oversight

AIDS Foundation Houston, Inc., Supportive Housing Grant TX21B97-1304, Houston, Texas

Published by the Department of Housing and Urban Development, Office of Inspector General on 2001-03-09.

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

                                                        U.S. Department of Housing and Urban Development
                                                        Southwest District Office of Inspector General
                                                        819 Taylor Street, Suite 13A09
                                                        Fritz G. Lanham Federal Building
                                                        Fort Worth, Texas 76102
                                                        (817)978-9309 FAX (817)978-9316
                                                        http://www.hud.gov/oig/oigindex.html



March 9, 2001                                            2001-FW-1803


MEMORANDUM FOR:                 Katie Worsham
                                Director
                                Office of Community Planning and Development, 6AD

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

SUBJECT:        AIDS Foundation Houston, Inc.
                Supportive Housing Program Grant TX21B97-1304
                Houston, Texas


As part of a nationwide review of HUD’s Continuum of Care Program, we audited AIDS Foundation
Houston, Inc.’s (Foundation) 1997 supportive housing program grant #TX21B97-1304. Our audit
objectives were to determine whether the Foundation: (1) maintained adequate management controls;
(2) implemented its grant in accordance with its application; (3) expended funds for eligible activities
under federal regulations and applicable cost principles; (4) maintained evidence of measurable results;
(5) leveraged HUD funds adequately; (6) expended funds timely; (7) expended funds for leasing in
compliance with federal regulations; (8) met the federal requirements for supportive service costs; and
(9) met the federal requirements for operating costs.

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

Our audit concluded that, while the Foundation and its Partners generally implemented grant activities
consistent with its grant application, it expended funds for ineligible and unsupported activities and did
not comply with federal cost requirements. The Foundation maintained evidence of measurable results,
leveraged HUD funds adequately, expended funds timely, and met federal requirements related to
leasing. Additionally, the Foundation provided sufficient technical assistance to its Partners and
reviewed their single audit reports and monthly expense reports.
                                                                                                                           2


However, of the $397,395 grant funds audited, the Foundation expended $69,369 on ineligible or
unsupported activities. The Foundation reimbursed Building Lives Offering Community Knowledge (the
BLOCK), a Partner, $14,888 in ineligible payroll, office supplies, telephone costs, and mileage costs.
The ineligible costs included $13,090 that the BLOCK charged to two grants.1 Additionally, the
Foundation reimbursed the BLOCK $27,203 for unsupported payroll, office supplies, telephone, and
mileage costs.

The Foundation drew down $27,278 for ineligible costs, including $23,089 for administrative costs,
$2,706 for an ineligible participant, and $1,483 for a computer and non-participant transportation costs.
The Foundation did not maintain sufficient documentation to support the homelessness eligibility of all 17
participants that we tested.2

Of the $69,369 in ineligible and unsupported costs, the Foundation directly incurred $27,278 while the
BLOCK incurred $42,091. Due to HUD’s agreement with the Foundation, we recommend that HUD
require the Foundation to repay or support those amounts.

We also recommend that HUD require the Foundation to revise its monitoring procedures to prevent
the future allocation of ineligible costs to federal grants. Also, HUD should seek administrative
sanctions against the BLOCK and its Executive Director for submitting two sets of time sheets and for
double-billing office supplies and telephone costs to two grants.

HUD should additionally require the Foundation to provide evidence that its grant participants met
eligibility requirements and reimburse HUD for costs of participants whose eligibility cannot be
supported. The Foundation should obtain and verify the necessary information to determine participant
eligibility for current and future HUD grants.

We discussed the audit results with the Foundation’s Deputy Executive Director on November 17,
2000. The Foundation generally agreed with the findings and acknowledged problems with the
BLOCK. However, it did not agree that it served ineligible individuals. The Foundation provided
additional documentation subsequent to our meeting. We modified the report as needed.

