Issue Date August 27, 2001 Audit Case Number 2001-AT-1006 TO: Emily Cuby Eberhardt, Director, Community Planning and Development Division, 4GD FROM: Nancy H. Cooper District Inspector General for Audit-Southeast/Caribbean, 4AGA SUBJECT: City of Hattiesburg, Mississippi Community Planning and Development Programs Hattiesburg, Mississippi We have completed an audit of the City of Hattiesburg, Mississippi’s Community Planning and Development Programs (CPD). The audit was initiated in response to a citizen’s complaint. Our objectives were to determine whether the City: (1) complied with Federal laws, Department of Housing and Urban Development (HUD) regulations, and other requirements; (2) had adequate controls to comply with the requirements; and (3) carried out its activities in an efficient, effective, and economical manner. Our report presents five findings that detail the City’s need for improvement with recommendations for corrective action. Within 60 days, please give us a status report for each recommendation in the report on: (1) the corrective action taken; (2) the proposed corrective action and a planned implementation date; or (3) why action is not considered necessary. Also, please furnish us copies of any correspondence or directives issued as a result of the audit. Should you or your staff have any questions, please contact me or Sonya D. Lucas, Assistant District Inspector General for Audit, at (404) 331-3369. We are providing a copy of this report to the City of Hattiesburg. Table of Contents Exit Management Memorandum (This Page Left Blank Intentionally) 2001-AT-1006 Page ii Table of Contents Exit Executive Summary We completed an audit of the City of Hattiesburg’s CPD Programs. We reviewed the Community Development Block Grant (CDBG) and HOME Investment Partnerships (HOME) Programs. We conducted the audit in response to a citizen’s complaint. Our objectives of the audit were to determine whether the City: (1) complied with Federal laws, HUD regulations, and other requirements; (2) had adequate controls to comply with the requirements; and (3) carried out its activities in an efficient, effective, and economical manner. We determined the City did not: (1) ensure funded activities met CDBG national objectives; (2) properly administer its rehabilitation program; (3) follow proper procurement and contracting procedures; (4) follow proper payroll administration procedures; and (5) establish and maintain basic operating systems for proper management of its CDBG and Home Programs. The City of Hattiesburg spent $242,000 of CDBG funds on Our audit disclosed activities that did not address a required national objective. The activities included a road improvement project for $175,000 and five grants to improve downtown commercial buildings totaling $67,000. The City did not demonstrate how the projects met a national objective. City Officials transferred funding from planned projects that met national objectives, without supporting the new activities’ eligibility. Therefore, the funding may not have best served the interests of low and moderate-income persons as intended. The City did not ensure that the rehabilitated houses in its program complied with HUD and local health, safety, and building standards. In addition, the City selected one house that was not feasible for its housing program. For the 20 houses inspected, we identified 54 work items that the contractors did not complete and 71 work items that the contractors completed in an unacceptable manner. We also identified 84 code or HUD Housing Quality Standards (HQS) violations that the City did not identify and include in its rehabilitation contracts. Of the 20 houses inspected, 13 involved full rehabilitation and 7 involved emergency repairs (see Appendices B and C). The full rehabilitation deficiencies occurred because the City’s inspectors did not identify inferior or incomplete work when performing inspections. The emergency repairs deficiencies occurred because the City did not clearly define an emergency situation, thus repairs were inconsistent. Also, the City did not adequately document the urgency of emergency repairs. The City did not include the code/HQS violations in its Page iii 2001-AT-1006 Table of Contents Exit Executive Summary rehabilitation contracts because its inspectors were not adequately trained to perform initial inspections and prepare adequate work write-ups. As a result, the homeowners were not provided decent, safe, and sanitary housing after the rehabilitation work was completed. The City of Hattiesburg’s procurement practices did not comply with Federal procurement and contracting requirements or its own procurement policy. The City improperly procured $2,916,831 of goods and services without adequately documenting the procurements. The contract deficiencies included: (1) improperly soliciting and awarding contracts (2) awarding sole source procurements; (3) not performing independent cost estimates or cost and price analyses; and (4) repeatedly selecting the same contractor. The deficiencies occurred because the City disregarded requirements and did not properly monitor the CDBG and HOME Programs. As a result, HUD lacked assurance that the City obtained goods and services at the most advantageous terms. The City did not maintain proper accounting controls over its payroll function. The City used CDBG funds to pay the salaries of an employee who did not provide services to its CDBG Program and four interns whose positions were not included in the CDBG budget. The City did not have written procedures for reviewing and approving payroll costs or documenting personnel decisions. As a result, the City paid $11,535 for non-related program activities and $13,019 for unbudgeted costs. The City did not establish and maintain operating systems to ensure its activities complied with the programs regulations. The City did not correct deficiencies HUD identified during its programs review. Also, the City did not monitor its subrecipients to ensure they implemented adequate systems for financial management. This occurred because the City did not properly manage its programs or have written procedures for monitoring subrecipients to ensure they properly implemented the required financial management systems. As a result of the City’s ineffective programs management, there was no assurance that subrecipients properly operated their programs and citizens received the intended programs benefits. 2001-AT-1006 Page iv Table of Contents Exit Executive Summary We recommend that HUD require the City to reimburse the CDBG Program for all ineligible costs and unsupported costs, and develop and implement controls and procedures to ensure proper administration of its programs. Also, the City should correct all deficiencies and HQS violations and submit a corrective action plan to correct the deficiencies identified by HUD during its reviews. We presented our findings to the City and HUD officials during the audit. We provided a copy of the draft report to the City and HUD’s Mississippi State Office on June 21, 2001. We discussed the report with the officials at the exit conference on July 6, 2001. The City provided written comments on August 9, 2001. The City’s comments are summarized in the findings and included in their entirety as Appendix G. Page v 2001-AT-1006 Table of Contents Exit Executive Summary (This Page Left Blank Intentionally) 2001-AT-1006 Page vi Table of Contents Exit Table of Contents Management Memorandum i Executive Summary iii Introduction 1 Findings 1 The City Spent $242,000 on Activities Not Addressing National CDBG Objectives 3 2 Homes Did Not Meet Standards 9 3 The City Did Not Follow Proper Procurement Requirements 21 4 Controls Over Payroll Were Inadequate 27 5 Controls Over Programs Needed Improvement 31 Management Controls 35 Follow-Up On Prior Audits 37 Appendices A Schedule of Ineligible and Unsupported Costs 39 B Properties Inspected-Full Rehabilitation Program 41 Page vii 2001-AT-1006 Table of Contents Exit Table of Contents C Properties Inspected-Emergency Rehabilitation Program 43 D Inspection Deficiencies for Full Rehabilitation Grants 45 E Inspection Deficiencies for Emergency Rehabilitation Grants 51 F Selected Photographs 53 G Auditee Comments 57 H Distribution 65 Abbreviations CDBG Community Development Block Grant CFR Code of Federal Regulations CPD Community Planning and Development GFCI Ground Fault Circuit Interrupter HOME HOME Investment Partnership HQS Housing Quality Standards HUD U.S. Department of Housing and Urban Development OIG Office of Inspector General OMB Office of Management Budget 2001-AT-1006 Page viii Table of Contents Exit Introduction The CDBG Program was established by Title I of the Housing and Community Development Act of 1974 (Public Law 93-383). The program provides grants to States and local governments to aid in the development of viable urban communities. Governments are to use grant funds to provide decent housing and suitable living environments and to expand economic opportunities, principally for persons of low and moderate-income. To be eligible for funding, every CDBG funded project and activity must meet one of the program’s three national objectives. Every activity, except program administration and planning, must: • Benefit low and moderate-income persons; or • Aid in preventing or eliminating slums or blight; or • Address a need with a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community. The HOME Investment Partnership Program was created under Title II of the National Affordable Housing Act of 1990. HOME was designed to strengthen public-private partnerships to expand the supply of decent, safe, sanitary, and affordable housing to low and very low- income families. The City of Hattiesburg’s CPD Programs are administered by the City’s Urban Development Department. From 1995 to 2000, the City’s CDBG and HOME annual allocations were as follows. YEAR CDBG HOME 1995 $1,049,000 $500,000 1996 $1,084,000 $404,000 1997 $1,068,000 $394,000 1998 $1,033,000 $422,000 1999 $1,038,000 $455,000 2000 $1,037,000 $455,000 The City of Hattiesburg is governed under a Mayor-Council form of government with a councilperson representing the City’s five Wards. As a result of the March 2001 election, a new administration had taken over. The Director of the Urban Development Department