regulation. Thirty-six small purchases were made between
                                  April 1993 and May 1999 totaling $41,693. HUD’s Ohio
                                  State Office of Community Planning and Development

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                                   defines a sufficient number of qualified sources as three or
                                   more. The City obtained only one or two quotes for each of
                                   the small purchases. Thus, the City was unable to show that
                                   the cost of the housing rehabilitation services, demolition
                                   services, and equipment was reasonable.

                                   The City did not ensure that the contract specifications for
   Contract Specifications         housing rehabilitation services detailed the required services
   Did Not Detail The              and/or materials. The Housing Standards Officer for the
   Required Services Or            Community Action Organization prepared the contract
   Materials                       specifications for the Community Housing Improvement
                                   Program’s housing rehabilitation contracts. The State’s Non-
                                   Participating Jurisdiction Housing Handbook required contract
                                   specifications to outline the rehabilitation work necessary to
                                   ensure that assisted houses met the State’s Residential
                                   Rehabilitation Standards when completed. However, the
                                   Housing Standards Officer’s contract specifications did not
                                   detail the scope of work, the quantity and quality of materials,
                                   and the method of installation.

                                   HUD’s Construction Analysts reviewed 35 contract
                                   specifications for housing rehabilitation services provided
                                   through the City’s Community Housing Improvement Program
                                   to determine whether the cost of the services was reasonable.
                                   The Construction Analysts were unable to provide a cost
                                   estimate because the contract specifications did not provide
                                   such items as: the type of materials to be used; length of runs
                                   for electrical wiring; size of material to be replaced or
                                   installed; sizes, type, and style of windows to be replaced;
                                   length, size, material, and type of piping to be installed; type
                                   of paint to be used; preparation of surfaces before painting;
                                   and the type, style, size, and number of kitchen cabinets to
                                   be installed. Without detailed contract specifications, HUD
                                   and the City lack assurance that housing rehabilitation
                                   services were reasonable or addressed all items that needed
                                   to be repaired.

                                   The City did not follow HUD’s regulation or the State’s
       The City Did Not Properly   requirements regarding the procurement of planning services
       Procure Its Planning        for the City’s Community Development Block Grant Program.
       Services                    Between 1992 and 1998, the City paid the Lawrence
                                   Economic Development Corporation $22,900 to provide
                                   planning services for the City’s Block Grant Program. The
                                   City did not sign a contract with the Economic Development
                                   Corporation outlining the scope of services or the time period

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                                  for the services to be provided. The Community Action
                                  Organization’s Director of Community Development said he
                                  thought the City could obtain the planning services without
                                  competition since the Economic Development Corporation
                                  was considered part of the City. However, the Executive
                                  Director of the Lawrence Economic Development Corporation
                                  said the Corporation was not part of the City. HUD’s
                                  regulation and the State’s requirements required the City to
                                  obtain the planning services through full and open competition.

                                  The City did not issue a Request for Qualifications or a
                                  Request for Proposal to obtain the planning services. A
                                  Request for Qualifications is used to determine whether a
                                  contractor has the necessary skills to provide the required
                                  services. A Request for Proposal is used to obtain cost
                                  estimates from qualified contractors. The City did not maintain
                                  records to detail the significant history of the procurement
                                  process, such as the rationale for the method of procurement or
                                  the basis for the services.

                                  The City did not properly procure its contracts with the
       Administration Contracts   Community Action Organization. In July 1999, the City
       Were Not Properly          signed an open-ended contract with the Ironton-Lawrence
       Procured                   County Area Community Action Organization to administer
                                  the City’s Community Development Block Grant Program.
                                  The City also awarded similar contracts to the Community
                                  Action Organization between April 1981 and July 1999.
                                  HUD’s regulation and the State’s requirements required the
                                  City to award its administrative services contracts through
                                  full and open competition.        The State’s Community
                                  Development Block Grant Small Cities Program Handbook
                                  prohibited the award of open-ended contracts. However,
                                  the City awarded an open-ended contract to the Community
                                  Action Organization without full and open competition.

                                  The City did not issue a Request for Qualifications or a
                                  Request for Proposal to obtain the administrative services for
                                  its Block Grant Program.             The Community Action
                                  Organization’s Director of Community Development said the
                                  City did not competitively procure the services. He said HUD
                                  approved the City’s initial contract with the Community Action
                                  Organization; however, he could not provide any
                                  documentation of HUD’s approval. In addition, HUD’s Ohio
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                                  have any documentation that it approved the Community
                                  Action Organization’s initial contract with the City.

                                  In addition, the City’s award of the July 1999 contract to the
                                  Community Action Organization violated HUD’s regulation
                                  and the City’s Charter regarding conflicts of interest. A former
                                  City Councilman was hired by the Community Action
                                  Organization in June 1998. The former Councilman proposed
                                  and voted for the Community Action Organization to
                                  administer the City’s Block Grant Program in 1999. HUD’s
                                  regulation and the City’s Charter prohibited the Councilman
                                  from being involved in the contract award to the Community
                                  Action Organization. The Charter requires that any contract
                                  which a Council member is interested in will be voided.

                                  The City’s failure to adhere to required contracting procedures
       Procurement Problems       occurred because the Ironton-Lawrence County Area
       Existed Because The City   Community Action Organization, which the City contracted
       Lacked Procedures And      with to administer its Community Development Block Grant
       Controls Over The          Program, lacked procedures and controls over the Program.
       Program                    The Director of the Community Action Organization’s
                                  Department of Community Development said he either
                                  misunderstood or was not aware of HUD’s or the State’s
                                  procurement requirements. The City’s Mayor said he was not
                                  aware of HUD’s regulation regarding conflicts of interest.
                                  Additionally, the City did not monitor the Community Action
                                  Organization to ensure it administered the Program as required.
                                  As a result, HUD lacks assurance that its funds were used
                                  efficiently and effectively, and the City’s procurement
                                  transactions were not subject to full and open competition.



   Auditee Comments               [Excerpts paraphrased from the City’s comments on our
                                  draft finding follow. Appendix B, pages 74 to 78, contain
                                  the complete text of the comments for this finding.]

                                  The problems cited with the procurement procedures appear
                                  to relate to the number of bids received and/or the
                                  availability of cost estimates to ensure contracts were
                                  reasonable and awarded through full and open competition.
                                  Many of the questioned contracts were from the Fiscal
                                  Years 1992 and 1994 Program. It appears that the
                                  minimum of three contractors were solicited to bid on the
                                  housing rehabilitation services; however, not all of those
                                  contractors submitted a bid. Cost estimates used to

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                           determine the reasonableness of the bids were not published
                           during the bidding process. Beginning with the Fiscal Year
                           1996 Program, the City changed its procurement
                           procedures to encourage all potential contractors to submit
                           a bid. The changes have already addressed many of the
                           issues relating to the procurement requirements and controls
                           for the rehabilitation services.

   OIG Evaluation Of       Of the 63 contracts awarded without three bids, 12 were
   Auditee Comments        awarded during the City’s 1996 Program after only one bid
                           was solicited. Thus, the changes made by the City during
                           the Fiscal Year 1996 Program did not ensure that three bids
                           were received for all housing rehabilitation services
                           contracts as required by the State. The City should assure a
                           sufficient number of bids are solicited to reasonably expect
                           responses from at least three bidders.



   Auditee Comments        The City can exceed the minimum small purchase
                           requirements by requesting more than three contractors to
                           submit quotes using the sealed bid format. The City feels
                           that by exceeding the small purchase requirements, it can be
                           assured that the costs are reasonable and without any
                           appearance of collusion.

       OIG Evaluation Of   We agree that the City can exceed the small purchase
       Auditee Comments    requirements by soliciting sealed bids. When this method is
                           used, the City is required to follow 24 CFR Part
                           85.36(d)(2). When the City obtains goods or services using
                           the small purchase procedures, it is required to follow 24
                           CFR Part 85.36(d)(1). The City did not obtain quotations
                           from a sufficient number of qualified sources as required.
                           Thirty-six small purchases were made between April 1993
                           and May 1999 totaling $41,693. The City obtained only
                           one or two quotes for each of the small purchases. The City
                           needs to establish procedures and controls to ensure that the
                           procurement of small purchases meet HUD’s regulation.