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




1
    The two grants were the 1997 Supportive Housing Program Grant #TX21B97-1304 received through AIDS Foundation and
    Housing Opportunities For People With AIDS (HOPWA) Grant #TX21H99-F003 received through the City of Houston.
2
    Upon inquiry, the Foundation obtained the necessary documentation to support the homelessness status of 16 of the 17
    participants. The Foundation could not support the eligibility of the other participant.
                                                                                                       3


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

Attachment
                                                                                                          4


Background.

Title IV of the Stewart B. McKinney Homeless Assistance Act authorized HUD’s Continuum of Care
supportive housing programs. HUD designed this grant to promote the development of supportive
housing and services. The grant encouraged the use of innovative approaches to assist homeless
persons and to provide supportive housing to enable them to live as independently as possible. Eligible
activities include: (1) transitional housing; (2) permanent housing for homeless persons with disabilities;
(3) innovative housing that meets the immediate and long-term needs of homeless persons; and (4)
supportive services for homeless persons not provided in conjunction with supportive housing.

The Foundation’s office is located at 3202 Weslayan Annex near downtown Houston, Texas. The
Foundation is a nonprofit community service corporation. It was created during 1982 in response to
community health problems resulting from Acquired Immunodeficiency Syndrome (AIDS). The
Foundation arranged to educate high-risk individuals, citizens, and health care professionals about
AIDS; to promote health and prevention of the disease; and to provide supportive services to people
affected by AIDS and their families.

Building Lives Offering Community Knowledge (the BLOCK) is a Texas nonprofit corporation. The
BLOCK’s office is located at 12707 Cullen, Houston, Texas. The BLOCK provided outreach,
HIV3/AIDS testing, and pre-test/post-test counseling to homeless individuals. Additionally, it offered
managed referrals to homeless individuals being released from the Houston and Harris County jails and
to those on the street, in emergency shelters, or in encampments not visited by SEARCH, another
homeless provider. The BLOCK planned to employ two additional full-time equivalent outreach
workers to fulfill its grant activities.

Grant Funds Awarded.

                  Type of Services                                           Grant Funds Awarded4
Leasing                                                                                             $ 375,541
Supportive services                                                                                  2,056,730
Operations                                                                                             425,485
Administrative                                                                                         142,889
Total                                                                                               $3,000,645

Under the $3,000,645 grant, the Foundation established a program called Project LifeRoad for HIV
positive homeless individuals. HUD executed the 2-year grant agreement on July 29, 1998. The grant
agreement incorporated the Foundation’s application. According to its application, the Foundation
agreed to provide housing and housing-based supportive services. HUD also awarded the Foundation
a 1999 Supportive Housing Program grant of $1,596,325 to continue Project LifeRoad.5

3
    HIV stands for Human Immunodeficiency Virus.
4
    Funds were awarded for the entire grant period of August 1, 1998, through July 31, 2000.
5
    We did not audit this grant.
                                                                                                         5



Grant Activities.

Activity                                                 Agency
Intake, monitoring, case management coordination,        The Foundation
benefits/resources counseling, project management,
and project administration
Outreach, HIV/AIDS testing, pre-test/post-test           The Foundation and the BLOCK
counseling, and managed referrals
Stabilization housing and needs assessment/service       CASA de Ninos, Inc.
plan development
Supportive housing for AIDS infected women and           A Friendly Haven
their children
Transitional supportive housing                          Steven’s House and Milam House
Supportive services including counseling, dental care,   CASA de Ninos, Inc., Vita-Living, Inc., Bering
health care, an adult day program, job training,         Community Service Foundation, and People With
employment, rental assistance, and household             AIDS Coalition
furnishings

Grant goals.

The Foundation set the following supportive housing goals for Project LifeRoad:

    •   62 households per year will enroll in a residential and supportive services program.
    •   50 households per year will remain in the program for at least 12 months.
    •   28 households per year will graduate from the program and exit to independent or subsidized
        housing.
    •   On-going case management and supportive services will be available to 100 percent of the
        graduates and will be accessed by an estimated 60 percent.

During the 2-year grant term, the Foundation planned to provide assistance for 124 individuals (60
individuals with families and 64 individuals without families). The Foundation provided assistance for
145 individuals during the grant period. However, it assisted only 17 individuals with families. The
remaining 128 were individuals without families.

