oversight

City of Dallas Continuum of Care Program, Dallas, Texas

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-12-13.

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

    AUDIT REPORT




      CITY OF DALLAS
CONTINUUM OF CARE PROGRAM

        DALLAS, TEXAS


         01-FW-251-1002

      DECEMBER 13, 2000


OFFICE OF AUDIT, SOUTHWEST DISTRICT
         FORT WORTH, TEXAS
                                                                   Issue Date
                                                                         December 13, 2000
                                                                   Audit Case Number
                                                                         01-FW-251-1002




TO:          Katie S. Worsham
             Director
             Community Planning and Development, 6AD

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

SUBJECT: City of Dallas
         Continuum of Care Program
         Dallas, Texas


As part of a nationwide review of HUD’s Continuum of Care Program, we audited the City of
Dallas’ 1996 Shelter Plus Care grant and its 1997 Supportive Housing grant. Our attached report
contains one finding.

Within 60 days, please furnish this office, for each recommendation in this report, a status on:
(1) corrective action taken; (2) the proposed corrective action and the date to be completed; or (3)
why action is not considered necessary. Also, please furnish us copies of any correspondence or
directives issued related to the audit.

If you have any questions, please contact William W. Nixon, Assistant District Inspector General
for Audit, at (817) 978-9309.
Management Memorandum




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01-FW-251-1002             Page ii
Executive Summary
As a part of a nationwide review of HUD’s Continuum of Care Program, we audited the
City of Dallas’ (City) 1996 Shelter Plus Care grant1 and its 1997 Supportive Housing
grant.2 Our objectives were to determine whether the City: (1) implemented the grants in
accordance with federal regulations and its grant agreements; (2) expended funds for
eligible activities under federal regulations and applicable cost principles; (3) maintained
accurate and adequate evidence of measurable results; (4) administered a sustainable
program; and (5) expended funds timely.



    City failed to implement its              Our audit concluded the City failed to implement its grants
    grants in compliance with                 in compliance with its grant agreements and federal
    grant agreements and                      regulations. Specifically, the City did not: (1) provide and
    federal regulations.                      document the matching supportive services required by the
                                              Shelter Plus Care grant; (2) expend its funds timely; (3) file
                                              accurate and consistent Annual Progress Reports; (4)
                                              include only eligible and supported costs in its grant
                                              drawdowns; (5) monitor the participants and their
                                              supportive service needs sufficiently; and (6) perform
                                              yearly Housing Quality Standards inspections for
                                              apartments inhabited 1 year or more. Furthermore, the City
                                              received $53,977 and $2,261 for ineligible and unsupported
                                              activities, respectively. The $53,977 included $28,264 of
                                              duplicated expenses, $21,130 in expenses for ineligible
                                              participants, and $4,583 in expenses incurred prior to the
                                              grant start date.

                                              Due to the seriousness of the problems, we recommend that
    Recommendations.                          HUD discontinue funding Continuum of Care grants to the
                                              City until the City can demonstrate that it can administer
                                              the funds appropriately. This includes providing HUD a
                                              comprehensive management plan and documentation
                                              detailing supportive services provided for all Shelter Plus
                                              Care grants. We also recommend that HUD require the
                                              City to repay $53,977 for ineligible costs and either support
                                              or repay $2,261 for unsupported costs.

                                              We held an exit conference with the City on November 2,
                                              2000, during which we presented our findings. The City
                                              provided its response to the audit report on November 3,


1
    Shelter Plus Care grant #TX21C96-0503.
2
    Supportive Housing grant #TX21B97-0906.

                                                     Page iii                                01-FW-251-1002
Executive Summary


                    2000. We considered the responses in preparing our final
                    report.




01-FW-251-1002              Page iv
Table of Contents

Management Memorandum                                                 i


Executive Summary                                                    iii


Introduction                                                          1


Finding

1    The City Failed to Implement Its Grants in Compliance                 5
     with Federal Regulations and Grant Agreements


Management Controls                                                    17



Follow-Up on Prior Audits                                             19



Appendices
      A Schedule of Questioned Costs                                  21

      B Auditee Comments                                              23

      C Distribution                                                  35




                                Page v                       01-FW-251-1002
Table of Contents




Abbreviations
       CFR          Code of Federal Regulations
       HQS          Housing Quality Standards
       HUD          U. S. Department of Housing and Urban Development
       NOFA         Notice of Funding Availability
       OIG          Office of Inspector General




01-FW-251-1002                        Page vi
Introduction
                                                  Title IV of the Stewart B. McKinney Homeless Assistance
    Background.                                   Act authorized HUD’s Continuum of Care Programs. HUD
                                                  began implementing the Continuum of Care concept
                                                  through the Notices of Funding Availability (NOFA)
                                                  beginning in fiscal year 1994. The Continuum of Care
                                                  concept includes three major competitively funded
                                                  programs: (1) Supportive Housing; (2) Shelter Plus Care;
                                                  and (3) Section 8 Moderate Rehabilitation for Single Room
                                                  Occupancy Dwellings. We audited the City’s 1996 Shelter
                                                  Plus Care grant and 1997 Supportive Housing grant.