   Auditee Comments        The City feels that some of the information in the
                           Community Housing Improvement Program’s Contracting
                           Specification Book, which shows material types and
                           standards, were not fully considered by HUD’s
                           Construction Analyst. The Book is provided to contractors
                           and is part of both the bidding and contracting documents.

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                           The Book also acts as a supplement to the contract
                           specifications.

                           The Community Action Organization has already
                           undertaken steps beginning with the Fiscal Year 1998
                           Program to expand staffing and expertise regarding contract
                           specifications. Staff is undergoing additional Program
                           training through the State. In addition, the Community
                           Action Organization hired additional certified staff in such
                           areas as heating systems. The City is prepared to review its
                           controls and procedures relating to contract specifications
                           and make any changes needed to help assure the
                           reasonableness of the rehabilitation services.

       OIG Evaluation Of   The City did not ensure that the contract specifications for
       Auditee Comments    housing rehabilitation services detailed the required services
                           and/or materials. The specifications did not provide such items
                           as: the type of materials to be used; length of runs for
                           electrical wiring; size of material to be replaced or installed;
                           sizes, type, and style of windows to be replaced; length,
                           size, material, and type of piping to be installed; type of
                           paint to be used; preparation of surfaces before painting;
                           and the type, style, size, and number of kitchen cabinets to
                           be installed.       In addition, the City’s Contracting
                           Specification Book did not sufficiently provide the
                           necessary information on the requested materials. Without
                           detailed contract specifications, HUD and the City lack
                           assurance that housing rehabilitation services were
                           reasonable or addressed all items that needed to be repaired.

                           The actions taken or planned by the City to improve its
                           contract specifications process for the housing rehabilitation
                           services should improve the process if the specifications
                           meet the requirements of the State’s Non-Participating
                           Jurisdiction Housing Handbook.



   Auditee Comments        The Program administration contracts with the Community
                           Action Organization were awarded according to the Ohio
                           Compliance Supplement. The Supplement does not require
                           the City to formally publish and accept bids for the
                           administrative services. Only supplies and materials that
                           exceed the City's bid limit must be competitively awarded.



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                           In regards to the conflict of interest by a former City
                           Councilman, the City does not believe that any conflict
                           exists. Therefore, any contract or grant applications that
                           the former Councilman endorsed and voted for are legal and
                           binding. The City’s Charter states that no member of the
                           Council shall be interested in the profits or endorsements of
                           any contract, job, work, or service for the City. The former
                           Councilman did not profit from the contract between the
                           City and theCommunity Action Organization.

       OIG Evaluation Of   HUD’s and the State’s guidelines required the City to
       Auditee Comments    award its administrative services contracts through full and
                           open competition. The State’s Community Development
                           Block Grant Small Cities Program Handbook prohibited the
                           award of open-ended contracts.         However, the City
                           awarded an open-ended contract to the Community Action
                           Organization without full and open competition. The Ohio
                           Compliance Supplement referenced by the City was issued
                           by the State Auditor’s Office and its purpose is to
                           incorporate significant new or revised State laws. The
                           Compliance Supplement does not allow the City to violate
                           other requirements concerning the procurement of
                           administrative services.

                           The City’s award of the July 1999 contract to the Community
                           Action Organization violated HUD’s regulation and the City’s
                           Charter regarding conflicts of interest.       24 CFR Part
                           85.36(b)(3) states no employee, officer, or agent of the
                           grantee or subgrantee will participate in the selection, or in
                           the award or administration of a contract supported by
                           Federal funds if a conflict of interest, real or apparent,
                           would be involved. Article II of the City’s Charter prohibits
                           members of the City Council from being interested in the
                           profits or compensation of any contract, job, work, or service
                           for the City. Any contract in which a member is or becomes
                           interested in will be voided. A former City Councilman was
                           hired by the Community Action Organization in June 1998.
                           The former Councilman proposed and voted for the
                           Community Action Organization to administer the City’s Block
                           Grant Program in 1999. The City should terminate its contract
                           with the Community Action Organization as required by the
                           City’s Charter




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   Auditee Comments      A full response to the procurement deficiencies cannot be
                         made until the City and the Community Action Organization
                         conduct a full investigation. Once this is completed, the
                         City will implement changes to the Program that are
                         necessary to assure that Federal, State, and local
                         requirements are followed.

   OIG Evaluation Of     Based upon the actions planned by the City, its procurement
   Auditee Comments      process should be improved if the actions are fully
                         implemented.


       Recommendations   We recommend that the Ohio State Office Director of
                         Community Planning and Development, in conjunction with
                         officials from the State of Ohio, assures that the City of
                         Ironton:

                         5A.     Establishes procedures and controls to ensure that
                                 the procurement of housing rehabilitation services,
                                 demolition services, parks and recreation equipment,
                                 and administrative services meet HUD’s regulations,
                                 the State of Ohio’s requirements, and the City’s
                                 Charter.

                         5B.     Establishes procedures and controls to ensure that
                                 the contract specifications for housing rehabilitation
                                 services meet the requirements of the State of
                                 Ohio’s Non-Participating Jurisdiction Housing
                                 Handbook.

                         5C.     Terminates its contract with the Ironton-Lawrence
                                 County Area Community Action Organization as
                                 required by Article II of the City’s Charter.




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  Management Controls
  In planning and performing our audit, we considered the management controls of the City of
  Ironton in order to determine our auditing procedures, not to provide assurance on the controls.
  Management controls include the plan of the organization, methods, and procedures adopted by
  management to ensure that its goals are met. Management controls include the processes for
  planning, organizing, directing, and controlling program operations. They include the systems for
  measuring, reporting, and monitoring program performance.


                                       We determined the following management controls were
    Relevant Management                relevant to our audit objectives:
    Controls
                                       •   Program Operations - Policies and procedures that
                                           management has implemented to reasonably ensure that a
                                           program meets its objectives.

                                       •   Validity and Reliability of Data - Policies and procedures
                                           that management has implemented to reasonably ensure
                                           that valid and reliable data are obtained, maintained, and
                                           fairly disclosed in reports.

                                       •   Compliance with Laws and Regulations - Policies and
                                           procedures that management has implemented to
                                           reasonably ensure that resource use is consistent with laws
                                           and regulations.

                                       •   Safeguarding Resources - Policies and procedures that
                                           management has implemented to reasonably ensure that
                                           resources are safeguarded against waste, loss, and misuse.

                                       We assessed all of the relevant controls identified above.

                                       It is a significant weakness if management controls do not
                                       provide reasonable assurance that the process for planning,
                                       organizing, directing, and controlling program operations will
                                       meet an organization’s objectives.

                                       Based on our review, we believe the following items are
   Significant Weaknesses              significant weaknesses:

                                       •   Program Operations.

                                           The City: (1) did not ensure that units met the State of
                                           Ohio’s Residential Rehabilitation Standards after they

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                            received housing assistance; (2) failed to ensure that assisted
                            properties were occupied by low or moderate income
                            families and provided totally deferred assistance to
                            households when they had the ability to repay part of their
                            housing assistance; (3) provided housing assistance to
                            households without property hazard insurance and/or
                            without recording mortgage liens, deed restrictions, or
                            covenants on the assisted properties; (4) did not establish
                            procedures and controls to prevent conflicts of interest in
                            the award of housing rehabilitation assistance; and (5)
                            failed to ensure that its Council and top management
                            exercised their responsibilities to implement effective
                            contracting controls (see Findings 1, 2, 3, 4, and 5).

                        •   Compliance with Laws and Regulations.