Audit Objectives, Scope, and Methodology.

Our audit objectives were to determine whether the Foundation: (1) maintained adequate management
controls; (2) implemented its grant #TX21B97-1304 in accordance with its application; (3) expended
funds for eligible activities under federal regulations and applicable cost principles; (4) maintained
evidence of measurable results; (5) leveraged HUD funds adequately; (6) expended funds timely; (7)
                                                                                                          6


expended funds for leasing in compliance with federal regulations; (8) met the federal requirements for
supportive service costs; and (9) met the federal requirements for operating costs.

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

We sampled Line of Credit Control System (LOCCS) accounting drawdowns and program participant
files for the audit. Using a table of random numbers, we selected 15 LOCCS drawdown requests from
a total population of 98, or 15.31%, during the period August 26, 1998,6 through July 17, 2000. The
sample consisted of drawdowns totaling $397,395 or 16.74 percent of $2,373,709 drawn down from
grant funds. Due to instances of noncompliance by the BLOCK, we expanded the audit to include all
expenditures7 reimbursed to the BLOCK from grant funds.

For participant files, we randomly selected 10 out of 77 participants from the first year of the grant using
the Foundation’s list of participants. We judgmentally selected an additional seven participant files
because none of the ten files had documents supporting homelessness as required by HUD. We
selected the seven participants from a list of eight remaining participants who obtained permanent
housing and left the program. Overall, we tested 17 out of 145 (11.72 percent) participants.

We performed audit work at the Foundation and nine Partner locations 8 for the period August 1, 1998,
through July 31, 2000. We performed our audit between July 19, 2000, and November 17, 2000, with
additional audit work on December 15, 2000. We conducted our audit in accordance with generally
accepted government auditing standards.

The Foundation Reimbursed the BLOCK $42,091 for Ineligible and Unsupported Supportive
Service Costs.

Due to inaccurate reports submitted by the BLOCK, the Foundation paid the BLOCK $14,888 in
ineligible and $27,203 in unsupported costs incurred between August 1, 1998, and July 31, 2000.




6
    This was the first grant drawdown.
7
    Period of August 1, 1998, through July 31, 2000.
8
    The Partners were A Friendly Haven, The Arrow Project, The BLOCK, CASA de Nino, Milam House, Omni,
    People With AIDS Coalition, Steven’s House, and Vita-Living.
                                                                                                          7




Summary of Ineligible and Unsupported Costs.

                                                                        Ineligible       Unsupported
     Description of Expenditure                                          Amount            Amount
     Costs billed to both Houston’s HOPWA grant and Project                 $13,090
     LifeRoad.
     Executive Director’s salary paid for hours not worked                       388
     Program Director’s salary                                                                  $18,679
     Mileage for the Executive Director and his son; office supplies;          1,410              8,524
     and telephone costs
     Total                                                                  $14,888             $27,203

The BLOCK’s Executive Director believes he can charge any costs incurred to any grant. For
example, the Executive Director double-charged his salary to two grants. Additionally, he did not
require his staff to report job activities on their time cards and did not implement policies and
procedures for reporting expenditures from each grant separately.

Furthermore, the BLOCK did not have an accounting system in place to separate costs of outreach
workers approved by the grant agreement from costs of other staff. As a result, HUD spent funds on
activities that the BLOCK cannot identify as benefiting homeless individuals of Project LifeRoad.

The Foundation paid the BLOCK $13,090 for costs paid from HOPWA grant funds.

The BLOCK billed $13,090 to both the HOPWA9 grant and Project LifeRoad for its Executive
Director’s salary, office supplies, and telephone costs incurred between June 29, 1999, and July 31,
2000. The ineligible costs included payments of $10,796 for the Executive Director’s Salary; $1,476
for office supplies; and $818 for telephone costs. The grant also paid for the Executive Director’s
mileage.

Circular A-122 prohibited the BLOCK from claiming a cost of Project LifeRoad that it “…included as
a cost…of any other federally-financed program.” Additionally, Circular A-122 required the
BLOCK’s time sheets to “…account for the total activity for which employees are compensated and
which is required in fulfillment of their obligations to the organization.” Those time sheets must “…reflect
an after-the-fact [emphasis added] determination of the actual activity of each employee.”