                                                  The City’s offices are located at 1500 Marilla in downtown
                                                  Dallas, Texas. The Day Resource Center is located at 901
                                                  South Ervay in Dallas, Texas. The City utilized the Day
                                                  Resource Center to provide services to the homeless. The
                                                  staff at the Day Resource Center included caseworkers
                                                  from the City, Dallas Metrocare, and up until recently the
                                                  Veterans Administration. The Day Resource Center
                                                  offered counseling services as well as referral services to
                                                  homeless individuals.

                                                  Shelter Plus Care grants provide rental assistance to hard-
    Shelter Plus Care.
                                                  to-serve homeless people with disabilities.3 A person with
                                                  disabilities is defined as one who has a disability that:

                                                  •    is expected to be of long-continued and indefinite
                                                       duration;
                                                  •    substantially impedes his or her ability to live
                                                       independently; and
                                                  •    is of such a nature that the disability could be improved
                                                       by more suitable housing conditions.4

                                                  HUD required the City to match the rental assistance
                                                  provided with an equal amount of supportive services.5
                                                  The supportive services must be appropriate to the needs of
                                                  the population served. HUD allowed the City to use up to 8
                                                  percent of this grant amount to cover administrative costs.6
                                                  Since 1996, HUD has awarded the City over $10 million in
                                                  Shelter Plus Care grants:

3
  The regulations define such disability as either severely mentally ill or chronic substance abusers.
4
  1996 Continuum of Care Application Instructions.
5
   24 CFR Part 582 Subpart A defines supportive services as assistance that meets the special needs of eligible persons. Such as
   health care, mental health treatment, alcohol and other substance abuse services, child care, case management, counseling, etc.
6
  24 CFR Part 582.105(e).

                                                          Page 1                                               01-FW-251-1002
Introduction

                                                     Grant                 Aw ard      Start
                                                     Number                Amount      Date          Te rm
                                                TX21C92-1051         $ 2,626,560       10/1/96      120 mos.
                                                TX21C93-1031               2,919,120   10/1/94      60 mos.
                                                TX21C96-0503               1,488,600    7/1/97      60 mos.
                                                TXC80-6003                 3,480,960   10/1/99 60 mos./re ne w al
                                                TX01-C906-001             350,400
                                                Tota l               $ 10,865,640


                                                The City used tenant-based rental assistance to provide
                                                housing under its grant. Participants can select their
                                                apartments from complexes throughout the City.7
                                                Participants must pay 30 percent of their adjusted gross
                                                income8 towards their rent. The Shelter Plus Care grant
                                                pays the remainder of the participant’s rent. If a participant
                                                has no income, the Shelter Plus Care grant will pay 100
                                                percent of the rent.

                                                Supportive Housing grants provide rental assistance and
    Supportive Housing
                                                supportive services to homeless individuals. According to
    Program.
                                                the goals of the program, the combination of rental
                                                assistance and supportive services enables homeless people
                                                to transition their way into permanent housing. The City
                                                does not require its participants to pay any portion of the
                                                rent. HUD limits assistance under this program to 2 years.
                                                Since 1996, HUD has awarded the City over $1.7 million in
                                                Supportive Housing grants:

                                                     G ra n t               A w a rd      S ta rt
                                                    Num be r                Am ount       D a te      T e rm
                                                T X 2 1 B 9 5 -0 9 9 7 $     402,015       4/1/96     4 6 m o s.
                                                T X 2 1 B 9 7 -0 9 0 6        749,670     10/1/98     3 6 m o s.
                                                T X 0 1 B 9 0 6 -0 0 2        294,000                 2 4 m o s.
                                                T X 0 1 B 9 0 6 -0 1 5      299,824                   2 3 m o s.
                                                T o ta l               $ 1,745,509

                                                Participants can select their apartments from complexes
                                                throughout the City.9 The City’s program provides 18
                                                months of housing assistance along with job placement and
                                                counseling for single homeless individuals. The City
                                                charged its grant for the salaries of a caseworker and a job
7
  The City maintains a listing of apartments.
8
  As defined by 24 CFR 582 Subpart D.
9
  The City maintains a listing of apartments.

01-FW-251-1002                                             Page 2
                                                                            Introduction


                           coach. Both of these individuals work solely with the
                           supportive housing participants.

                           The City’s program required participants to conduct a
                           documented daily job search and save a portion of their
                           salary. The savings enable them to enter permanent
                           housing when the program ends. Program staff conduct
                           quarterly focus group meetings with clients to secure input
                           and planning for future services or service modifications.

Audit Objectives, Scope,   Our objectives in auditing the City’s Continuum of Care
and Methodology.           grants were to determine if the City: (1) implemented the
                           grants in accordance with its applications; (2) expended
                           funds for eligible activities under federal regulations and
                           applicable cost principles; (3) maintained accurate and
                           adequate evidence of measurable results; (4) has a
                           sustainable program; and (5) expended funds timely.

