AUDIT REPORT SUPPORTIVE HOUSING PROGRAM GRANTS ADMINISTERED BY THE CITY OF SEATTLE AS PART OF THE SEATTLE-KING COUNTY CONTINUUM OF CARE STRATEGY 2001-SE-251-1001 AUGUST 15, 2001 OFFICE OF AUDIT, NORTHWEST/ALASKA SEATTLE, WASHINGTON Issue Date August 15, 2001 Audit Case Number 2001-SE-251-1001 MEMORANDUM FOR: Jack Peters, Director, Office of Community Planning and Development, 0AD (ORIGINAL SIGNED) FROM: Frank E. Baca, District Inspector General for Audit, 0AGA SUBJECT: Audit of Supportive Housing Program grants administered by the City of Seattle as part of the Seattle-King County Continuum of Care Strategy This is the final report of our audit of two Supportive Housing Program grants awarded to the City of Seattle as part of the nationwide review of HUD’s Continuum of Care Program. The audit resulted in four findings. Within 60 days, please give us for each recommendation in this report, a status on: (1) the corrective action taken; (2) the proposed corrective action and the date to be completed; or (3) why action(s) is considered unnecessary. Also, please furnish us with copies of any correspondence or directives issued because of the audit. Should you or your staff have any questions, please call me at (206) 220-5360. Management Memorandum (This page intentionally left blank) 2001-SE-251-1001 ii Executive Summary As part of a nationwide review of HUD’s Continuum of Care Program, we audited two Supportive Housing Program grants awarded to the City of Seattle as part of the Seattle-King County Continuum of Care Strategy. We performed the audit to determine if the City of Seattle has adequate management controls and is operating its Continuum of Care programs in a manner that provides reasonable assurance that: • funds are only expended for eligible program activities and participants; • costs are eligible and reasonable; • reported results are accurate and adequately supported; and • program funds are expended in a timely fashion. Generally, we found that the Seattle Continuum of Care programs are properly administered, program funds are expended in a timely fashion, and administrative costs did not exceed HUD’s limits. Also, the City of Seattle and its providers followed up on the progress of participants after they left the Supportive Housing Programs to measure the program’s success in improving the immediate and long-term employability of participants. We also found that the City of Seattle (City) had management control deficiencies and did not always comply with HUD requirements. Specifically, the City: Did not adequately monitor subgrantees. Consequently, project sponsors and providers charged the grants $97,038 in ineligible costs that were not related to administering and providing supportive services, and $70,367 in other unsupported costs. Assisted ineligible participants. City providers were not aware of all HUD requirements for participant eligibility and did not always properly document the homeless status of program applicants. As a result, the City assisted 33 (out of 129 reviewed) individuals that should not have been assisted with program funds. Charged questionable administrative funds. The City used $72,523 in administrative funds to pay for questionable indirect costs that were not directly related to Supportive Housing Program activities. This occurred because the City did not always adhere to HUD regulations regarding administrative costs. Did not provide adequate evidence of measurable results. The City did not provide information on all its performance measures, and did not have support for some of the data reported to HUD. This occurred because the City did not adequately review progress reports prior to submission. We are recommending that HUD require the City to reimburse the appropriate Supportive Housing Program grants for the ineligible amounts, and provide supporting documentation or reimburse the appropriate grants for the unsupported amounts. Also, the City needs to iii 2001-SE-251-1001 Executive Summary implement management controls to provide reasonable assurance that costs and participants are eligible and properly accounted for, and reported results are supported. We provided the City with a draft report on June 14, 2001 and discussed the findings with City officials at an exit conference on June 21, 2001. The City responded with written comments to the draft report on July 20, 2001, generally disagreeing with the findings. The Findings section of this report summarizes and evaluates the City's comments. A copy of the City's full response, without attachments, is included in Appendix B. The attachments included with the written comments are available upon request. 