9
    HOPWA Grant #TX21H99-F003 received through the City of Houston.
                                                                                                       8


The Foundation reimbursed the BLOCK $10,796 from grant funds for the Executive
Director’s salary paid from HOPWA funds.

From July 24, 1999, through July 31, 2000, the BLOCK’s Executive Director inappropriately reported
working for both the HOPWA grant and Project LifeRoad at the same time by using two sets of time
sheets. According to his time sheets, the Executive Director worked for the HOPWA grant from 9:00
a.m. to 5:00 p.m. on the same days that he worked for Project LifeRoad from 8:30 a.m. to 5:00 p.m.
HOPWA reimbursed the BLOCK $10,796 for the Executive Director’s salary. During the same time
period, Project LifeRoad paid the Executive Director’s salary of $20,927. Therefore, both grants
double paid at least $10,796 of the Executive Director’s salary. Furthermore, the Executive Director
violated the grant agreement by not dedicating 100 percent of his time to grant participants.

The Executive Director believed he benefited participants of both grants at the same time because he
constantly dealt with both programs on a daily basis. Therefore, he was continually going from one
program to another. We do not agree that the Executive Director benefited participants of both
programs at the same time. Even though both programs serve HIV positive individuals, they do not
have the same purposes. Project LifeRoad provides housing and supportive services to homeless
individuals while the HOPWA grant gives rental assistance to individuals with AIDS that may or may
not be homeless. Therefore, the programs do not serve the same population.

The Foundation reimbursed the BLOCK $1,476 for office supplies and $818 for telephone
costs paid from HOPWA funds.

Similarly to the Executive Director’s salary, the BLOCK billed both the HOPWA grant and Project
LifeRoad for $2,294 in office supplies and telephone costs incurred between June 29, 1999, and
July 31, 2000. As a result, the Foundation used grant funds to reimburse the BLOCK for expenditures
paid under another grant.

The Foundation paid the BLOCK $388 for the Executive Director for time not worked.

For the 2-week payroll period ended July 16, 1999, the Executive Director used $775 in grant funds to
pay himself for 80 hours even though the time reported on his time sheet totaled 40 hours, an ineligible
cost of $388. The Executive Director’s time sheet contained contradictory information. Even though
the Executive Director reported working from 9:00 a.m. through 1:00 p.m. (4 hours) for 10 days, he
reported 8 hours each day. As a result, the Executive Director billed the grant for time that he did not
work.

Circular A-122 required that “Charges to awards for salaries and wages…” must “…be based on
documented payrolls.”
                                                                                                                9


The Foundation paid the BLOCK $18,679 for the Program Director’s salary for time not
documented.

Between August 1, 1998, and July 31, 2000, the Foundation used outreach grant funds to pay the
BLOCK $18,679 for its Program Director’s salary, even though the Program Director could not
support time spent on outreach activities. In addition to outreach activities, the Program Director
performed all Project LifeRoad’s accounting work for the BLOCK. However, the BLOCK charged
100 percent of her salary to Project LifeRoad for outreach services.

Circular A-122 required that each time sheet must “…account for the total activity for which employees
are compensated and which is required in fulfillment of their obligations to the organization.” Those time
sheets must reflect “…the distribution of activity of each employee.” Additionally, each time sheet
“…must reflect an after-the-fact [emphasis added] determination of the actual activity of each
employee.”

The grant budget authorized the BLOCK to pay for two outreach workers under the supportive service
line item. It did not authorize the BLOCK to pay for its administrative costs of providing accounting
services. The Foundation instructed the BLOCK on Circular A-122’s requirements for reporting time
spent on different activities. However, the BLOCK did not comply with those requirements.

The Program Director did not keep activity reports that separated actual time spent on outreach
activities from time spent on accounting activities. Instead, she only reported total hours on a daily
basis. As a result, the BLOCK’s records did not support the Program Director’s salary paid from
Project LifeRoad’s outreach supportive service funds.