                           To achieve the audit objectives we:

                           •   Interviewed HUD staff;
                           •   Reviewed documentation provided by HUD on City
                               programs;
                           •   Reviewed audited financial statements;
                           •   Reviewed grant applications, agreements, and technical
                               submissions;
                           •   Interviewed City staff;
                           •   Reviewed City’s policies and procedures relating to
                               homeless grants;
                           •   Selected sample of transactions and program
                               participants to determine if the City was following their
                               own policies and procedures as well as federal
                               regulations;
                           •   Examined financial records for sample transactions;
                           •   Examined participant records for sample participants;
                               and
                           •   Reviewed annual progress reports.

                           We selected a judgmental sample of transactions and
                           program participants for the audit. The Shelter Plus Care
                           sample included 6 drawdown periods. We selected June
                           and July 1997 since this is when the program began. From
                           then on we selected every 4th drawdown. We reviewed
                           financial records for each of these drawdowns. We selected
                           our participants from the selected drawdowns by including

                               Page 3                                    01-FW-251-1002
Introduction


                           every 10th participant from reports provided by the City.
                           The Supportive Housing transactions sample included the
                           drawdown covering July 1998 through February 1999 since
                           this is when the program began. However, we only
                           sampled transactions occurring in November and
                           December, since this drawdown covered an 8 month period.
                           We selected July 1999 through August 1999 since it
                           appeared that this drawdown had been duplicated. We also
                           selected September 1999. In general, we selected every
                           other participant included on a list of participants for the
                           Supportive Housing sample.

                           We conducted the audit at City Hall and at the Day
 Audit Period and Sites.
                           Resource Center. Throughout the audit we obtained
                           computer-generated data from both HUD and the City.
                           However, we did not perform any tests on the validity or
                           reliability of such data except as noted in the findings and
                           management controls. The audit period for the Shelter Plus
                           Care grant generally covered June 1997 through December
                           1998. The audit period for the Supportive Housing grant
                           generally covered July 1998 through January 2000. We
                           extended the audit period as appropriate. We performed
                           field work from February through May 2000 with
                           additional field work performed in August 2000. We
                           conducted our audit in accordance with generally accepted
                           government auditing standards.




01-FW-251-1002                       Page 4
                                                                                                            Finding


             The City Failed to Implement Its Grants
             in Compliance with Federal Regulations
                     and Grant Agreements
Overall, the City administered its homeless grants poorly. The City failed to comply with
federal regulations and its grant agreements. Specifically, the City did not:

•      Provide and document the matching supportive services required by the Shelter Plus
       Care grant;
•      Expend its funds timely;
•      File accurate and consistent Annual Progress Reports;
•      Include only eligible and supported costs in grant drawdowns;
•      Monitor the participants and their supportive service needs sufficiently; and
•      Perform yearly Housing Quality Standards (HQS) inspections for apartments inhabited
       1 year or more.

The City provided insufficient administrative guidance to city personnel responsible for the
day-to-day operations of the grants. Further, the City did not implement sufficient
management controls over grant administration to ensure compliance with grant
requirements. Therefore, HUD cannot rely on the City to properly administer its homeless
grants. HUD should discontinue funding Continuum of Care grants to the City until the
City can demonstrate that it can administer the funds appropriately. This includes
providing HUD a comprehensive management plan and a report detailing supportive
services provided for all Shelter Plus Care grants. HUD should also require the City to
repay the $53,977 for ineligible activities and either support or repay the $2,261 for
unsupported activities.



     Criteria.                                    Shelter Plus Care. In obtaining funds, the City agreed to
                                                  follow all applicable federal regulations10 and the terms of
                                                  its grant agreement including:

                                                  •    Conducting an ongoing assessment of the rental
                                                       assistance and supportive services required by the
                                                       participants;
                                                  •    Ensuring the provision of supportive services in an
                                                       amount equal to the rental assistance provided by HUD;
                                                  •    Being responsible for overall administration of the
                                                       grant; and

10
     Subtitle F of Title IV of the Stewart B. McKinney Homeless Assistance Act and also 24 CFR 582.

                                                          Page 5                                      01-FW-251-1002
Finding


                                                  •   Complying with other terms and conditions, including
                                                      record keeping and reports.

                                                  Supportive Housing. In obtaining funds, the City agreed
                                                  to comply with all applicable federal regulations11 and the
                                                  terms of its grant agreement including:

                                                  •   Providing assistance to the participants in securing and
                                                      retaining employment and/or training;
                                                  •   Ensuring that participants conducted daily job search
                                                      with verified results; and
                                                  •   Requiring participants to set up savings accounts.

                                                  For its Shelter Plus Care grant, the City failed to provide
     The City failed to provide
                                                  the required supportive services to its participants. Further,
     and document supportive
                                                  the City did not adequately document those supportive
     services.
                                                  services it did provide to the participants. After several
                                                  requests, the City supplied documentation to support
                                                  $209,215 in supportive services.12 As of November 30,
                                                  1999, HUD provided the City with $460,195 in rental
                                                  assistance or $250,980 more than the City matched in
                                                  supportive services.