administers the City’s CPD Programs. The City’s books and records are maintained at 200 Forest Street, Hattiesburg, Mississippi. HUD’s Mississippi State Office of Community Planning and Development in Jackson, Mississippi, is responsible for overseeing the City’s administration of these programs. Page 1 2001-AT-1006 Table of Contents Exit Introduction The focus of our review was to determine if the City Audit Objectives, complied with Federal laws, HUD regulations, and other Scope and requirements in carrying out its CPD Programs. Our audit Methodology objectives were to determine whether the City: • Complied with the CPD Program requirements, laws, and regulations; • Had adequate controls to ensure compliance with HUD regulations; and • Carried out its activities in an efficient, effective, and economical manner. To accomplish the objectives, we tested program activities for compliance with program requirements. We interviewed the complainant, HUD’s CPD Division officials, current and former City employees, contractors, and homeowners. We reviewed related City files and records; controls and procedures over contracts awarded for fiscal years 1997 through April 2000; and general controls, including lines of responsibility, duties, accounting systems and procedures. We selected and tested items from January 1997 through April 2000 based on expenditure amounts. We performed detailed inspections for 20 of the 92 houses rehabilitated in 1999 and 2000. Of the 20 houses inspected, we selected 13 houses that were recently fully rehabilitated and 7 houses that had emergency repairs completed, based on the repair amount spent by year. The inspections were performed to determine compliance with HUD’s HQS and national and local building codes. We also made site visits to other rehabilitated houses, the Weathersby Road economic development project, and nine downtown commercial facade improvement projects. Our audit covered the period of 1997 through 2000. We extended the audit coverage as appropriate. We performed the audit field work from April through November 2000 in accordance with generally accepted government auditing standards. 2001-AT-1006 Page 2 Table of Contents Exit Finding 1 The City Spent $242,000 on Activities Not Addressing National CDBG Objectives The City of Hattiesburg spent $242,000 of CDBG funds on activities that did not address a required national objective. The activities included a road improvement project for $175,000 and five grants to improve downtown commercial buildings totaling $67,000. The City did not demonstrate how the projects met a national objective. City officials transferred funding from planned projects that met national objectives, without supporting the new activities’ eligibility. Therefore, the funding may not have best served the interests of low and moderate-income persons as intended. Title 24 of the Code of Federal Regulations (CFR), Part Criteria 570.200 requires each grantee to maintain evidence that each of its assisted activities meets one of the program’s three national objectives. Specific documentation must be maintained as described in Part 570.506. These regulations require that each activity either: • Benefit low and moderate-income persons; or • Aid in the prevention or elimination of slums or blight; or • Meet other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community and other financial resources are not available to meet such needs. Part 570.208(a)(4) provides criteria for determining whether a CDBG activity complies with national objectives when an activity is designed to create or retain permanent jobs. To qualify the recipient must document that at least 51 percent of the jobs will be held by, or will be available to, low and moderate-income persons within 2 years from the time of CDBG assistance. Part 570.208(b) states that CDBG funds can be used to address slum and blight conditions provided: (1) the project is located in a designated slum and blight area that contains a substantial number of deteriorating buildings; and (2) activities address specific conditions which contribute to the area being designated a slum and blight area. Page 3 2001-AT-1006 Table of Contents Exit Finding 1 On November 3, 1997, the City entered into a contract with Weathersby Road a road paving company. The contract was to expand improvements Weathersby Road to benefit a Lowe’s Improvement Warehouse that was located nearby. However, the CDBG funds were originally planned and budgeted for drainage improvement in a targeted low income community. The City reported in its 1998 Grantee Performance Report that the street improvements made it possible for Lowe’s to expand and relocate its Hattiesburg operations. One hundred forty seven new jobs were to be created over a 2 year period, of which 125 jobs would benefit low and moderate-income persons. The Mississippi Employment Security Commission was to assist in assuring that first consideration was given to low and moderate-income persons. The contractor completed the road improvements in May 1998. The City paid the contractor $227,741, which included $175,000 of CDBG funds. Therefore, documentation was required to support that low and moderate-income persons would hold at least 51 percent of the jobs within 2 years from the time of the CDBG assistance. The City did not maintain evidence supporting that the activity met the national objective. City Officials said that the road expansion was an economic development project and it met the CDBG national objective of jobs creation for low and moderate-income persons. The City did not have any agreements or documentation pertaining to the proposed jobs creation. A Lowe’s representative said they did not maintain records pertaining to jobs creation. The Lowe’s representative provided documentation showing that during 1998 and 1999, they filled 37 positions, rather than the projected 147 new jobs. Further, the representative said that they could not determine which of the 37 positions, if any, were newly created and which were turnovers of existing positions. Lowe’s documentation showed that of the 37 positions filled, low and moderate-income persons filled 19. However, the 19 positions were less than the 125 new jobs promised to benefit low and moderate-income persons. 2001-AT-1006 Page 4 Table of Contents Exit Finding 1 The City approved nine grants totaling $110,400 to improve downtown commercial building facades. The Façade improvements funds used for the downtown improvements were originally planned and budgeted for the City’s Micro-Loan Program. The Micro-Loan Program was to assist in the development and redevelopment of Hattiesburg’s low and moderate- income areas. The City did not fund any micro-loans. Instead, it transferred all funds to the downtown facades improvement without addressing how the activities would meet national objectives. As of November 2000, the City had disbursed $67,000 for five completed projects. The City did not consider the national objectives when awarding the grants. The City based the facade awards on a first come-first serve basis, giving priority to projects having a significant visual and economic impact and showing dedication to preserving historic building integrity. In addition to facade grants, the City offered the owners other financial incentives including tax credits. The City’s policy and procedure guidelines did not address slum and blight conditions. The guidelines approved in March 1999 by the City Council mentioned the facade improvement activities. The improvements were scheduled for funding under the 1996 Consolidated Plan. However, the improvements were not included in a plan until fiscal year 2000. In 2000, the City’s Consolidated Plan budgeted $50,000 for facade improvement activities. The 2000 Consolidated Plan stated that these activities would address national objectives by aiding in the prevention or elimination of slums or blight. We examined the project files and visited each of the nine approved facade projects. The files did not address the projects meeting a national objective. The properties were not located in a designated slum and blight area that contained a substantial number of deteriorating buildings. The staff did not provide any documentation showing that the properties were in such an area or that the projects addressed specific conditions, which contributed to designating downtown Hattiesburg a slum and blighted area. Page 5 2001-AT-1006 Table of Contents Exit Finding 1 The following downtown commercial buildings received funding approval. PROJECT ADDRESS AWARD Sack’s Outdoor Store 200 E. Pine Street $15,000 Impressions in Stone 113 Newman Street $10,000 Studio Properties LLC 101 East Front Street $15,000 Landscape Studio 201 West Pine Street $15,000 Forrest Paper Company 511 East Pine Street $12,000 Subtotal of Grants for $67,000 Completed Projects Perma Coatings 127 Market Street $ 6,400 DJ’s Shuttle & Tours 101 Hardy Street $12,000 Komp Equipment 319 East Pine Street $15,000 Phillips Law Office 33 Batson Street $10,000 Subtotal of Grants Approved – $43,000 Projects Not Completed Total of Grants Approved $110,400 COMPLETED PROJECTS Sack’s Outdoor Store – 200 East Pine Street - $15,000 2001-AT-1006 Page 6 Table of Contents Exit Finding 1 Studio Properties LLC-101 East Front Street-$15,000 In summary, the City spent $242,000 on a road improvement (economic development) project and five grants for downtown improvement projects that did not address any national objectives of the CDBG Program or serve the interests of low and moderate-income persons. Excerpts from the City of Hattiesburg’s comments on our draft findings follow. Appendix G contains the complete text of the comments. The City generally agreed with the finding. “The City of Auditee Comments Hattiesburg will document its files to show that 37 new jobs were created and that 19 (51.4 percent) of those jobs were filled by low- and moderate-income persons thus establishing the eligibility of the Weathersby Road improvements. “…The City will determine if the downtown area, including the improved facades, lies in an area already declared by the City Council of the City of Hattiesburg to be a slum and blighted area. If such designation has been established, it will be provided to HUD. If the area has not been declared a slum and blighted area, the City will extensively document the existence of a number of conditions causing the area to meet HUD and State of Mississippi criteria for slum and blighted area designation and appropriate for revitalization and improvement. Page 7 2001-AT-1006 Table of Contents Exit Finding 1 “…The City of Hattiesburg will enhance its CDBG filing system to include a detailed documentation of the eligibility of each and every project activity.” We believe the City’s action will strengthen controls over OIG Evaluation of the CDBG funded activities. Auditee Comments Recommendations We recommend that you require the City of Hattiesburg to: 1A. Provide documentation to support that the $242,000 of CDBG funds spent for the projects met CDBG national objectives or repay any unsupported costs to the CDBG Program. 