The incomplete time reports did not show how many hours the Program Director spent on outreach
activities. Further, the Program Director could not provide any documents (calendars, etc.) to support
the hours spent on those activities. For periods that the Program Director claimed outreach mileage, we
allowed payments from grant funds. However, her personnel file did not indicate that the BLOCK hired
her to do outreach work. Furthermore, her title does not appear appropriate for the position of
outreach worker. Therefore, the BLOCK could not support $18,679 of its Program Director’s salary
paid from grant funds.

The Foundation paid the BLOCK $1,410 ineligible and $8,524 unsupported supportive
service costs.

The Foundation paid the BLOCK $1,410 for ineligible mileage claimed by its Executive Director and
his son.10 Additionally, it paid $8,524 in unsupported costs consisting of $6,668 in mileage for the
Executive Director’s son, $49 in office supplies, and $1,807 in telephone costs.


10
     The Executive Director’s son was an employee of a temporary agency working for the City of Houston’s HIV
     Prevention Program.
                                                                                                            10


Circular A-122 required direct costs to be “…incurred specifically for the award.” The grant’s budget
authorized the BLOCK to pay for office supplies and telephone costs from supportive service funds.
According to the technical submission, “…supportive service funds may be used to pay for the actual
costs of supportive services and other costs directly associated with providing such services.”

Ineligible mileage.

Using grant funds, the Foundation paid the BLOCK $1,410 in ineligible mileage for its Executive
Director and his son. During July and August 1999, the Executive Director and his son claimed $848 in
ineligible mileage for a rental car. HOPWA grant funds11 paid for a portion of the car rental. Because
HOPWA funds paid for the car rental, it appears that the Executive Director used the car for the
HOPWA childcare program, not Project LifeRoad. The BLOCK’s Executive Director could not
explain why he claimed mileage for a rental car paid by another grant.

For January 2000 mileage, the Executive Director and his son claimed $562 in ineligible costs using
mileage reports that exactly duplicated the December 1999 mileage reports, except for the names and
the dates. Those reports even duplicated the odometer readings. The BLOCK’s Executive Director
could not explain the duplications.

Unsupported mileage.

Using grant funds, the Foundation paid the BLOCK $6,668 for the Executive Director’s son’s mileage
during a period that he worked full-time for the City of Houston’s HIV Prevention Program.

The Executive Director stated that Houston’s HIV Prevention Program and Project LifeRoad served
the same type of participants. Therefore, he could charge his son’s salary to one program (Houston’s
HIV Prevention Program) and his mileage to the other program (Project LifeRoad). According to the
Executive Director, his son’s outreach work benefited participants under both programs at the same
time.

We do not agree that the Executive Director’s son benefited participants of both programs at the same
time. Even though both programs had similar goals, they did not serve the same population. Houston’s
HIV Prevention Program targeted heterosexual individuals, and substance abusers with an emphasis on
sexually transmitted diseases. Participants did not need to be homeless as required under Project
LifeRoad. In fact, Houston’s outreach workers provided much of their outreach and HIV education
services to residents of apartments. In contrast, Project LifeRoad targeted homeless HIV positive
individuals, including homosexuals. As a result, the BLOCK did not have evidence that $6,668 in
mileage benefited Project LifeRoad.




11
     The HOPWA grant through the Foundation reimbursed the BLOCK $200 in car rental charged to A Friendly
     Haven’s (a Partner) childcare program.
                                                                                                       11


Unsupported office supplies and telephone costs.

The Foundation paid the BLOCK $49 for office supplies and $1,807 for telephone costs not directly
associated with outreach workers.

HUD generally allows grantees to pay for office supplies and telephone costs from operating funds if
they support the function and operation of the project. However, the BLOCK budgeted office supplies
and telephone services under the supportive service line item. HUD approved those costs as part of the
supportive service line item on the condition that it represented the outreach workers’ actual use of
office supplies and telephones in fulfilling their outreach duties for the grant.

The grant paid for office supplies used for client files, client documentation, and Project LifeRoad
correspondence. The grant agreement only allowed grant funds to pay for telephone costs of
coordinating outreach services, contacting possible referral sources, and communicating with Project
LifeRoad Partners.