                                                  HUD required the City to monitor the supportive services
                                                  and ensure the participants are receiving the appropriate
                                                  supportive services, even if it must fund the services
                                                  themselves.13 HUD also required the City to conduct an
                                                  ongoing assessment of the supportive services needed by
                                                  the participants.14 The City did not maintain
                                                  documentation on the supportive services provided (either
                                                  aggregate or per participant); therefore, it could not provide
                                                  an ongoing assessment of the needs of the participants or
                                                  the amount of services provided.

                                                  In a 1999 monitoring review, HUD noted similar problems
                                                  with the City’s 1994 Shelter Plus Care grant. Its
                                                  monitoring review found the City could not provide
                                                  documentation to verify that it matched the rental assistance
                                                  received with supportive services. The City’s response
                                                  stated that it had documented and verified a total of

11
      Subtitle C of Title IV of the Stewart B. McKinney Homeless Assistance Act, 24 CFR 583, and also the Notice of Funding
      Availability 62 FR 17024.
12
      The City should have had this information readily available
13
      24 CFR 582.110.
14
      24 CFR 582.300(b).

01-FW-251-1002                                                Page 6
                                                                                       Finding


                                 $1,946,371 in supportive services for this grant. However,
                                 HUD eventually determined the City provided $1,798,911
                                 as a supportive service match. For this grant, HUD
                                 provided $2,919,120 in rental assistance or $1,120,209
                                 more than the required match by the City.

                                 The local HUD field office interprets the McKinney Act as
                                 not allowing it to require the City to repay HUD the
                                 $1,120,209. Its interpretation is that HUD could only
                                 recapture “unexpended housing assistance.” Therefore, its
                                 monitoring review recommended the City “over match”
                                 existing Shelter Plus Care grants to make up for the
                                 supportive services the City did not provide for the 1994
                                 grant. However, this does rectify the fact that the
                                 participants under the 1994 grant did not receive the
                                 necessary supportive services. HUD should ensure that the
                                 City provides the required supportive services to those
                                 participants under the specific grant.

                                 Provision of supportive services is the cornerstone of the
                                 Shelter Plus Care Program. The program targets hard-to-
                                 serve homeless persons with disabilities15. The disabilities
                                 of these individuals substantially impede their ability to live
                                 independently. However, the City placed the individuals in
                                 apartments throughout the City and did not provide the
                                 required supportive services. Without the required match,
                                 the City not only violated its grant agreements but also
                                 hindered the success of any participants and the program.
                                 Since the participants did not receive sufficient supportive
                                 services, this program was nothing more than a temporary
                                 relief from homelessness.

                                 The City did not budget or administer grant funds to ensure
     The City did not expend
                                 the timely expenditure of the funds. The City performed
     funds in a timely manner.
                                 neither spending projections nor any other analysis for
                                 either of the grants audited. As of November 1999, the
                                 City was behind projected spending by $259,295 in its
                                 Shelter Plus Care grant. As of September 1999, the City
                                 was behind projections of spending in its Supportive
                                 Housing grant by $39,572.




15
     24 CFR 582.1.

                                     Page 7                                     01-FW-251-1002
Finding


                                           Shelter Plus Care - As of November 1999, the City was
                                           behind projected spending by $259,295 in its 1996 Shelter
                                           Plus Care grant. In an effort to expend the funds from a
                                           prior grant, the City transferred 30 of its 35 participants
                                           from this grant.16 This was nothing more than a paper
                                           transaction to help the City to expend its prior grant.
                                           Furthermore, during the first 19 months of the grant, the
                                           City failed to serve the required 50 participants. The City
                                           actually served the following number of participants during
                                           the period:

                                                   1997                             1998
                                           Month     Participants            Month    Participants
                                           June                13          January              34
                                           July                17          February             38
                                           August              19          March                35
                                           September           21          April                 5
                                           October             23          May                   5
                                           November            24          June                  5
                                           December            28          July                  5
                                                                           August                9
                                                                           September            19
                                                                           October              20
                                                                           November             25
                                                                           December             24

                                           The City had several waiting lists to get into the program.
                                           Each waiting list could have as many as a dozen individuals
                                           at one time. The City had no excuse for not spending its
                                           funds timely. The City should analyze grant funds on a
                                           continual basis to ensure that it spends funds timely and
                                           that it serves the required number of participants.

                                           Supportive Housing - The City will likely expend the
                                           $39,572 difference between its projected and actual
                                           expenditures, because it has not drawn down any of its
                                           administrative funds. The City was awarded $35,270 for
                                           administrative costs associated with this grant. However,
                                           as of September 1999, the City had not drawn down any
                                           administrative costs from the grant. The City claimed that
                                           HUD instructed them that no administrative costs could be
                                           drawn down until the City had the required number of
                                           participants.17 The City had 26 participants as of January
                                           1999, in spite of this however, it had not drawn down any

16
     HUD approved the transfer.
17
     This grant was for 25 participants.

01-FW-251-1002                                       Page 8
                                                                                                  Finding


                                            administrative funds. The City should not blame HUD for
                                            its lack of diligence in administering its grants.