                            The City did not follow HUD’s regulations, the State of
                            Ohio’s requirements, and/or their own policies to ensure
                            that: (1) assisted houses met the State’s Residential
                            Rehabilitation Standards; (2) only low or moderate income
                            families received housing rehabilitation services and that
                            households repaid part of their housing assistance when they
                            were able; (3) property hazard insurance and/or mortgage
                            liens, deed restrictions, or covenants were placed on assisted
                            properties; (4) conflicts of interest did not exist in the award
                            of housing rehabilitation assistance; (5) full and open
                            competition existed regarding the procurement of housing
                            rehabilitation services, demolition services, parks and
                            recreation equipment, and administrative services; and (6)
                            the specifications for housing rehabilitation contracts
                            showed the requested materials and/or services (see
                            Findings 1, 2, 3, 4, and 5).

                        •   Safeguarding Resources.

                            The City: (1) misused $35,376 of HUD funds (Community
                            Development Block Grant and HOME) to pay for housing
                            rehabilitation work that was improperly performed or that
                            was not provided; (2) improperly used $38,934 to assist
                            seven properties which were not occupied by low or
                            moderate income families; (3) lacked documentation to
                            show that $111,928 in housing assistance paid to 11
                            other households benefited low or moderate income
                            individuals; (4) improperly provided $145,995 in totally
                            deferred assistance to nine households when they had the

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       ability to repay part of their housing assistance; (5) failed
       to obtain income and/or expense documentation for six
       other households to determine if they had the ability to
       repay their $56,017 in housing rehabilitation assistance;
       (6) misused $58,353 in housing assistance for four
       households without property hazard insurance and/or
       without recording mortgage liens, deed restrictions, or
       covenants on the assisted properties; and (7) improperly
       provided $84,947 in housing rehabilitation assistance
       when conflicts of interest existed (see Findings 1, 2, 3,
       and 4).




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  Follow Up On Prior Audits
  This is the first audit of the City of Ironton’s Community Development Block Grant Program by
  HUD’s Office of Inspector General. The latest single audit for the City covered the fiscal year ending
  December 31, 1998. The report contained two findings. None of the findings related to the City’s
  Block Grant Program.




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                                                                                       Appendix A

  Schedule Of Questioned Costs
           Recommendation                           Type of Questioned Costs
              Number                           Ineligible 1/       Unsupported 2/

                  1A                             $ 35,376
                  2B                               38,934
                  2C                                                 $111,928
                  2D                              145,995
                  2E                                                    56,017
                  3B                                4,090
                  3C                               57,253
                  4D                               84,947
                 Total                           $366,595            $167,945


  1/   Ineligible costs are costs charged to a HUD-financed or insured program or activity that
       the auditor believes are not allowable by law, contract, or Federal, State, or local policies
       or regulations.

  2/   Unsupported costs are costs charged to a HUD-financed or insured program or activity
       and eligibility cannot be determined at the time of the audit. The costs are not supported
       by sufficient documentation or there is a need for a legal or administrative determination on
       the eligibility of the cost. Unsupported costs require future decision by HUD program
       officials. This decision, in addition to obtaining supporting documentation, might involve a
       legal interpretation or clarification of Departmental policies and procedures.




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  Auditee Comments
  March 14, 2000

  Heath Wolfe,
  Assistant District Inspector General
  U.S. Dept. Of Housing and Urban Development
  Office of Inspector General for Audit, Midwest
  Ralph H. Metcafe Federal Building
  77 West Jackson Boulevard, Suite 2646
  Chicago, Illinois 60604-3507

  RE: Response to HUD IG Draft Audit Finding of 1/31/2000

  Dear Mr. Wolfe:

          As the May for the City of Ironton, I provided the above referenced draft findings and
  reports to Ralph Kline of the Ironton Lawrence County Community Action Organization,
  Department of Housing and Community Development. I ask Mr. Kline to review the draft finding
  and reports as the contracting agency for the City of Ironton and to provide comment to the City.
  Mr. Kline response is outlined in the correspondence to my office dated 3/14/2000 as attached.
  Therefore, as the Mayor for the City, I would ask that you recognize those comments as
  comments made on behalf of the City of Ironton.

           Should you have any questions or wish discuss any of these issues further, please give me
  a call at (740)532-3833.

  Sincerely,

  /signed/

  Robert Cleary,
  Mayor

  cc.    Bill Graves, OHCP
         Ralph Kline, CAO




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  March 14, 2000

  Mayor Robert Cleary
  City of Ironton
  301 S. Third Street
  Ironton, Ohio 45638




  RE: Response to HUD IG Draft Audit Finding of 1/31/2000

  Dear Mayor Cleary:

         On the part of the Ironton Lawrence County CAO, Department of Housing and
  Community Development, I would like to respond to the above referenced HUD IG draft finding
  and report to the City of Ironton that was shared with us by your office as contracting entity for
  the City. This response reflects only comments to those items where there appear to be known
  discrepancies based upon opinions and information referenced in the reports. However, this
  response is not considered as a full response to the findings and report. A full response can not be
  made by our office until such time that full access to records and additional investigations into the
  various matters can be made.

          Issue: "Sample Selection and Inspection Result" states that the "City executed
  housing rehabilitation contracts for the seven houses between October 1997 and January 1999." It
  should be noted that rehabilitation contracts are executed directly between the respective
  homeowners and the contractors. The City, via the Ironton Lawrence CAO, provides financial
  assistance to the homeowner through the Rehabilitation Loan/Grant Agreement. Under this
  agreement, the homeowner is to contract with the contractor for the rehabilitation work with the
  Program providing technical assistance throughout the contracting process.

       Issue: "HUD Funds Were Used To Pay For Rehabilitation Work That Was
  Improperly Performed Or Not Provided":

           It was stated within the draft findings that "The housing assistance was intended to correct
  items that did not meet the State of Ohio's Residential Rehabilitation Standards." It should be
  noted that two of the seven structures (1114 South 10th Street and 3024 South 4th Street)
  identified were not provided as "rehabilitation assistance" but rather as "emergency repair
  assistance." As a result, repair work was intended to address the repairs that were identified at
  that time as emergency in accordance to the emergency repair guidelines and was not "... intended
  to correct items that did not meet the State of Ohio's Residential Rehabilitation Standards."

          In addition, it was stated that ‘The Director of Community Action Organization's
  Community Development Department said no one from Community Action Organization
  monitored the Housing Standards Officer's final inspection of houses to ensure the housing
  rehabilitation work was completed according to the State's Standards" This statement should be

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  clarified to reflect a response that "not all jobs may be subject to an additional inspection upon
  completion." However, homes are typically inspected during the course of the work by other
  CAO staff as well as City inspectors for compliance with the City Building Permits. In addition,
  units are randomly selected and inspected by representatives from the State of Ohio.

          This office is unable to respond to each of the individual items stated as either "Work
  Improperly Performed" or "Work Not Provided" until we can fully investigate each item. This
  investigation will be utilized to determine; 1. A review of Residential Rehabilitation Standards and
  other applicable standards to determine requirements at the time in which work was performed, 2.
  A review of the case files to determine what was specified within the respective work write ups,
  field notes, contracts, change orders to reflect work expected of the contractor, 3. A review of file
  information to determine if there were any known changes in conditions of the work beyond the
  control of the program from the time of contract completion. A response will be formulated for
  each of the items after full investigation can be completed and a determination can be made. It
  should be noted, however, that these items were just made known to the Program by the above
  referenced January 31, 2000 letter to the City. These issues have been made from solicitations
  made of the homeowners by this audit rather than directly by the homeowner through the
  Program's formal complaint system which is identified to, and acknowledged by, each of the
  program applicants as part of their application process.

          Should you have any questions or need any additional information, please feel free to
  discuss these issues with me further.