The BLOCK could not support the use of $1,856 in office supplies and telephone costs. The Executive
Director said that “everybody in the building” is an outreach worker and consequently the entire staff
directly benefited grant participants. The grant agreement allowed the Foundation to pay for two
outreach workers not the entire staff.

The Foundation not aware of problems.

The Foundation did not note problems with the BLOCK’s allocation of costs during its desk monitoring
of Project LifeRoad’s monthly expense reports. Additionally, its monitoring procedures did not include
comparing costs to other grants. Therefore, it could not detect double-billed costs during its regular
monitoring.

The Foundation sent detailed instructions to the BLOCK regarding Circular A-122’s requirements for
reporting staff hours spent on different activities. However, the BLOCK did not follow the
Foundation’s instructions and the Foundation reimbursed it based upon incorrect and incomplete time
sheets. HUD’s agreement is with the Foundation and therefore HUD should take action against the
Foundation.

The Foundation should reimburse HUD for the BLOCK’s ineligible expenditures of $14,888. It should
either submit documentation to support payments of $27,203 to the BLOCK from grant funds or
reimburse HUD for those costs. The Foundation should revise its monitoring procedures to prevent the
future allocation of ineligible expenditures to federal grants. Additionally, we recommend that HUD
take administrative sanctions against the BLOCK and its Executive Director for double-billing salary,
office supplies, and telephone costs to two grants.
                                                                                                             12


The Foundation reimbursed itself $23,089 for excess administrative costs.

The Foundation mistakenly drew down $23,089 for excess administrative costs. The Foundation’s
Director of Finance based his drawdowns on budgeted costs instead of actual costs.

The Technical Submission of the Grant Agreement awarded AIDS Foundation “…up to 5% of …” the
“…project award for administrative costs.” The grant budget based $142,889 administrative costs paid
from grant funds on 5% of $2,857,756 budgeted costs.

Because the Foundation spent less on leasing and supportive service costs than budgeted, total actual
costs were $2,395,903. Therefore, the Foundation could draw down $119,795 in grant funds for
administrative costs. Because the Foundation’s Director of Finance did not anticipate that total costs
would be less than budgeted, the Foundation drew down $142,884, or $23,089 more than authorized.

As a result, the Foundation used HUD funds to pay for administrative costs not covered by the grant
agreement. The Foundation acknowledged its mistake. The Foundation should reimburse HUD
$23,089 ineligible administrative costs paid from grant funds.

The Foundation did not document homelessness as required by HUD and paid $2,706 for an
ineligible participant.

The Foundation did not document homelessness for all 17 sampled program participants. We attribute
the problems to staff responsible for participant files not knowing HUD requirements related to
documenting homelessness. The Foundation paid $2,706 for one sample participant and could not
support his homelessness. Based upon the sample results, it appears that the Foundation maintains
inadequate documentation of the eligibility of its participants.

HUD’s definition of homelessness included “…someone who is living on the street or in an emergency
shelter, or who would be living on the street or in an emergency shelter without…” supportive housing
program assistance. HUD required the Foundation to document homelessness to ensure that
participants were “…part of the specific population targeted in the approved application.”

The Foundation received HUD training on program requirements including participant eligibility and
documentation of eligibility. HUD staff discussed its participant eligibility requirements at the start-up
conference attended by a representative from the Foundation. Additionally, HUD gave its grantees
brochures explaining the documentation requirements according to the type of homeless participants
served. Without such documentation, HUD has no tangible evidence that the Foundation served the
intended population.

In response to the audit finding, Project LifeRoad’s Program Manager provided documentation to
support that 16 out of 17 sampled participants met HUD’s definition of homelessness as indicated by
case manager notes in the participant files. The Foundation obtained most of the information from
former case managers and referring agencies.
                                                                                                         13



The Foundation could not provide documentation to support the eligibility of one participant. The
individual stated that he moved to a hotel, quit his job, and entered Project LifeRoad 4 days after
quitting his job. The Foundation could not confirm that the individual was homeless as defined by HUD.
The Foundation paid $2,706 in leasing costs on this individual.