     The City submitted                     The City did not collect and maintain documentation on
     inaccurate and inconsistent            participants to support progress reported to HUD. HUD
     Annual Progress Reports.               required the City to submit Annual Progress Reports
                                            showing the progress the City made toward its goals during
                                            the year and setting the goals for the upcoming year.
                                            Without participant information, the City could not submit
                                            accurate and consistent Annual Progress Reports.
                                            According to City officials, in order to complete the Annual
                                            Progress Report, the City inspected each participant’s file
                                            to determine if the participant met the City’s goals.
                                            However, it did not maintain any documentation of its
                                            review of the files. Therefore, no one could confirm the
                                            data without inspecting each file again.

                                            Furthermore, the City’s Annual Progress Reports included
                                            mathematical errors, inconsistency between goals set and
                                            the progress reported, and incorrect calculation of progress
                                            achieved. For example, the Annual Progress Report
                                            reflects that the Shelter Plus Care grant had 76 participants
                                            during the period July 1, 1998, through June 30, 1999.
                                            However, a list provided by the City reflected only 74
                                            participants.

                                             As an example of inconsistency, the City’s year one
                                            Annual Progress Report,18 stated that in year two “50% of
                                            those in vocational programs will demonstrate a
                                            documented increase in their vocational skill levels.”
                                            However, in its year two Annual Progress Report,19 the City
                                            reported “this goal has been exceeded in that 30% of the
                                            clients completed the Compensated Work Therapy program
                                            and Dallas Community College program requirements for
                                            graduation.” In addition to the apparent contradiction of
                                            the goal set and progress achieved, the City did not include
                                            individuals who dropped out of the program in the
                                            calculation of progress achieved. This practice inflates the
                                            progress reported on the Annual Progress Reports.

                                            The Annual Progress Reports filed by the City do not
                                            reflect a true picture of the program and the progress
                                            achieved. In order to accurately report its progress, the City

18
     July 1, 1997, through June 30, 1998.
19
     July 1, 1998, through June 30, 1999.

                                                Page 9                                     01-FW-251-1002
Finding


                                         must collect and maintain information on each participant.
                                         The City’s practice of inspecting each participant file for
                                         the Annual Progress Report is not only time consuming and
                                         inefficient but reflects poorly on the City’s administration
                                         and implementation of its grants. Essentially, the City’s
                                         record keeping for tracking and documenting the progress
                                         of the participants and its grants is nonexistent. It seems
                                         the City haphazardly placed numbers on the reports and
                                         submitted them. The City should collect and utilize
                                         participant information in order to monitor the success of
                                         its programs. As prepared, the City’s reports are worthless
                                         as an analysis tool or as a measure of progress.

                                         The City has drawn down funds for ineligible and
 The City included $53,977               unsupported costs totaling $53,977 and $2,261,
 in ineligible and $2,261 in             respectively. The City incorrectly received funds for a
 unsupported costs in grant              duplicated drawdown, expenditures incurred prior to the
 drawdowns.                              grant start date, and expenses for ineligible participants. In
                                         one drawdown reviewed, the City did not have support for
                                         $2,261.

                                         Duplicated Drawdown - The City included the same
                                         leasing and utility costs in two drawdowns from its
                                         Supportive Housing grant. The two drawdowns included:

            09/24/99                                    Co                   Supportive     Tota l
           Dra w dow n    Lea sing       Utilities   Pa yme nts   Admin       Services    Draw dow n
           July '99      $ 14,451.00 $     537.00 $     -233.00 $ 1,180.00
           August '99     11,028.00      2,481.00                 1,081.00
           Subtota l     $ 25,479.00 $ 3,018.00 $       -233.00 $ 2,261.00                $ 30,525.00


            10/13/99                                    Co                   Supportive     Tota l
           Dra w dow n    Lea sing       Utilities   Pa yme nts   Admin       Services    Draw dow n
           July '99      $ 14,451.00 $     537.00                            $ 9,874.00
           August '99   11,028.00 2,481.00
           Subtota l  $ 25,479.00 $ 3,018.00                                 $ 9,874.00 $ 38,371.00

           Duplicate
           Cha rge s     $ 25,479.00 $ 3,018.00 $       -233.00                           $ 28,264.00




01-FW-251-1002                                       Page 10
                                                                                                                     Finding


                                                 The City should repay its grant $28,264 for the duplicate
                                                 charges. The City could not support the $2,261 in
                                                 administrative costs included in the September drawdown.
                                                 The City should either provide support for this amount or
                                                 repay its grant the $2,261.

                                                 Expenses incurred prior to grant start date - Under the
                                                 Supportive Housing grant, the City incurred $4,58320 in
                                                 expenses prior to the grant start date.21 HUD prohibits the
                                                 City from expending funds until the grant has been
                                                 executed. The City offered no explanation for incurring
                                                 expenditures prior to the grant start date and should repay
                                                 its grant.

                                                 Ineligible Participants - The City paid $21,130 in rental
                                                 assistance for six ineligible participants. The City did not
                                                 properly document homelessness for these participants.
                                                 During a start-up conference held for each grant, HUD
                                                 instructs grantees on the requirements for documentation of
                                                 homelessness. However, the City could not say who
                                                 attended the start-up conferences, nor could it verify
                                                 whether the information was disseminated to the
                                                 individuals who worked on the grant.