  Sincerely,

  /signed/

  Ralph W. Kline,
  Community Development Director

  cc. Bill Graves, OHCP




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  July 14, 2000

  Heath Wolfe,
  Assistant District Inspector General
  U.S. Dept. Of Housing and Urban Development
  Office of Inspector General for Audit, Midwest
  Ralph H. Metcafe Federal Building
  77 West Jackson Boulevard, Suite 2646
  Chicago, Illinois 60604-3507

  RE: Response to HUD IG Draft Audit Finding of 1/31/2000

  Dear Mr. Wolfe:

          As the May for the City of Ironton, I provided the above referenced draft findings and
  reports to Ralph Kline of the Ironton Lawrence County Community Action Organization,
  Department of Housing and Community Development. I asked Mr. Kline, of the contracting
  agency for the City of Ironton, to review the draft findings and reports and to provide comments
  to the City. Mr. Kline’s response is outlined in the correspondence to my office dated 7/14/2000
  as attached. Therefore, as the Mayor for the City, I would ask that you recognize those
  comments as being made on behalf of the City of Ironton.

         Should you have any questions or wish to discuss any of these issues further, please give
  me a call at (740)532-3833.

  Sincerely,

  /signed/

  Robert Cleary,
  Mayor

  cc.    Bill Graves, OHCP
         Ralph Kline, CAO




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  July 14, 2000

  Mayor Robert Cleary
  City of Ironton
  301 S. Third Street
  Ironton, Ohio 45638

  Re: Response to HUD IG Draft Audit Finding of 1/31/2000

  Dear Mayor Cleary:

          On behalf of the Ironton Lawrence County CAO, Department of Housing and Community
  Development, I would like to respond to Mr. Bowen’s request for a more detailed response to
  the above referenced Draft Audit Finding. This response is supplemental to our letter dated
  March 14, 2000, and will only address each of the individual questioned items of work. I am
  utilizing the attached spread sheet provided by Mr. Bowen detailing each of these questionable
  items regarding the individual items. This response is being formulated based on information that
  we have been able to secure from files and site visits to date. However, this response is not
  considered as a full and final response to the findings and report. A full response cannot be
  formulated by our office until such time that a full and final audit report is provided to us.

         With regards to the response to the individual items of work, we have added a column to
  the above referenced spreadsheet utilizing a response code system, as attached.

          Should you have any questions or need any additional information, please feel free to
  discuss these issues with me further.


  Sincerely,

  /signed/

  Ralph W. Kline,
  Community Development Director

  cc: Bill Graves, OHCP

  Attachment




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                                                7/14/2000
                                              Response Notes

         Code A. Corrective work has already been completed as of the date of this response by
              the contractor at the contractor’s expense.

                   B. Proposes corrective work to be completed by the contractor but not yet
                   completed as of the date of this response.

                   C. Additional work already completed as of the date of this response in order to
                   meet RRS standards at the expense of the local program.

                   D. Proposes additional work to be completed to meet RRS standards at the
                   expense of the local program but not yet completed as of the date of this
                   response.

                   E. Other with referral to a specific note of response.

  Response Notes:

                   E-S.1: Follow up inspection and review of files show that the floors were braced
                   and are structurally sound. The surface of the floors was prepared to allow for
                   installation of new floor covering. It is the opinion of this office that the floors do
                   meet RRS standards as described in Section 2.2.1; “floors shall provide a
                   reasonably flat and horizontal surface to the interior of the dwelling.” It should be
                   noted in the commentary of the RRS standards in connection with flooring that
                   “OHCP” does not expect floors to be made completely level. (See Attached
                   Exhibit 1.)

                   E-S.2: Based on our office’s inspection, the heating vents in both the kitchen and
                   bathroom #1 were adjusted to the elevated floor level. (See Exhibit 2 showing the
                   location of those vents.)

                   E-S.3: Review of information on file shows that the trim on the bathroom door
                   was secured upon completion of the job. Based on a current inspection of the unit,
                   it appears that maintenance of the unit is an issue within the household. However,
                   the contractor has agreed to return to the job and reinstall the trim at no cost.

                   E-S.4: Both the door and trim in bedroom #1 were finished and in place upon
                   reinspection of the unit. (See photos in Exhibit 3). No additional work appears to
                   be needed.

                   E-S.5: In review of our files and reinspection of the roof, the work as called for
                   ($350.00) appears to be justified. The roof was shimmed, made sound, and
                   underlayment sheathing put into place before roof replacement. The roof as shown

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       in the photo (Exhibit 4) appears to meet RRS in that it is sound, functional, and
       level (as defined as being a reasonably flat and horizontal surface).

       E-S.6: Review of our files show that the handrails were stabilized upon completion
       of the contract. It is probable that the current condition is partially resultant from
       current abuse. However, the contractor is willing to re-stabilize the handrails
       again.

       E-F.1: It should be noted that this job was an emergency repair only. The
       condition of the house would not allow for a complete repair to bring the house to
       meet State RRS standards. The household contained family members that were of
       frail health. One emergency was to repair very poor flooring in the bathroom. A
       second repair consisted of replacing a furnace that had gone out leaving the family
       without any heat.

       With regards to not being level and being spongy, a review of the videos show that
       the flooring was braced and underlayment was installed to level the floor prior to
       installation of vinyl flooring. After completion, the video shows the floor to be
       sound and level according to RRS definition. It is possible that the current
       condition could be a result of either termites or further separation of joists and
       sills. This could result in the sponginess and the separation and curling of the vinyl
       flooring. Since videos show the work completed as an emergency repair job only,
       and the fact that the current conditions are likely resultant from other conditions
       within the structure that were not addressed by the emergency repair, the local
       program does not agree with your determination that the work was improperly
       performed.

       E-F.2: The furnace was installed to address a health and safety situation that was
       created when the Fletcher’s former heating unit became inoperable. Since there
       was illness in the family, the program replaced the heating unit only. At the date of
       inspection, that furnace appeared to continue to be operational and functional. A
       totally separate item of work, holes in the walls, was not addressed as part of the
       emergency repair. It appears that given the structural condition of the house, the
       problems with the walls could not be permanently addressed.

       E-P.1: Based on our reinspection of the facia on the Potter job, all facia appeared
       to be in place as evidenced within the photos attached as Exhibit 5. In order to
       take any action on this item, we would need further clarification as to the problem.

       E-P.2: Based on our reinspection, concrete splash blocks were put into place on
       the job. The program will contract to bring in additional fill, leveling, and seeding
       for the sunken area.

       E-P.3:Based on our recent inspection, a two-outlet GFI receptacle was installed.
       (See the photo in Exhibit 6.) Change Order #1, which is in question, specifically

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                   calls for “1”in quantity with 2 outside weatherproof outlets. (See Exhibit 7 for
                   copy of Change Order #1).

                   E-B.1: On this job it was originally intended to utilize the prior floor furnace vent
                   as a cold air return for the new forced air furnace. However, the new furnace
                   utilized a new cold air return and the contractor covered the old floor furnace
                   space with flooring underlayment for $25.00. Although the program does not feel
                   that this is a hazard or in violation of RRS standards, we have agreed to contract
                   for covering the questioned area with either vinyl or carpet flooring of the owner’s
                   choice for an additional $50.00. In conferring with the property owner as to this
                   decision, the owner requested that they would like to utilize the $50.00 allowance
                   in combination with their own funds to provide new carpet for the entire living
                   room area. The new carpeting is scheduled to be laid on August 7, 2000.

                   E-B.2:The receptacle outlet was readjusted by the contractor to make it more flush
                   to the wall. In addition, trim was added around the electrical box by the
                   contractor. (See the photo in Exhibit 8).

                   E-B.3: Upon reviewing our files, it appeared that the door to the bathroom was
                   initially installed correctly. Upon reinspection of the door, it appeared as though
                   the hinges had been bent. The contractor did return and straighten the hinges.
                   (See the photo in Exhibit 9).

                   E-B.4: Upon reinspection of Burkes unit, it was confirmed that five receptacles
                   were installed by the contractor in the room known as Bedroom #1.(See Exhibit
                   10 showing pictures of each of the five receptacles.) All wall receptacles were
                   tested as being grounded.