The Foundation should reimburse HUD $2,706 paid for the ineligible participant’s residence. Further, it
should also ensure that it has documentation that the remaining 128 grant participants met HUD’s
definition of homelessness and should reimburse HUD for costs of participants whose eligibility it cannot
support. The Foundation should obtain and verify the necessary information to determine participant
eligibility for current and future HUD grants.

The Foundation reimbursed itself for ineligible operating and supportive service costs.

The Foundation reimbursed itself $1,483 in ineligible operating costs of a computer used by the
BLOCK and supportive service costs of transportation for individuals not in Project LifeRoad.

According to the Foundation’s application plans approved by HUD, the BLOCK was to use its
computer for tracking grant participants. The Foundation budgeted the computer purchase as an
operating cost of providing supportive services to grant participants. Circular A-122 required direct
costs to be “…incurred specifically for the award.”

The grant’s budget authorized the Foundation to pay for participant transportation costs out of
supportive service funds. According to the technical submission, “…supportive service funds may be
used to pay for the actual costs of supportive services and other costs directly associated with providing
such services.”

The Foundation reimbursed itself $1,430 for a computer used by the BLOCK. Instead of tracking
grant participants, as HUD intended, the BLOCK used the computer to report financial transactions
related to collecting reimbursements from grant funds. The BLOCK did not have policies and
procedures for tracking individuals referred to Project LifeRoad and for tracking HIV tests performed
with grant funds. Additionally, the Foundation did not require the BLOCK to track grant participants.
As a result, HUD cannot determine whether the BLOCK provided outreach services as originally
intended by the grant application. Specifically, HUD cannot determine how many individuals the
BLOCK referred to the grant program and how many individuals tested for HIV using grant funds.

The Foundation reimbursed itself $53 from grant funds for transportation costs of non- participants of
Project LifeRoad.

The Foundation should reimburse HUD $1,483 in ineligible computer and transportation costs paid
from grant funds.
                                                                                                           14




Recommendations:

We recommend that HUD:

1A. Require the Foundation to reimburse HUD for $ 42,166 in ineligible costs paid from grant funds.

1B. Require the Foundation to reimburse HUD for $27,203 in unsupported costs paid from grant funds
    or provide supporting documentation.

1C. Require the Foundation to revise its monitoring policies and procedures for financial site visits to
    prevent the future allocation of ineligible and unsupported costs to federal grants.

1D. Take administrative sanctions against the BLOCK and its Executive Director for double-billing
    salary, office supplies, and telephone costs to two grants.

1E. Require the Foundation to provide evidence that its grant participants were homeless and
    reimburse HUD for costs of participants whose eligibility cannot be supported. The Foundation
    should obtain and verify the necessary information to determine participant eligibility for current and
    future HUD grants.
                                                                                        15


DISTRIBUTION

Secretary's Representative, 6AS
Comptroller, 6AF
Director, Accounting, 6AAF
Director, Office of CPD, 6AD
Deputy Secretary, SD (Room 10100)
Chief of Staff, S (Room 10000)
Office of General Counsel, C (Room 10214)
Assistant Secretary for Housing/FHA, H (Room 9100)
Assistant Secretary for CPD, D (Room 7100)
Assistant Secretary for Public & Indian Housing, P (Room 4100)
Office of Policy Development and Research (Room 8100)
Assistant Secretary for FHEO, E (Room 5100)
A/S for Congressional and Intergovernmental Relations, J (Room 10120)
Assistant Secretary for Administration, A (Room 10110)
Assistant Secretary for Public Affairs, W (Room 10222)
FTW ALO, AF (2)
CPD ALO, DOT (Room 7220) (2)
Dept. ALO, FM (Room 2206) (2)
Acquisitions Librarian, Library, AS (Room 8141)
Director, Hsg. & Comm. Devel. Issues, US GAO, 441 G St. NW, Room 2474
      Washington, DC 20548 Attn: Stan 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
AIDS Foundation Houston
The BLOCK
The City of Houston