1B. Establish and implement policies and procedures to ensure proper documentation of the national objectives for each activity funded with CDBG funds. 2001-AT-1006 Page 8 Table of Contents Exit Finding 2 Homes Did Not Meet Standards The City did not ensure that the rehabilitated houses in its program complied with HUD and local health, safety, and building standards. In addition, the City selected one house that was not feasible for its housing program. For the 20 houses inspected, we identified 54 work items that the contractors did not complete and 71 work items that the contractors completed in an unacceptable manner. We also identified 84 code or HUD HQS violations that the City did not identify and include in its rehabilitation contracts. Of the 20 houses inspected, 13 involved full rehabilitation and 7 involved emergency repairs (see Appendices B and C). The full rehabilitation deficiencies occurred because the City’s inspectors did not identify inferior or incomplete work when performing inspections. The emergency repairs deficiencies occurred because the City did not clearly define an emergency situation, thus repairs were inconsistent. Also, the City did not adequately document the urgency of emergency repairs. The City did not include the code/HQS violations in it rehabilitation contracts because its inspectors were not adequately trained to perform initial inspections and prepare adequate work write-ups. As a result, the homeowners were not provided decent, safe, and sanitary housing after the rehabilitation work was completed. The City did not meet its program objective of improving housing conditions for low and moderate-income families and very low-income families. Title 24 CFR 85.36 (b)(2) states that grantees and Repair work must be subgrantees will maintain a contract administration system completed in an that ensures contractors perform in accordance with the acceptable manner terms, conditions, and specifications of their contracts or purchase orders. The City’s July 1999 CDBG/HOME Rehabilitation Grant Program Guidelines provide procedures for initial inspections to complete work write-ups for substandard conditions and subsequent inspections to assure work was completed in an acceptable manner. Work write-ups for each property should provide specific details on work to be completed. The City’s Guidelines specified that in the event of conflict, Rehabilitated Federal rule would prevail. Title 24 CFR 570.208 properties must meet (b)(1)(iv) states that at a minimum, the local definition for HQS and/or local this purpose must be such that buildings rendered codes substandard would also fail to meet HQS for the Section 8 Housing Assistance Payments Existing Housing Program. In addition, the City’s Guidelines requires that each structure meet the requirements of the Housing Code, Page 9 2001-AT-1006 Table of Contents Exit Finding 2 Building Code, Plumbing Code, Mechanical Code, Gas Code, and National Electric Code. The City received $1.5 million annually from 1995 to 2000 in combined CDBG and HOME Program funds. During CDBG/HOME 1998 and 1999, the City expended the following: expenditures Year CPD Funds Activity Amount 1998 CDBG fully rehab 20 houses $346,525 1998 HOME fully rehab 5 houses 96,481 1998 CDBG emergency repairs 37 houses 163,992 1999 CDBG fully rehab 4 houses 109,245 1999 HOME fully rehab 9 houses 121,117 1999 CDBG emergency repairs 56 houses 237,073 We inspected 20 houses that the City had or should have performed its final inspections. We selected 13 houses that OIG inspections were recently fully rehabilitated and 7 that had emergency repairs made. We inspected the houses using HUD’s HQS manual and local building codes and standards. We identified the following deficiencies (see Appendices D and E for the deficiencies of each property). We identified 54 work items (48 full rehabilitation and 6 emergency) included in the rehabilitation contracts that the Contract work not contractors did not complete. For example, the contractors completed did not: (1) install a wheelchair ramp at the rear and handrails on exterior steps; (2) replace rotted window trim and soffitt; (3) install 200 AMP electrical service, a ground fault circuit interrupter (GFCI) in the bath and kitchen outlets, and a bath heat/vent light; (4) install kitchen cabinet shelving; and (5) paint hallway walls, den walls, and closets. Also, there were instances where contractors were paid twice for work performed such as front porch decking repair, front porch painting, rotten siding replacement, and water heater repairs. We identified 71 work items (66 full rehabilitation and 5 Repairs completed in emergency) where the contractor used inappropriate unacceptable manner installation techniques or shoddy materials. For example, the contractors did not properly: (1) remove flaking paint and paint chips and provide adequate paint coverage for a wheelchair ramp and exterior wood; (2) ensure adequate ventilation for numerous gas heaters; (3) install vinyl flooring and water heaters properly; (4) install GFCI outlets and a main/wall switch; and (5) encase kitchen electrical wiring in protective conduit and refinish kitchen cabinets. In addition, the contractor inappropriately extended a sewer 2001-AT-1006 Page 10 Table of Contents Exit Finding 2 vent pipe through the roof and installed drain pipes to the sewer. We identified 84 code or HQS violations (76 full rehab and Code/HQS violations 8 emergency) that the City did not identify during its housing inspections. Therefore, the City did not include the not identified violations in the contracts and the contractors did not correct the deficiencies. The deficiencies included unrepaired/unpainted bedroom closets, inappropriate paneling, kitchen cabinets not finished properly, doors improperly trimmed or not weather tight, vinyl improperly installed, smoke detector not installed, peeling paint, exposed electrical wiring, GFCI outlets not installed, rotted exterior wood/siding not replaced, seriously deteriorated exterior windows, dwelling not connected to approved sanitary sewer, toxic odor from opening to septic tank, existing unvented space heater, and water heater vent pipe not sealed. The following provides examples of the deficiencies we found at the houses inspected. Inspection of houses 33 Brady Road The homeowner received a CDBG grant for $19,680, including an initial contract for $17,270. The contract included repairs to exterior plywood and roof; windows replacement; gas furnace replacement; sewer line installation; sheetrock repair/replacement and painting; faucet, GFCI, and water heater installation; cabinet painting; formica countertop installed; and carpet installation. On November 10, 1999, the City’s Housing Inspector performed an initial inspection and repairs write-up. The Inspector also made four construction progress inspections between January 21 and February 16, 2000. The final inspection was performed on February 23, 2000. Prior to the final inspection, the City’s Land Development Code Division also performed a final electrical inspection. However, our July 25, 2000, inspection identified seven instances where contract work was not completed and one instance where the work was unacceptable. We also noted 12 substandard conditions that were not included in the contract. The new kitchen fixture had exposed electrical wiring (Figure 1). The kitchen vinyl was not properly trimmed Page 11 2001-AT-1006 Table of Contents Exit Finding 2 (Figure 2). An opening to the septic tank was hazardous and emitted toxic odors (Figure 3). Other code/HQS violations not identified in the City’s inspections included a switch not flush with the wall, kitchen formica top improperly installed, no interior access to the attic, bath GFCI outlet not installed, and doors not weather tight. Figure 1 Figure 2 Figure 3 2001-AT-1006 Page 12 Table of Contents Exit Finding 2 802 Atlanta Street The homeowner received a CDBG grant for $21,078, including an initial contract for $18,271. The contract included repairs to exterior siding, roof, windows, and deck; painting of interior and sheetrock/paneling replacement; and installing new doors, vinyl flooring/carpet, GFCI outlets, gas heaters, smoke detectors, and flex lines to the water heater/stove/heater. On January 24, 2000, the City’s Housing Inspector performed an initial inspection and repairs write-up. The Inspector also made nine progress construction inspections between March 20 and March 31, 2000, and two final inspections on April 11, 2000. Prior to the final inspection, the City’s Land Development Code Division also performed a final electrical inspection. However, our July 27, 2000, inspection identified two instances in which contract work was not completed and six instances where work was unacceptable. We also noted nine substandard conditions that were not included in the contract. The bedroom closet was not included in the repairs (Figure 4). The closet had hazardous splintered paneling, heavy water damage to the ceiling, a hazardous gas piping used as a clothes rod, and portions of the corners were open to the exterior. Other code/HQS violations not identified in the City’s inspections included additional electrical outlets needed in the living room and bedroom, smoke detector needed in the den, gutter required a downspout, exterior electrical wiring required protective conduit, rotted exterior wood needed replacing, and unvented gas heaters were installed. Figure 4 Page 13 2001-AT-1006 Table of Contents Exit Finding 2 Other examples of poor workmanship included a water Various