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 THIS PAGE LEFT BLANK INTENTIONALLY 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 THIS PAGE LEFT BLANK INTENTIONALLY 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. Page 21 01-FW-251-1002 Appendix A THIS PAGE LEFT BLANK INTENTIONALLY 01-FW-251-1002 Page 22 Appendix B Auditee Comments Page 23 01-FW-251-1002 Appendix B 01-FW-251-1002 Page 24 Appendix B Page 25 01-FW-251-1002 Appendix B 01-FW-251-1002 Page 26 Appendix B Page 27 01-FW-251-1002 Appendix B 01-FW-251-1002 Page 28 Appendix B Page 29 01-FW-251-1002 Appendix B 01-FW-251-1002 Page 30 Appendix B Page 31 01-FW-251-1002 Appendix B 01-FW-251-1002 Page 32 Appendix B Page 33 01-FW-251-1002 Appendix B 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
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)