                   In addition, the contractor has returned to the unit and moved the smoke detector
                   beyond the 8 inches from the wall to meet RRS standards. (See Exhibit 11 for
                   the photo evidencing movement of the smoke detector.

                   E-B.5: The Program has provided for the contractor to provide trim around the
                   door for Bedroom #2. This work has been completed and is shown by the
                   photograph in Exhibit 12.

                   E-B.6: Upon reinspection of the unit, it was confirmed that there were four
                   receptacles installed in the room known as Bedroom #2. All receptacles were
                   tested as being grounded. (See photographs of each of the four receptacles in
                   Exhibit 13). The same as Bedroom #1, the contractor did reinstall the smoke
                   detector so that there was a minimum of 8 inches from the wall to meet RRS
                   standards.

                   E-B.7: Upon reinspection of the unit, it was determined that one GFI receptacle
                   was installed in the laundry room. The receptacle was installed with a GFI breaker

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       in the electrical box as recommended for receptacles used for washers. The
       contractor did return and did install a second GFI receptacle in the laundry room.

       E-B.8: Upon reinspection of the unit, the foundation vent was in place on the unit.
       (See the photo in Exhibit 14.)

       E-E.1: Upon reinspection of the unit, the kitchen floor did appear to be level in
       accordance to RRS definition. The work did appear to be in place in accordance
       to contract. The location of any soft spot was unable to be determined. We
       would need additional clarification prior to taking any additional action. (See
       photo in Exhibit 15).

       E-E.2: Although access has been limited as to the reinspection of this unit, it is the
       feeling of the local program that the closet does currently meet the RRS definition
       of level and is functional without any hazards. Therefore, we don’t feel additional
       work to level the closet floor is justified.

       E-E.3: Upon reinspection of the unit and review of our records it was found that
       one splash block was installed. Another appears to have been installed and was
       later uninstalled by the property owner and is currently at the site. One splash
       block was change ordered out in Change Order #4 to redirect into an existing drain
       tile. Two splash blocks appeared to be missing but it was undetermined as to
       whether or not they were initially installed. It is the expectation of the program
       that the contractor return and install splash blocks at these two locations.

       With regards to the two splash blocks that were indicated as being overpaid, it
       appears that upon arriving at the site, the gutters and down spouts were
       reconfigured and perhaps reduced the number of down spouts and the need for the
       initial estimated number of splash blocks. However, the estimated numbers
       included in the bid documents by the program are indicated as estimated quantities
       as indicated in the bottom of each work write-up sheet. It is the expectations of
       the program to have a functioning gutter and down spout system that meets RRS
       codes upon completion and is not meant to provide detailed estimations of total
       material supplies needed for the job. It is the opinion of this program, with
       exception of the two missing splash blocks, that the contractor did provide for a
       gutter and down spout system that does meet RRS. The price for doing so was
       considered as competitive pricing based on the bidding process utilized in
       determining the contractor and base price for the job.

       E-E.4: Upon reinspection of the unit, the outside electrical receptacle was installed
       and in place on the side porch. (See photo in Exhibit 16).

       E-M.1: Upon review of our files and reinspection of the unit, it was determined
       that the contractor did run a new entry cable from the meter to the relocated
       electric box for the $100 bid item that was replaced. The electric company did

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                   not indicate the need to make any changes from the meter box to the utility pole.
                   Although it was agreed upon verbally and accepted by the Utility company, this
                   clarification appears not to have made it into a written change order. However, it
                   also appears as though the contractor did sufficient work considering the cost of
                   service cable and the number of feet which the cable was run in order to justify the
                   $100 bid for that item of work. However, the program has made arrangements
                   for the contractor to add the mast and additional service line. That work has been
                   completed and is evidenced by the photo in Exhibit 17.

                   E-Mc.1: In reviewing our file with regards to this emergency repair, it appears as
                   though the program’s estimates on the surface areas, etc. were off. However, it is
                   the expectation of the program, as indicated at the bottom of each bid sheet, that
                   the estimated quantities provided by the program for bidding purposes are
                   estimates only and not actual quantities. It is also listed on each bid sheet that the
                   contractor is responsible for actual measurements for placement of their pricing,
                   and are also provided the opportunity of doing a walk-through before bidding to
                   verify and seek any corrections to the program’s estimates or description of work
                   to be performed.. Since there were multiple contractors that placed bids on the
                   job, and there were no change orders affecting pricing on any of the items of work
                   in question, it is felt by the local program that the cost paid for doing each of the
                   items of work is competitive and reasonable even though the program’s
                   estimations of quantities are not exact. Therefore, it is the opinion of this office
                   that the respective items of work were completed by the contractor. In the future,
                   the program will attempt to include more accurate estimates in quantities as part of
                   the work write-up utilized in bidding repair projects.

                   With regards to matching colors of new shingles to existing shingles, it is
                   impossible to provide exact matches because of changes made by manufacturers.
                   Therefore, shingles of like colors were utilized for the repair job to blend with the
                   existing shingles on the remaining part of the house.




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  August 24, 2000

  Heath Wolfe,
  Assistant District Inspector General
  U.S. Dept. Of Housing and Urban Development
  Office of Inspector General for Audit, Midwest
  Ralph H. Metcafe Federal Building
  77 West Jackson Boulevard, Suite 2646
  Chicago, Illinois 60604-3507

  RE: Response to HUD IG Draft Audit Finding of 7/17/2000

  Dear Mr. Wolfe:

          As the Mayor for the City of Ironton, I provided the above referenced draft findings and
  reports to Ralph Kline of the Ironton Lawrence County Community Action Organization,
  Department of Housing and Community Development. I asked Mr. Kline, of the contracting
  agency for the City of Ironton, to review the draft finding and reports and to provide comments to
  the City. Mr. Kline's response is outlined in correspondence to my office dated 8/23/2000 as
  attached. Therefore, as the Mayor for the City, I would ask that you recognize those comments
  as being made on behalf of the City of Ironton.

         Should you have any questions or wish to discuss any of these issues further, please give
  me a call at (740) 532-3833.

  Sincerely,

  /signed/

  Robert Cleary,
  Mayor

  cc.   Lisa Patt-McDaniel, OHCP
        Ralph Kline, CAO




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  August 23, 2000

  Mayor Robert Cleary
  City of Ironton
  301 S. Third Street
  Ironton, Ohio 45638

  RE: Response to HUD IG Draft Audit Finding of 7/17/2000

  Dear Mayor Cleary:

          On the part of the Ironton Lawrence County CAO, Department of Housing and
  Community Development, I would like to respond to the above referenced HUD IG draft finding
  and report to the City of Ironton that was shared with us by your office as contracting entity for
  the City. This response reflects only comments to those items where there appear to be known
  discrepancies based upon opinions and information referenced in the reports. However, this
  response is not considered as a full response to the findings and report. A full response can not be
  made by our office until additional investigations into the various matters can be made.

  Issue #I: The City did not obtain documentation to show assisted households met the
  income requirements:

         Although the Program has not had an opportunity to review each of the cases cited within
         the draft finding, we did review a sampling of files and found that some of those files did
         have supporting documentation for incomes. Included in Attachment #1 is documentation
         showing income of either the owners and/or tenants for 614 Lawrence Street, 614 ½
         Lawrence Street, 616 Lawrence Street, and 3034 South 6th Street. The program proposes
         to review each of the respective case files for needed documentation, and if missing, work
         with the respective applicants to secure such documentation as needed.


  Issue #2: The City provided assistance to Households that had the ability to repay their
  assistance:

         Although the program has not had the opportunity to review each of the respective files
         listed within the draft finding, it was noted that some of the applicants were very low
         income households at or below 50% of median income. It has been the policy of the City
         that individuals at or below 50% of median income were not considered for any repayment
         except upon the sale of property. This policy is reflected throughout several different
         sections of the Community's application when referencing types of assistance and expected
         pay back.

          Should you have any questions or need any additional information, please feel free to
  discuss these issues with me further.