                                                 The City did not enforce program requirements or provide
     The City provided                           adequate monitoring of participants. In one instance, the
     insufficient monitoring of                  City’s Shelter Plus Care grant paid rent on an apartment
     participants.                               that the participant had vacated at least 7 months earlier.22
                                                 The City had documentation that should have alerted it to
                                                 this condition. Specifically, the utility bills for this
                                                 apartment had gone as low as $5 a month. The City can
                                                 pay rental assistance for only 1 month after a participant
                                                 vacates the apartment.23

                                                 Contrary to the Supportive Housing grant requirements, the
                                                 City did not require participants to perform a daily job
                                                 search or maintain a savings account. Of the 19 files
                                                 reviewed, none had a daily job search and only 3 files had
                                                 any evidence of a savings account. Furthermore, the audit
                                                 noted instances in which the participant clearly violated
                                                 program requirements and the City took nugatory action.

20
   This was included in their initial drawdown of $85,899, and includes expenses incurred in July and August 1998.
21
   The grant started on September 1, 1998.
22
   Also, the City did not document that this individual was homeless.
23
   24 CFR 582.105(d)(1).

                                                     Page 11                                                01-FW-251-1002
Finding


                 For instance, one participant was evicted from her
                 apartment for alleged drug trafficking and unauthorized
                 tenants. She also repeatedly missed appointments with her
                 case worker. Instead of removing the participant from the
                 program, the City allowed her to sign another agreement.
                 After entering the new apartment, the participant continued
                 to have an unauthorized guest. It got so bad that the
                 apartment complex was forced to change the locks to
                 remove the unauthorized guest. It appears that during the
                 1½ years that she participated in the program, she did not
                 have a steady job much less maintain a savings account.
                 During the audit period, the participant requested that the
                 City remove her from the program. It is unknown whether
                 the City continued paying her rent.

                 According to City personnel, they have attempted to
                 terminate participants for noncompliance with program
                 requirements. However, management has told them to
                 terminate “only in the most extreme circumstances.” City
                 personnel believed that they went the extra mile; however,
                 they acknowledged that going the extra mile usually did not
                 work. The City did not have adequate procedures to ensure
                 that the participants followed program requirements or
                 faced consequences including terminating them from the
                 program.

                 The grant provided participants with 2 years of rental
                 assistance to enable them to make the transition from
                 homeless to independent living. While in the program, the
                 grant required participants to obtain a steady job and save
                 money. With no enforcement of the program requirements,
                 not only did the City violate its grant agreement, but it also
                 hindered the success of the participants. The City provided
                 no incentive for participants to strive to become self-
                 sufficient. Therefore, at the end of the 2-year period, the
                 participants gained little to nothing.

                 If the City did not intend to enforce the requirements of the
                 grant, the City and not HUD should be paying the rents for
                 the participants. The City should develop and implement
                 the necessary procedures to ensure that participants follow
                 program requirements.




01-FW-251-1002             Page 12
                                                                                Finding


The City did not perform   Contrary to Shelter Plus Care program requirements, the
yearly Housing Quality     City did not perform yearly HQS inspections of the
Standards (HQS)            apartments. The City’s Housing Inspector explained that
inspections.               apartment complexes often refuse to allow him into the
                           apartments. HUD cannot be sure that the apartments
                           included in the City programs meet the HQS.



                           The City’s revised response is included as Appendix B.
Auditee Comments           We did not include as part of the City’s response any
                           confidential information.

                           The City concurred that it did not implement its grants in
                           compliance with grant agreements and federal regulations.
                           However, the City disagreed that it included ineligible
                           participants in grant drawdowns or drew down funds sooner
                           than was permitted by regulations. The City’s response
                           included actions that it has taken to mitigate the severity of
                           the problems detected during the audit.

                           The City believes its files had sufficient documentation to
                           verify the six individuals identified in the audit met the
                           eligibility requirements. The City stated, “The Department
                           used as its documentation, the Participant Outcome
                           Monitoring System (POMS) which was previously
                           recommended by local HUD staff, to document the
                           homeless condition of our clients.” Therefore, the City
                           believes it appropriately paid $21,130 in rental assistance
                           on behalf of these participants.

                           The City maintained the eligibility of the $4,583 incurred
                           prior to the grant start date. According to the City’s
                           response:
                               “…the City was notified on July 14, 1998 of the award
                               of the Supportive Housing funding. The notice
                               informed the City no funds could be disbursed until
                               after the grant was fully executed. The City assumed all
                               eligible expenses incurred from the time of notification
                               could be reimbursed once the grant was executed.
                               Review of the applicable regulations does not prohibit
                               this action.”

                           With respect to the Housing Quality Standards inspections,
                           the City acknowledged that it did not perform all the

                              Page 13                                    01-FW-251-1002
Finding


                      inspections. However, this was due to a lack of
                      cooperation from apartment managers. The City cited
                      actions it has taken to correct this problem.