other houses heater missing a flue collar (Figure 5), peeling paint (Figure inspected 6), and vinyl improperly installed (Figure 7). Appendix F contains additional photographs of deficiencies. Figure 5 Figure 6 Figure 7 2001-AT-1006 Page 14 Table of Contents Exit Finding 2 The homeowner received a CDBG grant for $24,906, House not feasible including an initial contract for $19,985. The contract for program included electrical installation; replacing siding, back porch sill, windows, rear steps, plywood and flooring for front porch, ceiling tiles, and bathroom floor; back porch repairs; leveling the house; interior painting; and vinyl, cabinet, sink, vent hood and space heater installation. However, our July 27, 2000, inspection identified 8 instances where contract work was not completed and 12 instances where work was unacceptable. We also noted seven substandard conditions that were not included in the contract. The deficiencies and substandard conditions included plumbing vent pipes not extended through the roof, poor installation of electrical wiring, non-mortared concrete block piers, unvented and inappropriate sized space heaters, interior doors in disrepair (Figure 8), rotted window sashes and framework, and unrepaired holes in flooring (Figure 9). Figure 8 Figure 9 Page 15 2001-AT-1006 Table of Contents Exit Finding 2 Section V.A. of the City’s Guidelines state that a house is feasible for rehabilitation if the cost does not exceed 50 percent of the present day cost of new construction, based on $45 per square foot. However, Section VII. C. limits the rehabilitation assistance to $25,000. If the deficiencies and additional substandard conditions noted during our inspection were considered, the house would have required an additional estimated $24,288 in repairs to meet code/HQS requirements. Thus, the rehabilitation would have far exceeded the $25,000 limit. Therefore, the City should not have included the house in its rehabilitation program. The City accepted inferior or incomplete work by the Code/HQS contractors. The 54 incomplete contracted work items and requirements were the 71 unacceptable work items we identified demonstrate not enforced this. The number of fully rehabilitated houses completed by the City dropped from 25 in 1998 to 13 in 1999. While some of it is attributable to the City’s increased efforts on emergency repairs, we believe the City may have sacrificed quantity and quality due to limited staff. Currently, the City has only three employees in its Urban Development Community Development Division administering its housing programs, which include full rehabilitation, emergency repairs, neighborhood improvements, demolition, down payment assistance, and facade improvements. The City did not ensure its work write-ups included all Inspection work necessary repairs. Based on our inspections, the 84 write-ups inadequate code/HQS deficiencies that were not included in the rehabilitation contracts demonstrate the need for the City to improve its initial inspections and work write-ups. The inadequate write-ups and need for excessive change orders creates opportunity for waste and abuse. The City’s Urban Development staff acknowledged that prior work write-ups lacked clarity and did not identify all necessary repairs. The City’s HUD Housing Inspectors and code enforcement Inspectors need employees did not receive adequate training to complete the additional training write-ups or to perform adequate inspections. This was particularly evident in the 84 code/HQS violations omitted from rehabilitation contracts. Former community development employees performed most of the housing inspections. Also, the City’s Land Development Code 2001-AT-1006 Page 16 Table of Contents Exit Finding 2 Division did not note deficiencies when it performed inspections. For instance, contrary to the City’s Guidelines, the “final word” on code compliance relating to mechanical and electrical is the responsibility of the Code Division. Although, our inspections disclosed instances where despite the Code Division’s approval, a 200 AMP electrical service was not installed, GFCI outlets were improperly or not installed, electrical wiring was not placed in protective conduit, unvented gas heaters were routinely accepted, and water heaters were not appropriately repaired or replaced. Section IX C. 3.b. of the City’s Guidelines indicates that the HUD Housing Inspector shall insist upon quality construction with high quality new materials. The Inspector shall not sign off on any inspection if inferior or defective construction or materials exists. The City did not clearly define and document emergency Emergencies were situations. Section I of the City’s September 1999 not clearly defined Emergency Housing Repair Grant Program Guidelines states that only repairs of an emergency nature will be considered for approval. The guidelines define emergency as work that is necessary to eliminate conditions detrimental to health and safety. The emergency is to be determined by the contractor and verified by the City’s HUD Housing Inspector, Building Inspector, or Housing Coordinator. Section IV states that the contractor’s work write-up shall show all work necessary to correct the emergency repairs identified. However, based on our inspections, the City was inconsistent when determining emergency situations. For instance, the City addressed the replacement of space heaters in one instance, but not in another where health and safety was an issue. The inconsistency indicates the need to more clearly define an emergency. Also, the City needs to improve its documentation of the urgency of a repair. During our review, the City began making plans to correct The City’s actions to the cited deficiencies. The City’s proposed actions address deficiencies included re-inspecting the houses we inspected and correcting the cited deficiencies, correcting the space heater and sewer problems, ensuring that contractors correct the unacceptable work, implementing a contractor debarment policy, and determining necessary staff adjustments including dismissal, reassignment, and hiring. Page 17 2001-AT-1006 Table of Contents Exit Finding 2 Excerpts from the City of Hattiesburg’s comments on our draft findings follow. Appendix G contains the complete text of the comments. The City generally agreed with the finding. “The City will Auditee Comments temporarily suspend the housing rehabilitation program pending a complete evaluation of the program, its guidelines and procedures. Upon completion of the evaluation, the City will make necessary changes to insure that the program is implemented in accordance with the local program guidelines, building and related codes, and HUD rules and regulations governing housing rehabilitation programs. Staff training will be a priority.” OIG Evaluation of We believe the City’s action will strengthen controls over its Auditee Comments housing program. Recommendations We recommend you require the City of Hattiesburg to: 2A. Correct all deficient, incomplete work and code/HQS violations noted during our inspections. Any work items noted as not completed or not completed in an acceptable manner should be corrected at no further costs to the program. 2B. Re-inspect all houses completed since January 1998 that we did not inspect and correct any items that were not completed or completed in an unacceptable manner. Also, correct all code/HQS violations that should have been included in the work write-up, but were omitted. Any work items noted as not completed or not completed in an acceptable manner should be corrected at no further costs to the program. 2C. Remove any contractor unwilling to correct the deficiencies identified during the inspections or incapable of performing quality work. 2001-AT-1006 Page 18 Table of Contents Exit Finding 2 2D. Improve the system for performing inspections by providing adequate staff training for assigned personnel. 2E. Establish and implement policies and procedures to ensure proper guidelines for defining and documenting an emergency and to assign responsibility of final approval for code compliance. 2F. Ensure local codes are enforced and communicate such enforcement to participating contractors. 2G. Monitor future rehabilitation contracts to ensure work is performed in accordance with standards and specifications. 2H. Repay the CDBG Program $24,906 for the ineligible rehabilitation grant. Also, determine if any other repairs were made to the 208 E. 5th Street house from CDBG funds and, if so, repay the funds to the CDBG Program. Page 19 2001-AT-1006 Table of Contents Exit Finding 2 (This Page Left Blank Intentionally) 2001-AT-1006 Page 20 Table of Contents Exit Finding 3 The City Did Not Follow Proper Procurement Requirements The City of Hattiesburg’s procurement practices did not comply with Federal procurement and contracting requirements or its own procurement policy. The City improperly procured $2,916,831 of goods and services without adequately documenting the procurements. The contract deficiencies included: (1) improperly soliciting and awarding contracts; (2) awarding sole source procurements; (3) not performing independent cost estimates or cost and price analyses; and (4) repeatedly selecting the same contractor. The deficiencies occurred because the City disregarded requirements and did not properly monitor the CDBG and HOME Programs. As a result, HUD lacked assurance that the City obtained goods and services at the most advantageous terms. Title 24 CFR 85.36 (b)(2) requires a contract administration Procurement system that ensures contractors perform according to terms, requirements conditions, and specifications of their contracts. Section (c)(1) states that all procurement transactions be conducted in a manner providing full and open competition, including prohibitions against placing unreasonable requirements on firms in order for them to qualify to do business and any arbitrary action in the procurement process. Section (b)(9) requires the grantees to maintain sufficient records to show the significant history of the procurement. The records shall document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the cost or price. Section (f)(1) states that grantees and subgrantees must perform a cost or price analysis in connection with every procurement action. Section (b)(1) states that grantees