2001-SE-251-1001 iv Table of Contents Management Memorandum i Executive Summary iii Introduction 1 Findings 1. Inadequate Monitoring of Subgrantees Results in Questionable Costs 7 2. Supportive Housing Program Providers Did Not Have Evidence to Support Homeless Eligibility 13 3. The City Charged Questionable Administrative Costs to Supportive Housing Program Grants 17 4. The City Needs to Improve Its Reviewing and Reporting of Measurable Results 21 Appendices A. Schedule of Questioned Costs 25 B. Auditee Comments 27 C. Distribution 33 v 2001-SE-251-1001 Table of Contents Abbreviations APRs Annual Progress Reports City City of Seattle CFR Code of Federal Regulations FPA Freemont Public Association HUD Housing and Urban Development NOFA Notice of Funding Availability OIG Office of Inspector General Providers Non-profit agencies SCC Seattle Conservation Corps SHP Supportive Housing Program WDC Workforce Development Council YWCA Young Women’s Christian Association 2001-SE-251-1001 vi Introduction Each fiscal year, HUD announces through a Notice of Background Funding Availability (NOFA) competition designed to help communities develop a Continuum of Care system to assist homeless persons. Such a system should address the specific needs of each homeless subpopulation: the jobless, veterans, homeless persons with serious mental illnesses, persons with substance abuse issues, persons with HIV/AIDS, persons with multiple diagnoses, victims of domestic violence, runaway youth, and other homeless persons. Basic components of a Continuum of Care system. The primary purpose of the NOFA is to fund projects that will fill gaps in locally developed Continuum of Care systems to help homeless persons move to self-sufficiency and permanent housing. The NOFA further described the basic components of a Continuum of Care system as: • Outreach and assessment to identify an individual’s or family’s needs, and make connections to facilities and services. • Immediate (emergency) shelter, and safe, decent alternatives to the streets. • Transitional housing with appropriate supportive services to help people achieve independent living. • Permanent housing or permanent supportive housing arrangements. HUD homeless programs. Three of HUD’s six Special Needs Assistance Programs (SNAPs) or Homeless programs are 100 percent competitively funded through the Continuum of Care Program as authorized by the Stewart B. McKinney Homeless Assistance Act. The HUD Office of Community Planning and Development administers these programs, which include the following: • Supportive Housing Program (SHP), • Shelter Plus Care (S+C), and • Section 8 Moderate Rehabilitation for Single Room Occupancy Dwellings (SRO). 1 2001-SE-251-1001 Introduction Supportive Housing Program. The Supportive Housing Program is designed to promote the development of supportive services. The supportive services are designed to address the special needs of the homeless persons served by the project. Services may be provided directly by the project sponsor through an agreement with the grantee, and/or through arrangements with public or private service providers. The Seattle-King County Continuum of Care Strategy. Seattle-King County implemented a Continuum of Care Strategy that provides for a “regional” system of emergency shelters, transitional and permanent housing, and a range of supportive services. The region has enjoyed a strong homeless provider coalition since 1979. The coalition is a group of committees comprised of non-profit organizations, homeless individuals, mainstream services, and various public and private entities that helps to shape and participates in Continuum of Care planning. The City of Seattle’s segment of the Continuum of Care program addresses trends and needs within the City, whereas the King County segment focuses on the suburban and rural areas outside Seattle. Supportive Housing Program grants awarded to the City of Seattle. For fiscal years 1996 through 1998, HUD awarded the City of Seattle $26,016,567 in Supportive Housing Program grants under the Seattle-King County Continuum of Care Strategy: Number of Grant Year SHP Grants Authorized Amount 1996 11 $13,439,254 1997 7 8,494,777 1998 5 4,082,536 Totals 23 $26,016,567 Description of grants included in our audit. We selected for review, the two largest Supportive Housing Program grants awarded to the City of Seattle for fiscal years 1996 and 1997. The City entered into agreements with the Fremont Public Association and the Workforce Development Council to implement two programs called “Solid Ground” and “Homeless Intervention Project,” respectively. 