                      Included in the City’s response was a management plan
                      intended to address the concerns of the OIG and HUD. The
                      City believes this management plan combined with recent
                      changes in management and changes in operations will
                      result in a stronger administration of its programs.




  OIG Evaluation of   The City’s response, specifically the attached management
                      plan, shows a willingness to correct the problems noted in
  Comments            the finding. However, in order to demonstrate its ability to
                      administer its grants appropriately, the City must
                      implement these changes and evaluate the outcomes. As
                      such, we did not change our recommendation that HUD
                      discontinue funding until the City can administer the grants
                      appropriately.

                      We take exception to the City’s statement, “In many
                      instances program staff responsible for implementing the
                      grants have in fact met the requirements of the grants with
                      one major exception – they did not adequately document
                      their activities.” The City’s statement appears to trivialize
                      the problems and conditions noted in the finding as simply
                      a lack of documentation. The City did indeed lack
                      documentation. However, the lack of documentation is
                      only a symptom of the City’s inability to administer its
                      Continuum of Care Programs effectively. For instance, the
                      lack of supportive services documentation only exposes the
                      larger problem of the City not addressing the needs of its
                      participants or demonstrating that the participants received
                      the care needed to assist them in living as independently as
                      possible.

                      The City could not support its assertion that the six
                      individuals cited in the finding were eligible participants.
                      As stated in the finding, HUD provided the City specific
                      instructions on documenting homelessness and the City did
                      not follow them. Furthermore, the City could not verify
                      that it trained City staff on administering and operating
                      these grants. Several of the individuals cited in the finding
                      had been living with family or friends prior to entering the

01-FW-251-1002                  Page 14
                                                                       Finding


                  program. Irrespective of the documentation maintained,
                  these individuals were not eligible to participate under
                  these grants.

                  In its response the City included a letter from an apartment
                  manager regarding the participant who had vacated his
                  apartment at least 7 months prior to termination of rental
                  assistance. However, this does not agree with
                  documentation included in the participant file. No
                  participant in these programs should go 7 months without
                  contact. Without this contact, the City does not know if it
                  is paying rent on a vacant apartment, but also whether the
                  participant is making progress under this program.

                  The City’s assumption that expenses incurred prior to the
                  grant start date were eligible expenses is incorrect.
                  Regulations clearly define the effective date as the date
                  HUD executes the grant.

                  We revised our report as necessary.



Recommendations   We recommend HUD to:

                  1A. Discontinue funding Continuum of Care grants for the
                      City until such time as the City demonstrates its
                      ability to administer the grants appropriately. This
                      includes providing HUD a comprehensive
                      management plan in the areas of:

                       •   Supportive services;
                       •   Personnel training;
                       •   Oversight responsibility;
                       •   Participant monitoring;
                       •   Draw down procedures and review;
                       •   Expenditures of grant funds along with
                           projections; and
                       •   Annual Progress Report preparation and review.

                  1B. Require the City to provide a report detailing
                      documented supportive services provided for all
                      Shelter Plus Care grants. The report should reflect:

                       •   Supportive Service providers utilized;

                     Page 15                                    01-FW-251-1002
Finding


                      •   Types of services provided;
                      •   Dollar value of those services;
                      •   Steps taken to verify documentation; and
                      •   How the supportive services address the particular
                          needs of the Shelter Plus Care participants.

                 1C. Require the City to reimburse HUD for $53,977 for
                     ineligible expenditures.

                 1D. Require the City to either support or reimburse HUD
                     $2,261 in unsupported costs.




01-FW-251-1002            Page 16
Management Controls
In planning and performing our audit, we obtained an understanding of the management
controls that were relevant to our audit. Management is responsible for establishing
effective management controls. Management controls, in the broadest sense, include the
plan of 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.




 Significant Controls            We determined the following internal controls were relevant
                                 to our audit objectives:

                                 •   eligibility of program activities and participants;
                                 •   measurement and documentation of program results;
                                 •   monitoring of drawdowns;
                                 •   timely expenditure of grant funds;
                                 •   monitoring of supportive services;
                                 •   monitoring of program participants; and
                                 •   oversight responsibility and overall grant
                                     administration.

                                 We evaluated all of the relevant control categories
                                 identified above by determining the risk exposure and
                                 assessing control design and implementation.

 Significant Weaknesses          It is a significant weakness if internal controls do not give
                                 reasonable assurance that resource use is consistent with
                                 laws, regulations, and policies; that resources are
                                 safeguarded against waste, loss, and misuse; and that
                                 reliable data is obtained, maintained, and fairly disclosed in
                                 reports. As discussed in our finding, we believe the
                                 following items are significant weaknesses in that the City
                                 lacks sufficient controls to ensure:

                                 •   eligibility of participants;
                                 •   proper measurement and documentation of program
                                     results;
                                 •   timely monitoring of grant drawdowns;
                                 •   timely expenditure of grant funds;
                                 •   monitoring and documenting of supportive services;
                                 •   monitoring of program participants to ensure adherence
                                     to program rules and guidelines; and

                                      Page 17                                   01-FW-251-1002
Management Controls


                      •   overall grant administration in accordance with federal
                          regulations and grant agreements.