and subgrantees should use their own procurement procedures that reflect applicable State and local laws and regulations, provided that procurements conform to applicable Federal law. The City’s February 21, 2000, Purchasing Manual requires written bids, initiated only by Purchasing Division staff members, for amounts from $1,500 to $10,000. For amounts over $10,000 purchases must be bid as required by state law, which in part requires advertising for competitive sealed bids once each week for 2 consecutive weeks and making the purchase from the lowest and best bidder. Page 21 2001-AT-1006 Table of Contents Exit Finding 3 The City contracted services totaling $2,916,831 without Competitive properly executing contracts or documenting a cost or price procedures were not analysis. The services included full and emergency followed or rehabilitation construction ($2,410,844), engineering ($273,796), road paving ($222,741) and consultants ($9,450). Some of the emergency rehabilitation construction and engineering services procurements were sole source without competitive prices or proposals. The City repeatedly obtained the same firm for its engineering services and used the same small group of contractors from 1995 to 2000 for its rehabilitation construction services. As a result of the City disregarding the procurement procedures, it incorrectly obtained goods and services without full and open competition. The City did not have effective controls over its Rehabilitation procurement and contracting for rehabilitation contractors construction selected for homeowner grantees. From 1995 to 2000, the contracts City spent $2,410,844 for home rehabilitation grants. The grants consisted of $1,773,313 for 117 full rehabilitation grants and $637,531 for 137 emergency rehabilitation grants. The City did not establish or implement procurement and contracting procedures for compliance with Federal regulations or its own requirements. Further, the rehabilitated homes in our sample did not meet HUD and local standards, as discussed in Finding 2. The City did not allow homeowners to choose the contractors to perform the rehabilitation work on their houses. The City required homeowners to use the contractors it selected. However, the work performed by the selected contractors was inadequate. For example, the City paid a contractor $20,646 to rehabilitate a property that resulted in poor workmanship. However, the City inspector passed the property. One of the work items was the construction of a porch (see photo below). 2001-AT-1006 Page 22 Table of Contents Exit Finding 3 The City’s Senior Planner stated that he was told the contractor stole bricks to support the poorly constructed porch. The Senior Planner forced the contractor to return the bricks. However, the City did not take action against the contractor and continued doing business with him. The homeowners’ granddaughter, who signed most of the grant documents for her grandmother, stated that she was very unhappy with the quality of work performed. She complained to City Officials and refused to sign the $20,646 check for payment to the contractor. Therefore, the City officials had the grandmother sign the check for payment. The City procured contractors for its full rehabilitation program by soliciting bids from a small select group of contractors, instead of advertising for bids, as required by the procurement policy. The City’s practice was to reject all bids that were not within 10 percent of the estimated cost for rehabilitating the properties. This practice resulted in the City awarding contracts to contractors bidding higher than the low bidder and other bidders. After eliminating bidders, the City routinely approved change orders to increase the contract prices. For example, the property pictured above was procured by soliciting bid proposals instead of advertising for sealed bids as required by the City’s procurement procedures. The contractor who was awarded the contract was not the low bidder. The selected bid was $20,141, but the lowest bid was $19,434. The City’s files contained five bid proposals as shown below. Page 23 2001-AT-1006 Table of Contents Exit Finding 3 CONTRACTOR BID AMOUNT PROPOSED A $19,434 B 20,141 C 21,260 D 24,350 E No Bid Contractor E said he submitted a proposal showing no bid, because City Officials asked him to bid. He stated that he could not properly remodel the property within the dollar limits set by the City Inspector. The City provided no basis or rationale for not competitively awarding the emergency rehabilitation contracts. We were informed that awards should have been rotated among the bidders, but they were not. As a result, the City incorrectly awarded contracts through non- competitive procurement. The City used the same engineering firm for two CDBG Engineering services contracts. It paid the engineering firm $273,796 from contract January 1998 to August 2000. Initially, the City used qualification-based procurement procedures to obtain the firm’s services and did not consider the price. The City used sole source procurement procedures to award a second contract to the same firm without advertising or seeking proposals from other firms. The City did not provide a cost or price analysis for the contracts to support the price reasonableness or to justify awarding the second contract without competition. The Director of Public Services stated that as an engineer he was familiar with prices charged for such services. Based on his knowledge and guidelines from the engineering profession, he determined that the contract prices were reasonable. However, he did not document his determinations. Although the method is prohibited by 24 CFR 85.36 (f)(4), the City made the $273,796 payment on percentage of cost method of compensation. Since the engineering firm was responsible for determining and monitoring projects costs, the percentage of cost basis used to compensate the firm was susceptible to abuse. 2001-AT-1006 Page 24 Table of Contents Exit Finding 3 On November 3, 1997, the City entered into a contract with Road paving a road paving company. The executed contract did not contract include a contract amount or reference any documents identifying the contract amount. The Public Services Department staff said that the $230,191 contract price was shown in the proposal, which was part of the contract, and it was not necessary to reference that document in the contract itself. The contract did not include the required provisions pertaining to records retention, Davis-Bacon Act, or equal employment opportunity. The City did not follow procurement requirements for Consulting services consulting services contracts awarded sole source. In July contracts 1999, the City entered into a professional services agreement with three consultants to design and administer a survey and analyze survey data. The consultants did not sign the service agreement. Only the City Urban Development Director’s signature was on the agreement. The City agreed to pay a total fee of $9,450 as work was completed. The billings and payments were based on the percentage of budgeted hours completed, rather than services completed, as specified in the agreement. The City’s files did not document the reason for the sole source award or a cost or price analysis. As a result, the City awarded a non-binding and non-competitive contract without justification. The City’s Senior Planner approved the payment, but noted on the payment request that he had not seen a contract supporting the payment. Excerpts from the City of Hattiesburg’s comments on our draft findings follow. Appendix G contains the complete text of the comments. The City generally agreed with the finding. “…The City Auditee Comments will compile documentation to support a determination that the Engineering and Consulting Services were reasonable and necessary. To establish the reasonableness of fees, the documentation will include, among other things, a comparative analysis of engineering fees for similar construction projects using the nationally accepted standards of the National Society of Professional Engineers. The costs of any engineering or consulting services that are not documented to be reasonable and necessary will be repaid to the CDBG Program. Page 25 2001-AT-1006 Table of Contents Exit Finding 3 “…The City of Hattiesburg will review and evaluate its existing procurement policies and make necessary changes that will insure that all procurement of goods and services will be in compliance with Title 24 CFR 85.36 and other HUD requirements. “…All Contractors who do not perform acceptable work or will not correct unacceptable work will be subject to debarment.” We believe the City’s action will strengthen controls over the OIG Evaluation of procurement operations. Auditee Comments Recommendations We recommend that you require the City of Hattiesburg to: 3A. Provide documentation to justify the reasonableness and necessity of the engineering and consultant services contracts. 3B. Establish and implement policies and procedures on procurement and contract administration to ensure compliance with 24 CFR 85.36 and other HUD requirements. At a minimum the policies and procedures should ensure that: (1) sealed bidding is used when appropriate; (2) the lowest responsible bidder is selected; (3) full and open competition is promoted; (4) invoices are not paid unless an executed contract is properly in place; and (5) sole source procurements are not awarded. 