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  Sincerely,

  /signed/

  Ralph W. Kline,
  Community Development Director

  cc. Lisa Pat-McDaniel, OHCP




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  April 6, 2000

  Heath Wolfe,
  Assistant District Inspector General
  U.S. Dept. Of Housing and Urban Development
  Office of Inspector General for Audit, Midwest
  Ralph H. Metcafe Federal Building
  77 West Jackson Boulevard, Suite 2646
  Chicago, Illinois 60604-3507

  RE: Response to HUD IG Draft Audit Finding of 3/6/2000

  Dear Mr. Wolfe:

          As the Mayor for the City of Ironton, I provided the above referenced draft findings and
  reports to Ralph Kline of the Ironton Lawrence County Community Action Organization,
  Department of Housing and Community Development. I asked Mr. Kline, of the contracting
  agency for the City of Ironton, to review the draft finding and reports and to provide comments to
  the City. Mr. Kline’s response is outlined in correspondence to my office dated 4/6/2000 as
  attached. Therefore, as the Mayor for the City, I would ask that you recognize those comments
  as being made on behalf of the City of Ironton.

         Should you have any questions or wish to discuss any of these issues further, please give
  me a call at (740)532-3833.

  Sincerely,

  /signed/

  Robert Cleary,
  Mayor

  cc.    Bill Graves, OHCP
         Ralph Kline, CAO




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  April 6, 2000

  Mayor Robert Cleary
  City of Ironton
  301 S. Third Street
  Ironton, Ohio 45638

  RE: Response to HUD IG Draft Audit Finding of 1/31/2000

  Dear Mayor Cleary:

         On the part of the Ironton Lawrence County CAO, Department of Housing and Community
  Development, I would like to respond to the above referenced HUD IG draft finding and report
  to the City of Ironton that was shared with us by your office as contracting entity for the City.
  This response reflects only comments to those items where there appear to be known
  discrepancies based upon opinions and information referenced in the reports. However, this
  response is not considered as a full response to the findings and report. A full response can not be
  made by our office until such time that full access to records and additional investigations into the
  various matters can be made.

       Issue: The Program need to establish procedures and controls to ensure
  rehabilitation assistance meets State of Ohio Grant requirements regarding hazard
  insurance, mortgage liens, deed restrictions, or covenants on rehabilitation loans.

         The Program discussed with legal counsel the issue of not having change order amounts
  secured within the Program mortgages placed upon the properties at the time of loan closing and
  initial contracting. Legal counsel has in turn provided the Program with an open ended mortgage
  to be executed at the time of the initial contract which is being used on future rehabilitation jobs.
  The mortgages will be placed for the maximum activity amount allowable for the program.
  Therefore, any change orders for any future jobs should be secured under the Program's
  mortgage. A copy of this open ended mortgage is attached as Attachment 1.

         With regards to the securing of hazard insurance for rehabilitation projects, if this is a
  required policy by HUD and the State, then the program will implement a policy requiring hazard
  insurance and the listing of the Program as insured lenders on all future rehabilitation projects.
  However, such a policy would have to be implemented realizing that this policy would likely
  eliminate some of the lowest income clients and neighborhoods from receiving assistance for
  which the HUD programs are intended because those clients will not be able to afford such
  insurance. We will await a final decision and direction from HUD and the State before
  implementing such a policy.

  Record Mortgage Liens on 11 properties cited in the draft findings in the amount of
  $50,817:




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        The Program is proceeding to obtain updated filings of mortgages to reflect the program
  change order amounts. To the date of this response, we have filed additional mortgages to reflect
  the change orders for the following properties:

        514 South 10th Street                            $13,004
        802 South 7th Street                             $12,751
        609 Lawrence Street                              $ 4,285
        616 Lawrence Street                              $ 3,847
        614 and 614 !/2 Lawrence Street (2 units)        $ 6,670
        2439 South 10th Street                           $ 2,860
        914 Walnut Street                                $ 1,960
        305 Batham Lane                                  $ 1,350

        Total to Date:                                   $46,727

  The recorded mortgages are attached as Attachment 2. The program will pursue the balance of
  the requested mortgage additions.

  Provide evidence of property hazard insurance for five properties amounting to $78,528.

         The Program has begun to search through files and inquire with the property owners in
  question with regards to hazard insurance. To the date of this response, we have found evidence
  to the following properties in questions:

        512 South 8th Street                            $15,130
        918 Adams Street                                $16,665
        1825 South 4th Street                           $ 6,145

        Total                                           $37,940

  Should HUD and the State require hazard insurance, and under directive of HUD and State, then
  the Program will take appropriate actions to require the remaining property owners obtain
  appropriate hazard insurance. Evidence of the insurance for the above listed properties obtained
  to date are attached as Attachment 3.

         This office is unable to respond at this time to each of the remaining individual items stated
  in the draft finding. An investigation will be conducted with each of these remaining items and
  individual clients, and a formal response will be developed for each of these items as required at a
  later date.

        Should you have any questions or need any additional information, please feel free to
  discuss these issues with me further.




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  Sincerely,

  /signed/

  Ralph Kline,
  Community Development Director

  cc. Bill Graves, OHCP




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  July 28, 2000

  Heath Wolfe,
  Assistant District Inspector General
  U.S. Dept. Of Housing and Urban Development
  Office of Inspector General for Audit, Midwest
  Ralph H. Metcafe Federal Building
  77 West Jackson Boulevard, Suite 2646
  Chicago, Illinois 60604-3507

  RE: Response to HUD IG Draft Audit Finding of 6/23/2000

  Dear Mr. Wolfe:

          As the Mayor for the City of Ironton, I provided the above referenced draft findings and
  reports to Ralph Kline of the Ironton Lawrence County Community Action Organization,
  Department of Housing and Community Development. I asked Mr. Kline, of the contracting
  agency for the City of Ironton, to review the draft finding and reports and to provide comments to
  the City. Mr. Kline’s response is outlined in correspondence to my office dated 7/27/2000 as
  attached. Therefore, as the Mayor for the City, I would ask that you recognize those comments
  as being made on behalf of the City of Ironton.

         Should you have any questions or wish to discuss any of these issues further, please give
  me a call at (740)532-3833.

  Sincerely,

  /signed/

  Robert Cleary,
  Mayor

  cc.    Lisa Patt-McDaniel, OHCP
         Ralph Kline, CAO




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  July 27, 2000

  Mayor Robert Cleary
  City of Ironton
  301 S. Third Street
  Ironton, Ohio 45638

  RE: Response to HUD IG Draft Audit Finding of Letter Dated June 23, 2000

          On the part of the Ironton Lawrence County CAO, Department of Housing and
  Community Development, I would like to respond to the above referenced HUD IG draft finding
  and report. This response reflects only comments to those items where there appear to be known
  discrepancies based upon opinions and information referenced in the reports. However, this
  response is not considered as a full response to the findings and report. A full response can not
  be made by our office until such time that full review of records and additional investigations into
  the various matters can be made.

          As a general comment with regards to the statement made in your draft finding that “The
  Department of Community Development’s Director for the Ironton-Lawrence County Area
  Community Action Organization, which the City contracted with to administer its Community
  Housing Improvement Program (formerly the Comprehensive Housing Program), said he was not
  aware of HUD’s conflict of interests requirements.” ; it is felt that this is an inaccurate quote. As
  the Department of Community Development Director, a more accurate representation of that
  statement would be that in 1991 under the Comprehensive Housing Program, the Department of
  Community Development was not aware nor was provided a copy of the written “conflict of
  interests” rules and regulation, and procedures as was provided to us by the State and utilized by
  the program in later years. Rather, at that time when we inquired to the State as to proper
  procedure for determining appropriate actions regarding conflict of interest, we were instructed,
  either verbally or by written means, to refer the matter to local legal counsel.