01-FW-251-1002                  Page 18
Follow-Up on Prior Audits
This is the first audit by our office of the City of Dallas’ Continuum of Care grants.

We reviewed the 1997 and 1998 audited financial statements for the City of Dallas. The audit
contained no findings regarding the Continuum of Care grants.




                                            Page 19                                  01-FW-251-1002
Follow-Up on Prior Audits




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01-FW-251-1002                  Page 20
                                                                                                              Appendix A


Schedule of Questioned Costs


                                                                      Type of Questioned Costs
          Issue                                                      Ineligible 1/  Unsupported 2/


1C Ineligible expenditures                                            $53,977

1D Unsupported costs                                                                            $2,261

          Totals                                                      $53,977                   $2,261




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 questioned by the auditor because the eligibility cannot be determined at the
  time of audit. The costs are not supported by adequate documentation or there is a need for a legal or
  administrative determination on the eligibility of the costs. Unsupported costs require a future decision
  by HUD program officials. This decision, in addition to obtaining supporting documentation, might
  involve a legal interpretation of Departmental policies and procedures.




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Appendix A




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01-FW-251-1002      Page 22
                               Appendix B

Auditee Comments




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Appendix B




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            Appendix B




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            Appendix B




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            Appendix B




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            Appendix B




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            Appendix B




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01-FW-251-1002   Page 34
                                                                                     Appendix C

Distribution
Secretary's Representative, 6AS
Comptroller, 6AF
Director, Accounting, 6AAF
Director, CPD, 6AD
Secretary, S (Room 10000)
Deputy Secretary, SD (Room 10100)
Assistant Deputy Secretary for Field Policy & Mgmt, SDF (Room 7108)
Acting Assistant Secretary for Administration, A (Room 10110)
Deputy Chief of Staff for Programs & Policy, S (Room 10226)
Deputy Asst. Secretary for Public Affairs, S (Room 10222)
Special Asst. for Inter-Faith Community Outreach, S (Room 10222)
Executive Officer for Admin Operations & Management, S (Room 10220)
General Counsel, C (Room 10214)
Director, Office of Federal Housing Enterprise Oversight, O, 9th Floor Mailroom
Assistant Secretary for Housing/FHA, H (Room 9100)
Office of Policy Development & Research, R (Room 8100)
Assistant Secretary for CPD, D (Room 7100)
Government National Mtg. Assoc., T (Room 6100)
Assistant Secretary for Fair Housing & Equal Opportunity, E (Room 5100)
Chief Procurement Officer, N (Room 5184)
Assistant Secretary for Public & Indian Housing, P (Room 4100)
Chief Information Officer, Q (Room 3152)
Director, Office of Departmental Operations & Coordination, I (Room 2124)
Chief Financial Officer, F (Room 2202)
Director, Enforcement Center, V, 200 Portals Bldg., D.C. 20024
Director, REAC, X, 1280 Maryland Ave., SW (Ste.800), D.C. 20024
Director, Office of MF Assistance Restructuring, Y, 4000 Portals Bldg., D.C. 20024
Deputy Chief Financial Officer for Operations, FF (Room 2202)
David Gibbons, Director, Office of Budget, FO (Room 3270)
FTW ALO, 6AF (2)
CPD ALO, DOT (Room 7220) (2)
Dept. ALO, FM (Room 2206) (2)
Acquisitions Librarian, Library, AS (Room 8141)




                                         Page 35                                01-FW-251-1002
Appendix C



                                DISTRIBUTION (Cont’d)

Director, Hsg. & Comm. Devel. Issues, US GAO, 441 G St. NW, Room 2T23
     Washington, DC 20548 Attn: Stanley Czerwinski
Henry A. Waxman, Ranking Member, Committee on Govt Reform,
     House of Rep., Washington, D.C. 20515
The Honorable Fred Thompson, Chairman, Committee on Govt Affairs,
     U.S. Senate, Washington, D.C. 20510
The Honorable Joseph Lieberman, Ranking Member, Committee on Govt Affairs,
     U.S. Senate, Washington, D.C. 20510
Cindy Fogleman, Subcomm. on Gen. Oversight & Invest., Room 212,
     O'Neill House Ofc. Bldg., Washington, D.C. 20515
The Honorable Dan Burton, Chairman, Committee on Govt Reform,
     House of Representatives, Washington, D.C. 20515
Deputy Staff Director, Counsel, Subcommittee on Criminal Justice, Drug Policy & Human
     Resources, B373 Rayburn House Ofc. Bldg., Washington, D.C. 20515
Steve Redburn, Chief, Housing Branch, Office of Management and Budget
     725 17th Street, NW, Room 9226, New Exec. Ofc. Bldg., Washington, D.C. 20503
Inspector General, G
Mayor, City of Dallas
City Manager, City of Dallas
Director, Environmental & Health Services Dept.
Assistant Director, Environmental & Health Services Dept.




01-FW-251-1002                              Page 36