3C. Consider debarring any contractor performing poor quality work. 2001-AT-1006 Page 26 Table of Contents Exit Finding 4 Controls Over Payroll Were Inadequate The City did not maintain proper accounting controls over its payroll function. The City used CDBG funds to pay the salaries of an employee who did not provide services to its CDBG Program and four interns whose positions were not included in the CDBG budget. The City did not have written procedures for reviewing and approving payroll costs, or documenting personnel decisions. As a result, the City paid $ 11,535 for non-related program activities and $13,019 for unbudgeted costs. Title 24 CFR part 570.502 requires each grantee to Financial management implement a financial management system in conformity requirements with 24 CFR 85 and Office of Management Budget (OMB) Circular A-87. Section 85.20 (b)(3) requires each grantee to maintain effective control and accountability for all assets and to adequately safeguard all property and assure it is used for authorized purposes. Section 85.20 (b)(4) requires actual expenditures be compared to budgeted amounts. From September 1999 to March 2000, the City used Improper payroll $11,535 of CDBG funds to pay the salary of a Code paid Enforcement Inspector who never provided services to the CDBG Program. The City’s Accounting Department charged the salary based on information provided by the Personnel Department without requiring verification from the Urban Development Department. The Accounting Department provided the Urban Development Department quarterly salaries charged to the CDBG Program, but did not provide an itemization of salaries charged. Therefore, improper salaries charged to the CDBG Program were not detected. In addition, the City payroll records showed $13,019 of CDBG funds used to pay interns whose positions were not included in the CDBG budget as shown below. Hire Date Position Annual Rate 7/6/99 Intern A $ 2,083 7/6/99 Intern B 427 7/7/99 Intern C 7,435 11/1/99 Intern D 3,074 Total $13,019 Page 27 2001-AT-1006 Table of Contents Exit Finding 4 The City’s budget included an administrative assistant position for $24,702. The position was not filled, which resulted in a year-end surplus. Also, the City paid its Community Development Specialist $2,789 less than the authorized amount, creating another surplus. The surplus from the positions offset the spending for the unbudgeted intern positions. Therefore, the unauthorized spending went undetected because overall payroll costs were within the budget limits. The City’s Senior Planner stated that he did not know how the interns’ salaries were charged, and he was unaware of any CDBG activities performed by the interns. The City did not have procedures for reviewing and approving payroll costs to ensure the actual expenditures compared to the budgeted amounts. The City’s personnel or payroll files did not justify payroll decisions. The personnel and payroll officials could not explain the payroll deficiencies. As a result, the City paid $24,554 of ineligible payroll costs. Excerpts from the City of Hattiesburg’s comments on our draft findings follow. Appendix G contains the complete text of the comments. The City generally agreed with the finding. “The City will Auditee Comments repay the CDBG Program $25,554 for payroll costs paid to the Code Enforcement inspector and the four interns. The City will review its Financial Management Systems and establish and implement written policies and procedures to ensure payroll records are accurately documented, reviewed and approved. The policy and procedures will be developed in accordance with Title 24 CFR 85 and OMB Circular A-87.” We believe the City’s action will strengthen controls over OIG Evaluation of its payroll function. Auditee Comments 2001-AT-1006 Page 28 Table of Contents Exit Finding 4 Recommendations We recommend that you require the City of Hattiesburg to: 4A. Repay the CDBG Program $24,554 for the payroll costs paid to the Code Enforcement Inspector and for the intern positions. 4B. Establish and implement policies and procedures to ensure payroll records are accurately documented, reviewed, and approved. Page 29 2001-AT-1006 Table of Contents Exit Finding 4 (This Page Left Blank Intentionally) 2001-AT-1006 Page 30 Table of Contents Exit Finding 5 Controls Over Programs Needed Improvement The City did not establish and maintain operating systems to ensure its activities complied with the programs regulations. The City did not correct deficiencies HUD identified during its programs review. Also, the City did not monitor its subrecipients to ensure they implemented adequate systems for financial management. This occurred because the City did not properly manage its programs or have written procedures for monitoring subrecipients to ensure they properly implemented the required financial management systems. As a result of the City’s ineffective programs management, there was no assurance that subrecipients properly operated their programs and citizens received the intended benefits. Paragraph A (2)(a) of OMB Circular A-87 requires efficient Financial management and effective administration of Federal awards through the requirements application of sound management practices. Title 24 CFR 85.20(a)(3) requires grantees to maintain effective controls and accountability for all grantees and subgrantees cash and other assets. Grantees must adequately safeguard all such property. Section 570.502 requires each grantee to implement a financial management system in conformity with 24 CFR Part 85 and OMB Circular A-87. Section 85.20 (b)(3) requires that financial management systems effectively account for and control the use of program funds and other assets. Section 85.36 (b)(2) requires grantees and subgrantees to maintain a contract administration system, which ensures that contractors perform in accordance with the terms, conditions, and specifications of their contracts. Section 570.501(b) requires that subrecipients adopt and implement the same standards for financial management as grantees. HUD has documented a history of problems with the City’s HUD reviews administration of the CDBG and HOME Programs. HUD performed reviews from 1996 to 2000 and identified various deficiencies that the City has not corrected. For example, HUD cited that the City’s: (1) rehabilitated houses did not meet HQS; (2) internal control system over its procurement system was inadequate, (3) HOME Program needed improvement; and (4) program management needed improvement. Page 31 2001-AT-1006 Table of Contents Exit Finding 5 The City’s Urban Development Director said that management delegated the responsibility of implementing the corrections to the staff, however the corrections were not made. The Director said currently he uses action plans and verifies that the required corrective actions were completed for the deficiencies identified. The City’s subrecipient agreement included a provision that Subrecipients were the City would monitor them against goals and performance not monitored standards. However, the City did not monitor its three subrecipients. The City had four contracts involving the three subrecipients. The contracts performance time frames expired without the subrecipients accomplishing all of the contractual tasks. The City did not address the subrecipients’ poor performance. Instead of monitoring the subrecipients’ performance or even suspending or terminating the contracts, the City chose not to monitor the subrecipients. The City did not have written procedures for monitoring subrecipients to ensure they properly implemented their contracts or the required financial management systems. Therefore, the City did not assure the subrecipients had established, or were maintaining, all records required by Federal regulations. The City Officials said that they did not monitor the subrecipients because they had not spent much of the funds granted. The City should have realized that the slow spending by subrecipients indicated possible ineffective program administration. Therefore, the City should have intensified, rather than reduce, the monitoring. By not fulfilling its oversight responsibilities, neither the City nor HUD had adequate assurance that subrecipients were effectively accounting for and controlling the use of program funds. * * * * * * In summary, the City did not effectively manage its CDBG and HOME Programs or adequately monitor its subrecipients to ensure that they were effectively administering their contracts. As a result, the City’s subrecipients were not effectively accomplishing the tasks required by their contracts. 2001-AT-1006 Page 32 Table of Contents Exit Finding 5 Excerpts from the City of Hattiesburg’s comments on our draft findings follow. Appendix G contains the complete text of the comments. The City generally agreed with the finding. “…The City Auditee Comments will undertake a comprehensive review of its financial management systems, procedures for monitoring CHODOs [Community Housing Development Organizations] and sub-recipients, and procedures for responding to HUD’s monitoring findings to insure that those monitoring findings and those cited in the Audit Report will not be repeated.” We believe the City’s action will strengthen controls over OIG Evaluation of the program. Auditee Comments Recommendations We recommend that you require the City of Hattiesburg to: 5A. Establish and implement policies and procedures on financial management systems to ensure compliance with 24 CFR 85 and OMB Circular A-87. 5B. Monitor the performance of its subrecipients to ensure contractual agreements are completed. Terminate the contracts of any subrecipient who does not properly fulfill its contract requirements. 5C. Submit a corrective action plan to correct the deficiencies identified by HUD during its reviews. Page 33 2001-AT-1006 Table of Contents Exit Finding 5 (This Page Left Blank Intentionally) 2001-AT-1006 Page 34 Table of Contents Exit Management Controls In planning and performing our audit, we considered the City’s management controls to determine our audit procedures and not to provide assurance on the controls. Management is responsible for establishing effective management controls to ensure that its goals are met. Management controls 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. We determined the following management control categories were relevant to our audit objectives: Eligibility with program requirements. Procedures used to comply with laws and regulations to meet national objectives. Procedures used to ensure proper housing rehabilitation. Procurement and contracting. Procedures used to ensure expenditures for administering the programs were eligible. Management monitoring methods. Procedures used to monitor subrecipients of grants and loans. We assessed controls in place. We obtained an understanding of the City’s procedures and HUD’s requirements, assessed control risk, and performed various substantive tests of the controls. A significant weakness exists if management 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 are obtained, maintained, and fairly disclosed in reports. Based on our review, we believe the City had significant weaknesses in the management controls. The specific weaknesses are discussed in the findings. Page 35 2001-AT-1006 Table of Contents Exit Management Controls (This Page Left Blank Intentionally) 2001-AT-1006 Page 36 Table of Contents Exit Follow-Up On Prior Audits This is the first Office of Inspector General audit of the City of Hattiesburg’s CDBG and Home Programs. Nicholson & Company, P.A., Certified Public Accountants, completed the last Independent Auditor’s audit report for the fiscal year ended September 30, 1997. The report issued December 1, 1997, contained no findings or unresolved prior findings related to any Federally sponsored program. Page 37 2001-AT-1006 Table of Contents Exit Follow-Up On Prior Audits (This Page Left Blank Intentionally) 2001-AT-1006 Page 38 Table of Contents Exit Appendix A Schedule Of Ineligible and Unsupported Costs Recommendation Ineligible1 Unsupported2 1A $ 242,000 2H $ 24,906 4A 24,554 Totals $ 49,460 $ 242,000 1 Ineligible costs are not allowed by law, contract, HUD or local agency policies or regulations. 