         With regards to the two specific issues of conflict of interest, I would like to respond as
  follows:

  Issue 1:        The City Inappropriately Provided Assistance to Units Owned by
                  Community Action Organization:

          The Ironton Lawrence County Community Action Organization Acting as Management
  disagrees with your assessment that the utilization of Rehabilitation Assistance upon the
  referenced properties was inappropriate. First, since the acquisition, ownership, operation and
  maintenance of the two properties in question (863 &863 ½ North 5th Street, and 318 Elm Street)
  were acquired and operated for the City under a plan originally approved by HUD for the benefit
  of low and moderate income tenants, then the beneficiary of any assistance by the program is to
  the tenants who occupy the units. Since the Ironton-Lawrence County Area Community Action
  Organization, Inc. (CAO) is a non-profit corporation with operations regulated under Internal
  Revenue Code 501(c)(3), and since the CAO is audited as a non-profit corporation by the State of

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  Ohio, there is assurance that the questioned expenditures continue to accrue to the benefit of the
  low income tenants living within the units, and that there are no “personal interest, direct or
  indirect, which is incompatible or in conflict with the discharge or fulfillment to the functions or
  responsibilities with respect to the completion of the housing rehabilitation work.” Such personal
  interests would result in a loss of CAO’s non-profit status. Rather, it is the mission of the CAO
  as a nonprofit corporation to provide such services to disadvantaged residents as were served by
  the questioned rehabilitation projects. Further, the work was completed in accordance with
  program requirements, the records being reported in full view and subject to the inspection of
  City, State of Ohio, HUD, CAO single agency auditors, Department of Development Auditors,
  and the State Auditors for the City of Ironton.

  Issue 2:         The City Inappropriately Provided Housing To Relatives of a Community
                   Action Organization Employee:

          The Ironton Lawrence County Community Action Organization disagrees with the
  statement that assistance was “improperly” provided to Relatives of a Community Action
  Employee. This action was undertaken after consultation with the State with the State’s
  direction at that time to check with local legal counsel. Based upon our recollection of the event,
  a local legal counsel opinion was sought out, and the independent opinion determine that the
  employee did not act in a decisional making capacity and an exception could be made to any
  potential conflict of interest. Therefore, providing assistance to the questionable relatives would
  be considered as an exception to the conflict of interest in this case.

          What appears to be the greatest problem in this case is the age and availability of
  documentation regarding this case. Most Program records regarding this case are no longer
  available since the assistance was provided nearly 10 years ago beyond the 1989 Program record
  retention requirements (See Attachment 1). Likewise, in inquiring with the City Solicitors’s office
  his guidance in this matter was sought, the case also appears to be beyond normal retention
  requirements of legal counsel. Therefore, it does not appear that we continue to have the
  requested documentation showing the actions by the Program, State, and local legal counsel.
  However, as previously provided to the HUD IG Office, we were able to retrieve from a former
  complaint file a June 28, 1993 letter by the State of Ohio to the HUD Area Office showing that
  the matter was previously investigated by the State and HUD Area Offices when records were
  available. As stated within that letter, it was determined that neither the employee nor the
  Ironton-Lawrence County Community Action Organization, Inc. acted improperly in this matter.

          Therefore, it appears as though the Program did take appropriate steps when providing
  assistance to the three respective households in question based upon the direction and information
  provided to the Program in regard to the handling of potential conflicts at that time.

          Should you have any questions or need any additional information, please feel free to
  discuss these issues with me further.




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  Sincerely,

  /signed/

  Ralph W. Kline,
  Community Development Director




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  August 30, 2000

  Heath Wolfe,
  Assistant District Inspector General
  U.S. Department of Housing and Urban Development
  Office of Inspector General for Audit, Midwest
  Ralph H. Metcalfe Federal Building
  77 West Jackson Boulevard, Suite 2646
  Chicago, IL 60604-3507

  RE:    Response to HUD IG Draft Audit Finding of August 4, 2000 (Supplement to Ralph
         Kline's response dated 8/30/00)

  Dear Mr. Wolfe:

          As the Mayor for the City of Ironton, I provided the above referenced draft findings and
  report to Ralph Kline of the Ironton Lawrence County Community Action Organization,
  Department of Housing and Community Development. I asked Mr. Kline, of the contracting
  agency for the City of Ironton, to review the draft findings and reports and to provide comments
  to the City. Mr. Kline's response is outlined in correspondence to my office dated 8/30/2000 as
  attached. This communication is a supplement to the response from Mi. Kline dated 8/30/2000.


  Administration Contracts Were Not Property Procured:

  I would like to respond to the above referenced HUD IG draft finding and report on the
  procurement of professional services of the Community Action Organization as the City of
  Ironton's grant administrator. These services were procured according the Ohio Compliance
  Supplement, Section 2-1 (copy attached). In accordance with the compliance supplement the City
  of Ironton is not required to formally publish and accept bids for professional services, only
  supplies and materials that exceed the city's bid limit, as set by ordinance, must be competitively
  bid and awarded. The contract between the City of Ironton and the Community Action
  Organization is audited annually according to Section 2-1, by the Auditor of State's office.

  In regards to the conflict of interest by Councilman Joseph Black, it is the view of the
  administration of the City of Ironton that no conflict exists from Mr. Black's employment with the
  Community Action Organization. As such, any contract or grant applications for which Mr.
  Black endorsed and voted are legal and binding. The Charter for the City of Ironton under
  section 2.02 states that no member of council shall be interested in the profits or endorsements of
  any contract, job, work or service for the City of Ironton. Mr. Black did not receive or profit
  from the contract between the Community Action Organization and the City of Ironton.

  The Community Action Organization is comprised of many different divisions, in which each
  division is independently funded. The division for which Mr. Black is employed has a primary
  function to monitor the construction of buildings within the flood plain areas of Lawrence County.

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  Mr. Black's employment with the Lawrence County Flood Plain Program is funded by Lawrence
  County Commissioners and grants obtained by the Community Action Organization on the behalf
  of the Lawrence County Commissioners. The City of Ironton has no interest in the flood plain
  program. The City of Ironton has a formal flood way protection system thus we are exempted
  from the 100- year flood plain restrictions, unlike other area of Lawrence County, Ohio. For the
  above-mentioned division of services and the separate funding of each division administered by
  the Community Action Organization, it is the City of Ironton's view that there was not a conflict
  of interest or profit to be gained on the part of Mr. Black. Thus making all contracts with the
  Community Action Organization and any grants on behalf of the City of Ironton legal and binding.


  Should you have any questions or need any additional information, please feel free to discuss
  these issues with me further.



  Sincerely,

  /signed/

  Robert A. Cleary, Mayor.,
  City of Ironton




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  August 30, 2000

  Mayor Robert Cleary
  City of Ironton
  301 S. Third Street
  Ironton, Ohio 45638

  RE: Response to HUD IG Draft Audit Finding of 8/4/2000

  Dear Mayor Cleary:

          In behalf of the Ironton Lawrence County Community Action Organization (CAO),
  Department of Housing and Community Development, I would like to respond to the above
  referenced HUD IG draft finding and report to the City of Ironton that was shared with us by
  your office as contracting entity for the City. However, this response is not considered as a full
  response to the findings and report. A full response cannot be made by our office until an
  additional investigation into the various matters can be made.

          Our Office has reviewed the various issues raised in the above referenced draft audit
  finding. It is the opinion of this Office that many of these issues involve differences of
  interpretation of not only Federal rules and regulations, but also of those laws, rules, regulations,
  and policies at both the State and local level.

          Based on the review of the recommendations and schedules providing further details of
  the audit, it appears as though the primary issues of the draft findings relate to: 1) procurement
  procedures relating to the housing rehabilitation program, small purchases, and some larger
  publicly bid contracts; 2) Contracting specifications associated with housing rehabilitation
  services; and 3) City contracting procedures as it relates to the CAO’s administrative contract.
  Given the time constraints, we were unable to research all details relevant to these issues.
  However, I would like to provide the Program’s general response to each of these issues.