2001-SE-251-1001 2 Introduction Solid Ground project, sponsored by the Fremont Public Association. SHP grant number WA19B96-0801 was a new grant, with an original term of three years. Including a one-year extension, the grant period was from May 1, 1997 through April 30, 2001. The grant award was for $2,298,658 and through the end of the grant period, $2,050,040 had been spent. Grant Number WA19B96-0801 Allocations: Award Expended Supportive services $2,189,198 $1,947,892 Administration 109,460 102,148 Totals $2,298,658 $2,050,040 Solid Ground helps the homeless obtain housing. The program is a coordinated, countywide service delivery system helping homeless families in obtaining essential services and transitioning to permanent housing. The project provides comprehensive case management, housing search, and a wide range of supportive services such as assisting clients in dealing with the issues surrounding their homelessness. The Fremont Public Association waived the use of administrative funding, so that all administrative funds under this grant would be available to the City. Homeless Intervention Project, sponsored by the Workforce Development Council.1 SHP grant number WA19B97-0828 was a two-year renewal grant, with a grant period, including extension, from November 30, 1998 through January 31, 2001. The grant award was for $2,125,482 and through the end of the grant period $1,999,438 had been spent. Grant Number WA19B97-0828 Allocations: Award Expended Supportive services $2,024,269 $1,899,703 Administration 101,213 99,735 Totals $2,125,482 $1,999,438 1 The Seattle-King County Private Industry Council (PIC) was the original project sponsor. In 1998, PIC assigned its rights and obligations to the Workforce Development Council. 3 2001-SE-251-1001 Introduction Homeless Intervention Project assists homeless individuals and families in moving out of homelessness by obtaining the skills necessary to enter and retain employment, and become self-sufficient. Under cost-reimbursable contracts, the Workforce Development Council contracted with four non-profit agencies (providers) to provide supportive services: the Young Women’s Christian Association (YWCA), the Seattle Conservation Corps, the Washington State Employment Security Department, and FareStart. • The YWCA services are designed to support the participants as they prepare for and enter sustaining employment. Services include case management, training and employment support, housing, counseling and referral, childcare, food and clothing banks. Many of the YWCA’s homeless participants are domestic violence victims, single head of households and/or single women with little or no job skills. • The Seattle Conservation Corps (SCC) is a comprehensive return to work program for homeless adults. The program provides paid work experience, case management, support services including available mental health counseling and substance abuse treatment, individualized educational opportunities and life skills training in an on-site learning center, and job search and placement assistance with a staff job developer. The majority of SCC participants are single adults with multiple barriers to gaining and/or retaining employment. • The Washington State Employment Security Department has the Homeless Employment Project that is designed to provide rapid response employment services for work ready homeless adults. Job search activities and employment retention are supported with referrals to other community services and with direct application of program funds for such things as shelter, bus fare, appropriate work clothing or tools, identification documentation, professional licenses, rental assistance, and other services. 2001-SE-251-1001 4 Introduction • FareStart prepares men and women for employment in the food service industry. It operates food service businesses that provide the vehicle for FareStart students to learn and practice food service skills. The 16 week, forty hour per week program includes technical skills, job readiness, basic needs, and job placement and retention. Unlike the Fremont Public Association grant, the City and Workforce Development Council shared the administrative funds under this grant. The Workforce Development Council’s contracts with the providers only provide for supportive services costs, except that some administrative costs were granted to the Washington State Employment Security Department. Objectives, Scope, and Our objectives were to determine whether the City of Methodology Seattle (a) has adequate management controls, and (b) is administering its Supportive Housing Programs in a manner that provides reasonable assurances that: • funds are only expended for eligible program activities and participants; • costs are eligible and reasonable; • reported results are accurate and adequately supported; and • program funds are expended in a timely fashion. To achieve the audit objectives, we selected two Supportive Housing grants awarded to the City of Seattle. We examined grant files, analyzed the supporting documents for expenses, and reviewed the participant files. We reviewed applicable criteria including the Office of Management Budget Circulars A-87, “Cost Principles for State, Local and Indian Tribal Governments” and A-122, “Cost Principles for Non-Profit Organizations.” We held discussions with staffs of the City, project sponsors, and supportive service providers regarding their methods of accounting for funds and client services. We also held discussions with the local officials from the Office of Community Planning and Development. Our audit of selected Supportive Housing Program grants generally covered the period May 1, 1997 through December 30, 2000, although we extended this period as appropriate. We performed audit fieldwork at offices of 5 2001-SE-251-1001 Introduction the City of Seattle, project sponsors, and subcontractors from October 2000 to March 2001. We conducted the audit in accordance with the generally accepted government auditing standards. 