2 Unsupported costs are not clearly eligible or ineligible but warrant being contested because of the lack of documentation supporting the need to incur such costs. Page 39 2001-AT-1006 Table of Contents Exit Schedule Of Ineligible And Unsupported Costs (This Page Left Blank Intentionally) 2001-AT-1006 Page 40 Table of Contents Exit Appendix B Properties Inspected – Full Rehabilitation Program CODE/HQS GRANT GRANT ITEMS NOT ESTIMATED VIOLATIONS ESTIMATED TOTAL INSPECTION DATES REPAIR WORK COMPLETED/ ITEMS NOT IN VIOLATIONS ESTIMATED PROPERTY ADDRESS GRANTEE OIG COSTS ITEMS UNACCEPTABLE COST CONTRACT COST REPAIR COST FULL REHAB 802 ATLANTA STREET 4/11/00 7/27/00 $21,078 61 2/6 $2,593 9 $1,847 $4,440 800 FAIRLIE STREET 1/18/00 7/27/00 10,590 34 4/2 1,380 9 2,310 3,690 709 SHORT 9TH STREET 4/27/00 7/28/00 22,832 70 1/6 880 1 1,330 2,210 518 McINNIS SPRINGS RD 7/31/00 12,793 68 5/5 1,168 5 554 1,722 422 MOBILE STREET 1/28/00 8/02/00 22,836 80 3/6 715 8 680 1,395 908 FLOWERS STREET 5/26/00 8/02/00 24,571 66 2/9 1,645 2 1,575 3,220 423 BRADY ROAD 1/31/00 7/25/00 22,243 53 1/4 2,619 4 7,181 9,800 433 BRADY ROAD 2/23/00 7/25/00 19,680 74 7/1 740 12 3,065 3,805 418 E. 7TH STREET 3/9/00 7/25/00 24,831 81 6/6 3,120 7 2,300 5,420 905 RIVER STREET 4/3/00 7/26/00 23,815 75 2/2 890 4 1,550 2,440 710 SHORT 9TH STREET 4/27/00 7/26/00 24,590 76 1/4 1,230 7 1,920 3,150 524 E. 6TH STREET 5/4/00 7/26/00 24,224 93 6/3 2,465 1 2,090 4,555 208 E. 5TH STREET 2/2/00 7/27/00 24,906 77 8/12 8,681 7 15,607 24,288 TOTALS $278,989 908 48/66 $28,126 76 $42,009 $70,135 Note: Grantee inspection date represents the date shown on the certificate of final inspection. If no date is shown, the final inspection was not documented in the file Page 41 2001-AT-1006 Table of Contents Exit Properties Inspected – Full Rehabilitation Program (This Page Left Blank Intentionally) Page 42 2001-AT-1006 Table of Contents Exit Appendix C Properties Inspected – Emergency Rehabilitation Program CODE/HQS ITEMS NOT ITEMS VIOLATIONS INSPECTION DATES REPAIR WORK COMPLETED/ NOT AN NOT IN PROPERTY ADDRESS GRANTEE OIG COSTS ITEMS UNACCEPTABLE EMERGENCY CONTRACT 17 COLLINS ROAD 10/18/99 7/31/00 $7,596 2 0/1 0 1 231 MAY AVENUE 05/04/00 7/31/00 5,965 8 0/0 2 2 106 N. 24TH AVENUE 7/31/00 6,730 3 1/0 0 0 406 ASHFORD STREET 08/19/99 7/31/00 5,865 10 1/2 5 1 718 MCMINNIS SPRING RD 06/08/99 8/01/00 4,356 9 2/1 6 0 428 MLK DRIVE 10/18/99 8/01/00 5,920 7 2/1 3 1 1011 DEASON AVENUE 09/16/99 8/01/00 5,724 7 0/0 3 3 TOTALS $42,156 46 6/5 19 8 Note: Grantee inspection date represents the date shown on the certificate of final inspection. If no date is shown, the final inspection was not documented in the file. Page 43 2001-AT-1006 Table of Contents Exit Properties Inspected – Emergency Rehabilitation Program (This Page Left Blank Intentionally) 2001-AT-1006 Page 44 Table of Contents Exit Appendix D Inspection Deficiencies For Full Rehabilitation Grants Deficiency 1 2 3 802 Atlanta Street Flaking paint and paint chips not removed X Wheelchair ramp not installed at rear X Inadequate paint coverage on wheelchair ramp X Hallway walls not painted X GFCI outlet not installed at sink X Exterior front door not weather-stripped X Defective cabinet drawer guide X Additional electrical outlets needed in living room; bedroom X Water heater not enclosed X Bedroom closet not repaired; splintered paneling; wall not sealed; corner open X to the exterior; ceiling heavily water damaged; hazardous piping for clothes rod Smoke detector not installed in den X Downspout for new gutter needed X Sewer cleanout cap needed X Exterior electrical wiring not placed in protective conduit X Exterior porcelain fixture not replaced X Rotted exterior wood not replaced X Unvented gas heater X 800 Fairlie Street 200 Amp electrical service not installed X New exterior wood not fully primed/painted X Kitchen wall cabinet hardware not installed X Repair of front porch decking duplicated X Rotted siding not replaced; joints not sealed before painting X Rear porch panel siding not exterior grade; not sealed and caulked X X Unvented space heater X Smoke detector needed in hallway X GFCI outlet not installed at washer X Hallway light fixture not installed X GFCI outlets not installed at exterior X Exterior electrical wiring not in protective conduit X Water heater vent pipe not sealed X Burglar bars on front bedroom windows unacceptable X 1 Work Not Completed 2 Unacceptable workmanship 3 Code/HQS violation not included in contract Page 45 2001-AT-1006 Table of Contents Exit Inspection Deficiencies For Full Rehabilitation Grants Deficiency 1 2 3 709 Short 9th Street Storm door closes improperly X Front exterior door not weather tight X Bedroom number1 door closes improperly X Kitchen vinyl flooring torn X Water heater discharge line improperly constructed X Laundry room vinyl floor loose at seams X Unvented space heater X Bathroom needs wall fixture/switch control at vanity/sink X 518 McInnis Springs Rd. Doorbell not installed X Water heater missing flue collar; discharge line improperly constructed X Kitchen vinyl poorly installed X Kitchen cabinet shelving not installed X Kitchen cabinet door post not repaired X Kitchen cabinet plywood end piece not installed X Formica edging missing at stove area X Bath ceiling paint peeling X Bath GFCI outlet not installed X Bath vanity door post not repaired; door not installed to framework X Bath wall not repaired under sink X Bath vanity shelving not painted X Bedroom ceiling globe not replaced X Hall paneling inappropriate width; improperly installed X Bedroom window opens improperly X 422 Mobile Street Some roof shingles not replaced; chimney flashing not properly installed X Rotted window trim not replaced X GFCI kitchen and bath outlets improperly installed X Brick veneer not properly sealed X Sewer vent pipe not extended through roof X Exterior door not weather tight at den/laundry room X X Heat/vent light unit not installed X Bedroom number1 baseboard not replaced/painted X 1 Work Not Completed 2 Unacceptable workmanship 3 Code/HQS violation not included in contract 2001-AT-1006 Page 46 Table of Contents Exit Inspection Deficiencies For Full Rehabilitation Grants Deficiency 1 2 3 422 Mobile Street Vinyl flooring not sealed at tub X Den panel wall not sealed at electrical box X Bath (half) without vent fan or window X Bedroom (1st floor) wall switch omitted X Kitchen windows have no locks X Bedroom number 3 electrical outlet cover plate missing X Rear window brick sill cracked and not sealed X Kitchen cabinet interior side not painted X 908 Flowers Street Rear exterior door not weather tight; will not latch X Laundry room storm door will not latch X Rear landing guardrail spindles irregularly spaced X Kitchen electrical wiring not placed in protective conduit X Kitchen countertop delaminating X Roof eave trim loose near gable peak X Roof trim and drip edge missing at front gable X Door to hallway number 2 installed upside down; hardware omitted X Smoke detector not installed X Front porch painting duplicated X Water heater vent pipe not sealed X Unvented space heaters X Bedroom door poorly trimmed X 423 Brady Road Exterior paint surfaces not prepared properly X Exterior steps require handrails on both sides X Paint peeling in dining room/rear bedroom/utility room X Kitchen cabinets improperly refinished X Unvented space heater X Dining room exterior door not weather tight; will not latch X Exterior windows seriously deteriorated; missing locks; missing sash cords; X sashes rotted; panes loose/broken Utility room floor not sealed around pipes/baseboards X Dwelling not connected to approved sanitary sewer X 1 Work Not Completed 2 Unacceptable workmanship 3 Code/HQS violation not included in contract Page 47 2001-AT-1006 Table of Contents Exit Inspection Deficiencies For Full Rehabilitation Grants Deficiency 1 2 3 433 Brady Road Sewer line not properly capped; trench not backfilled X X Den not painted and damaged ceiling tiles replaced X Desk not stained/painted X GFCI not installed (1 of 2) in kitchen X Kitchen cabinet new drawer not installed X Bedroom number 1 closet not painted X Bedroom number 1 wall switch not flush with the wall X Bathroom number 2 linen closet doors not installed X Kitchen formica top improperly installed X Attic interior access not installed X Rear gable doors not secured X Laundry room electrical outlet plate missing X Bath grab bar/soap dish not caulked/sealed X GFCI outlet not installed in bath X Kitchen vinyl not properly trimmed X Living room exterior door not weather tight; deadbolt inoperative X Foyer exterior door not weather tight X Open septic tank in carport area; toxic odors X Exposed electrical wiring at kitchen light fixture X 418 E. 7th Street Paint chips not disposed of properly X Soffit not replaced (none on the house) X Metal grating not installed X Main switch not installed X GFCI outlets not installed in kitchen and bath X Kitchen vinyl seam not sealed properly X Kitchen cabinets shelving not installed; protruding nails X Bathroom number 1 water cutoff is inoperable X Unvented space heaters X Siding replacement duplicated X Water heater repairs duplicated X Drain line replacement and bathroom tie in duplicated X Hallway smoke detector needed X 1 Work Not Completed 2 Unacceptable workmanship 3 Code/HQS violation