  Issue #1: Procurement Procedures:

          With regards to the first issue pertaining to the procurement procedures of the housing
  program, a primary problem appears to be related to the number of bids received and/or the
  availability of program cost estimates to assure full and open competition, and cost
  reasonableness. In reviewing the cases with these issues, many of the cases were from the 92 and
  94 fiscal year rehabilitation programs. These appear to be housing rehabilitation cases where the
  minimum of three contractors were selected by the homeowners, bids were solicited by the
  Program, but not all contractors placed bids. Also, during that time frame, cost estimates utilized
  to determine cost reasonableness were not published in the bidding process. Since that point of
  time and beginning in the 96 fiscal year program, the program worked along with the State and
  has changed its bidding procedure and estimate format. Program changes now encourage all
  potential contractors to bid jobs. We feel that these changes have already addressed many of
  these issues relating to procurement standards and control for the rehabilitation program.

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         With regards to procurement procedures relating to small purchases as cited with the
  demolition contracts, it is the opinion of this Office, that the Program can exceed minimum small
  purchase requirements in seeking more than three contractors to submit quotes and ask that those
  quotes be provided to us in a sealed bid format. It is felt by the Program, that in exceeding the
  small procurement standards, it can be assured that costs for such services are reasonable and
  without any appearance of collusion.

         Regarding the recreational equipment and improvement contracts cited, these contracts
  were undertaken in the 92 and 94 fiscal year programs. We will need to further research those
  records, with the City to adequately respond to the issues and concerns raised.

         To summarize, regarding the procurement recommendations, it is the intent of the
  Program to: 1) research each of these issues in conjunction with the City, State and HUD; 2)
  review the changes in procedures already implemented by the Program; and, 3) implement any
  changes in Program and policies necessary to assure that Federal, State, and Local standards are
  met.

  Issue #2:

         With regards to contracting specifications, it is felt that some of the specifications in the
  Program’s Contracting Specification Book detailing material types and standards were not fully
  considered by the HUD Construction Analysis Team (Copy of Specification Book is included in
  Attachment 1). This document is provided to contractors and is referenced and made part of both
  the bidding and contracting documents. The document also acts as a supplemental narrative
  included in the basic work write up.

          The Program has already undertaken steps beginning with its current 98 fiscal year
  program to expand staffing and expertise in this area. Staff is now undergoing additional training
  through the State sponsored R.R.S. Implementation Training program. In addition, the Program
  has brought aboard certified expertise from the local weatherization program, especially in areas
  relating to heating systems and other relevant areas.
          In summary, the Program is prepared to continue working with the City, State and HUD
  to review internal controls and procedures relating to contract specifications and make any
  changes needed to help assure cost reasonableness of rehabilitation services.

  Issue #3:

          With regards to the issue relating to the administrative contract with the CAO, it is felt
  that the City and its legal counsel can better address issues relating to the City Charter. In
  reference to the City’s administrative contracts with CAO, it should be noted that the contracting
  relationship was initially established in accordance to a general plan acknowledged by HUD. The
  CAO also realizes that procurement requirements may have changed at the Federal, State, and
  local levels since the initiation of the original contract. It is the recommendation of CAO that if
  the City so chooses to continue contracting with the CAO as an administrative entity, that we
  jointly review with Federal, State, and Local representatives existing contracting procedures to

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  Appendix B


  determine if those procedures need to be changed. If changes need to be made in the City’s
  procurement procedures, the CAO will work to comply with those procedures.

          Should you have any questions or need any additional information, please feel free to
  discuss these issues with me further.

  Sincerely,

  /signed/

  Ralph W. Kline, Director
  Department of Housing and Community Development

  cc:    Lisa Patt-McDaniels - OHCP




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                                                                                  Appendix C

       Distribution
       Secretary’s Representative, Midwest (2)
       Senior Community Builder/State Coordinator, Ohio State Office
       Senior Community Builder/Coordinator, Cincinnati Area Office
       Director of Community Planning and Development, Ohio State Office (2)
       Deputy Secretary, SD (Room 10100)
       Acting Chief of Staff, S (Room 10000)
       Special Assistant to the Deputy Secretary for Project Management, SD (Room 10100)
       Assistant Secretary for Administration, A (Room 10110)
       Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120)
       Senior Advisor to the Secretary, Office of Public Affairs, W (Room 10132)
       Director of Scheduling and Advance, AL (Room 10158)
       Counselor to the Secretary, S (Room 10218)
       Deputy Chief of Staff, S (Room 10226)
       Deputy Chief of Staff for Operations, S (Room 10226)
       Deputy Chief of Staff for Programs, S (Room 10226)
       Deputy Chief of Staff for Policy, S (Room 10226)
       Acting Deputy Assistant Secretary for Public Affairs, W (Room 10222)
       Special Assistant for Inter-Faith Community Outreach, S (Room 10222)
       Executive Officer for Administrative Operations and Management, S (Room 10220)
       Senior Advisor to the Secretary for Pine Ridge Project, W (Room 10216)
       General Counsel, C (Room 10214)
       Assistant General Counsel, Midwest
       Director of Federal Housing Enterprise Oversight, O (9th Floor Mailroom)
       Assistant Secretary for Housing-Federal Housing Commissioner, H (Room 9100)
       Office of Policy Development and Research, R (Room 8100)
       Assistant Secretary for Community Planning and Development, D (Room 7100)
       Executive Vice President, Government National Mortgage Association, T (Room 6100)
       Assistant Secretary for Fair Housing and Equal Opportunity, E (Room 5100)
       Chief Procurement Officer, N (Room 5184)
       Assistant Secretary for Public and Indian Housing, P (Room 4100)
       Chief Information Officer, Q (Room 8206)
       Director of Departmental Operations and Coordination, I (Room 2124)
       Chief Financial Officer, F (Room 2202)
       Deputy Chief Financial Officer for Finance, FF (Room 2202)
       Acting Director of Enforcement Center, V (200 Portals Building)
       Director of Real Estate Assessment Center, X (1280 Maryland Avenue, SW, Suite 800)
       Director of Multifamily Assistance Restructuring, Y (4000 Portals Building)
       Assistant Deputy Secretary for Field Policy and Management, SDF (Room 7108) (2)
       Director of Budget, FO (Room 3270)
       Audit Liaison Officer, 3AFI (2)
       Special Adviser/Comptroller, D (Room 7228) (2)
       Departmental Audit Liaison Officer, FM (Room 2206) (2)
       General Deputy Assistant Secretary for Community Planning and Development, D
          (Room 7100)

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       Appendix C


       Deputy Assistant Secretary for Grant Programs, DG (Room 7208)
       Acting Director of Block Grant Assistance, DGB (Room 7286)
       Director of Field Management, DCF (Room 7204)
       Acquisitions Librarian, Library, AS (Room 8141)
       Deputy Staff Director, Counsel, Subcommittee on Criminal Justice, Drug Policy &
           Human Resources, B 373 Rayburn House Office Building, Washington DC 20515
       The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, 340
           Dirksen Senate Office Building, United States Senate, Washington DC 20510
       The Honorable Joseph Lieberman, Ranking Member, Committee on Governmental Affairs,
           706 Hart Senate Office Building, United States Senate, Washington DC 20510
       Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn
           Building, United States House of Representatives, Washington DC 20515
       Henry A. Waxman, Ranking Member, Committee on Government Reform, 2204 Rayburn
           Building, United States House of Representatives, Washington DC 20515
       Ms. Cindy Foglemen, Subcommittee on Oversight and Investigations, Room 212, O'Neil
           House Office Building, Washington DC 20515
       Director, Housing and Community Development Issue Area, United States General
           Accounting Office, 441 G Street, N.W., Room 2474, Washington DC 20548 (Attention:
           Judy England-Joseph)
       Steve Redburn, Chief, Housing Branch, Office of Management and Budget, 725 17th Street,
           N.W., Room 9226, New Executive Office Building, Washington DC 20503
       Mayor, City of Ironton (2)
       Deputy Director of Community Development, State of Ohio Department of Development (2)




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