not included in contract 2001-AT-1006 Page 48 Table of Contents Exit Inspection Deficiencies For Full Rehabilitation Grants Deficiency 1 2 3 418 E. 7th Street Bedroom number 4 vinyl not replaced X Paint peeling in bedroom number 3 X Kitchen stove burner is hazardous X Burglar bars unacceptable on bedroom windows X Exterior door double-key deadbolt locks unacceptable X Electrical outlets in dining room inappropriate X 905 River Street Turbines (non-existent) not painted X Siding not repaired/painted X Unvented space heaters X Roof edge installation duplicated X Kitchen vinyl poorly repaired seam X Existing unvented space heater(s) not removed X Kitchen vent hood installed too high X Electrical outlets in bedrooms number 2 and 3 inappropriate X 710 Short 9th Street X Flaking paint and paint chips not removed X Kitchen cabinet doors improperly installed X Kitchen formica countertop not sealed Smoke detector not installed X Unvented space heaters X Existing unvented space heater not removed X Front exterior door not weather tight X Dining room floor not level X Interior door at bedroom number 2 needs trimming X Closets not painted X Exterior electrical wiring improper; not in protective conduit X Porcelain fixture improper for exterior use X 524 E. 6th Street Knee brace at front porch overhang not repaired X Windows (6) not enclosed X No certification for insulation X Cabinet door interior not stained X 1 Work Not Completed 2 Unacceptable workmanship 3 Code/HQS violation not included in contract Page 49 2001-AT-1006 Table of Contents Exit Inspection Deficiencies For Full Rehabilitation Grants Deficiency 1 2 3 524 E. 6th Street Bathroom vinyl seam not sealed X Sink top not secured to vanity X Unvented space heaters; wrong size installed X Smoke detector needed in bedroom number 2 X No lock on gable door X Eave vents not closed X 208 E. 5th Street Siding not adequately sealed before painting X Electrical wiring not attached to joist; no cover plate on junction box X Barge rafter not replaced X Broken window panes not replaced X Rear bath and kitchen not properly jacked and leveled X Rear brick pier not properly repaired X Ceiling tiles not replaced X Bath linoleum floor has open seam X New heat, vent light unit not installed X Faucet handle improperly installed X Door does not close properly X Kitchen cabinetry does not meet code X Rear door not refurbished X Back porch not properly jacked and leveled X Unvented space heaters X Concrete blocks not mortared X Boarding (1x6) not installed X Windows not trimmed X No certification for insulation X Heater repairs (flex lines) not specified X Electrical code deficiencies X Areas need leveling X Smoke detectors needed in hallway X Windows in disrepair X Exterior vent stack not extended through roof X Wood floor openings not repaired X Water heater piping in disrepair; not enclosed X 1 Work Not Completed 2 Unacceptable workmanship 3 Code/HQS violation not included in contract 2001-AT-1006 Page 50 Table of Contents Exit Appendix E Inspection Deficiencies For Emergency Rehabilitation Grants Deficiency 1 2 3 4 17 Collins Road Drain pipes to the sewer precariously installed X Old septic tank should have been removed and hole filled X 231 May Avenue Handicap ramp improperly constructed X Unvented gas space heaters with no flex-line and cutoff valve X New supply lines to bath X New gable vent X 106 N. 24th Ave. New exterior wood not painted X 406 Ashford St. Install new faucet etc. in bathroom X Rebuild commode X Install new faucets etc. in kitchen X Replace fascia board and paint X Wall switch improperly installed X X 200 amp electrical service not installed X Exterior siding not repaired and sealed X Water heater needed replacement X 718 McInnis Spring Rd. Reroof house X Replace boots on plumbing stacks X Repair tub handle X X Repair exterior front faucet X Repair exterior back faucet X Repair washing machine pipe, vent etc. X 120 linear feet of sewer line not installed X New sewer line exposed to potential damage X 1 Work not completed 2 Unacceptable workmanship 3 Not an emergency 4 Code/HQS violation not included in contract Page 51 2001-AT-1006 Table of Contents Exit Inspection Deficiencies For Emergency Rehabilitation Grants Deficiency 1 2 3 4 428 MLK Drive 200 amp electrical service, mast, weatherhead, and panel not installed X X Bath switch and GFCI outlet improperly installed X Smoke detector not installed X X Water heater needed replacement X Light fixtures installed X 1011 Deason Ave. New gas heaters not vented X X Install smoke detectors (one not installed) X X Install new light fixtures X Water heater improperly vented X 1 Work not completed 2 Unacceptable workmanship 3 Not an emergency 4 Code/HQS violation not included in contract 2001-AT-1006 Page 52 Table of Contents Exit Appendix F Selected Photographs 428 Martin Luther King Drive Water heater was red tagged by the gas company because emergency repairs were in progress. This is a health and safety violation. 428 Martin Luther King Drive The installation of a new bathroom wall switch and GFCI outlet had substandard workmanship. Page 53 2001-AT-1006 Table of Contents Exit Selected Photographs 231 May Avenue Unvented gas space heater in the bedroom should have been included in emergency repairs. This is a health and safety violation. 518 McInnis Springs Road Kitchen vinyl flooring was poorly installed and trimmed at cabinet base area. 2001-AT-1006 Page 54 Table of Contents Exit Selected Photographs 208 E.5th Street Defective wood trim and sill not replaced before painting. Vent pipe was not extended through the roof. Therefore, sewer gas escapes through the opening. 208 E.5th Street Rotted window sashes and framework. Page 55 2001-AT-1006 Table of Contents Exit Selected Photographs (This Page Left Blank Intentionally) 2001-AT-1006 Page 56 Table of Contents Exit Appendix G Auditee Comments Page 57 2001-AT-1006 Table of Contents Exit Auditee Comments 2001-AT-1006 Page 58 Table of Contents Exit Auditee Comments Page 59 2001-AT-1006 Table of Contents Exit Auditee Comments 2001-AT-1006 Page 60 Table of Contents Exit Auditee Comments Page 61 2001-AT-1006 Table of Contents Exit Auditee Comments 2001-AT-1006 Page 62 Table of Contents Exit Auditee Comments Page 63 2001-AT-1006 Table of Contents Exit Auditee Comments 2001-AT-1006 Page 64 Table of Contents Exit Appendix H Distribution Director, Community Planning and Development Division, 4GD Secretary, S Deputy Secretary, SD (Room 10100) Chief of Staff, S (Room 10000) Assistant Secretary for Administration, S (Room 10110) Acting Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120) Deputy Assistant Secretary, Office of Public Affairs, S, (Room 10132) Deputy Assistant Secretary for Administrative Services, Office of the Executive Secretariat, AX (Room 10139) Deputy Assistant Secretary for Intergovernmental Relations, Acting Deputy Chief of Staff, S (Room 10226) Deputy Chief of Staff for Policy, S (Room 10226) Deputy Chief of Staff for Programs, S (Room 10226) Special Counsel to the Secretary, S (Room 10234) Senior Advisor to the Secretary, S Special Assistant for Inter-Faith Community Outreach, S (Room 10222) Executive Officer for Administrative Operations and Management, S (Room 10220) General Counsel, C (Room 10214) Assistant Secretary for Housing/Federal Housing Commissioner, H (Room 9100) Assistant Secretary for Policy Development and Research, R (Room 8100) Assistant Secretary for Community Planning and Development, D (Room 7100) Assistant Deputy Secretary for Field Policy and Management, SDF (Room 7108) Office of Government National Mortgage Association, T (Room 6100) Assistant Secretary for Fair Housing and Equal Opportunity, E (Room 5100) Director, Office of Departmental Equal Employment Opportunity, U Chief Procurement Officer, N (Room 5184) Assistant Secretary for Public and Indian Housing, P (Room 4100) Director, Office of Departmental Operations and Coordination, I (Room 2124) Office of the Chief Financial Officer, F (Room 2202) Chief Information Officer, Q (Room 3152) Acting Director, HUD Enforcement Center, V, 1250 Maryland Avenue, SW, Suite 200 Acting Director, Real Estate Assessment Center, X, 1280 Maryland Avenue, SW, Suite 800 Director, Office of Multifamily Assistance Restructuring, Y, 1280 Maryland Avenue, SW, Suite 4000 Inspector General, G (Room 8256) Page 65 2001-AT-1006 Table of Contents Exit Distribution Secretary's Representative, 4AS State Coordinator, Mississippi State Office, 4GS Audit Liaison Officer, 3AFI Audit Liaison Officer, Office of Public and Indian Housing, PF (Room P8202) Departmental Audit Liaison Officer, FM (Room 2206) Acquisitions Librarian, Library, AS (Room 8141) Counsel to the IG, GC (Room 8260) HUD OIG Webmanager-Electronic Format Via Notes Mail (Cliff Jones@hud.gov) Public Affairs Officer, G (Room 8256) Stanley Czerwinski, Associate Director, Resources, Community, and Economic Development Division, U.S. GAO, 441 G Street N.W., Room 2T23, Washington DC 20548 The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, United States Senate, Washington DC 20510-6250 The Honorable Joseph Lieberman, Ranking Member, Committee on Governmental Affairs, United States Senate, Washington DC 20510-6250 The Honorable Dan Burton, Chairman, Committee on Government Reform, United States House of Representatives, Washington DC 20515-6143 The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform, United States House of Representatives, Washington, DC 20515-4305 Ms. Cindy Fogleman, Subcommittee on Oversight and Investigations, Room 212, O'Neil House Office Building, Washington, DC 20515-6143 Steve Redburn, Chief, Housing Branch, Office of Management and Budget, 725 17th Street, NW, Room 9226, New Executive Office Bldg., Washington, DC 20503 Sharon Pinkerton, Deputy Staff Director, Counsel, Subcommittee on Criminal Justice, Drug Policy and Human Resources, B373 Rayburn House Office Bldg., Washington, DC 20515 Armando Falcon, Director, Office of Federal Housing Enterprise Oversight, O, 1700 G Street, NW, Room 4011, Washington, DC 20552 2001-AT-1006 Page 66 Table of Contents Exit
City of Hattiesburg, Mississippi, Community Planning and Development Programs, Hattiesburg, Mississippi
Published by the Department of Housing and Urban Development, Office of Inspector General on 2001-08-27.
Below is a raw (and likely hideous) rendition of the original report. (PDF)