2001-SE-251-1001 6 Finding 1 Inadequate Monitoring of Subgrantees Results in Questionable Costs Project sponsors and providers charged the Supportive Housing Program grants $167,405 in questionable costs, including $97,038 in ineligible costs and $70,367 in unsupported costs. These questionable costs might have been avoided if the City performed adequate and timely financial reviews to ensure project sponsors and service providers met applicable Federal requirements. Eligible costs for HUD regulations governing the Supportive Housing Supportive Housing Program allow for supportive services costs and Program grants administrative costs. Supportive services costs: 24 CFR 583.120, Grants for Supportive Services Costs states: “HUD will provide grants to pay…for the actual costs of supportive services for homeless persons for up to five years. All or part of the supportive services may be provided directly by the recipient or by arrangement with public or private service providers. Costs associated with providing supportive services include salaries paid to providers of supportive services and any other costs directly associated with providing such services.” Administrative costs: 24 CFR 583.135, Administrative Costs states: “Up to five percent of any grant awarded under this part may be used for the purpose of paying costs of administering the assistance. Administrative costs include the costs associated with accounting for the use of grant funds, preparing reports for submission to HUD, obtaining program audits, similar costs related to administering the grant after the award, and staff salaries associated with these administrative costs.” Federal regulations and the grant agreement make the City responsible for City responsible for monitoring grant activities. HUD making sure grant activities regulations at 24 CFR 85.40 state: “Grantees are comply with program responsible for managing the day to day operations of grant requirements and subgrant supported activities. Grantees must monitor grant and subgrant supported activities to assure 7 2001-SE-251-1001 Finding 1 compliance with applicable Federal requirements…Grantee monitoring must cover each program, function or activity.” The Supportive Housing Program grant agreements between the City and HUD state: “The recipient agrees to comply with all requirements of the Grant Agreement, and to accept responsibility for such compliance by any entities to which it makes grant funds available.” Subgrantees charged the The Fremont Public Association and the Workforce grants $97,038 in ineligible Development Council and two of its providers charged the costs projects $97,038 for costs that were not related to administering and providing supportive services under the Supportive Housing Program grants. The Fremont Public Association charged the Solid Ground project $74,228 in ineligible costs. The $74,228 included $67,933 in administrative costs. These administrative costs were ineligible because these were charged against supportive service funds of the grant. The charges were also unsupported because they were based on budget estimates rather than actual expenditures. Further, in its agreement with the City, the Fremont Public Association waived the use of administrative funding. The waiver allowed the City to claim the five percent in administration costs that HUD permits under the grant. In addition, the Fremont Public Association charged the project $6,295 in other costs not related to providing supportive services under the grant. The Workforce Development Council and two of its providers charged the Homeless Intervention Project $22,810 in costs unrelated to providing supportive services. The $22,810 included $3,701 charged by the Workforce Development Council for costs not related to administering the project. Further, the Washington State Employment Security Department and the YWCA charged the project $11,098 and $8,011, respectively, for costs not related to administering and providing supportive services. Over $70,000 in Two providers, YWCA and the Seattle Conservation questionable salary and Corps, could not support approximately $70,367 in occupancy costs charged administrative salary and occupancy expenses allocated to the Homeless to the Homeless Intervention Project. Intervention Project The YWCA charged about $62,205 in salary and occupancy charges that were not directly related to the project. The $62,205 included an estimated $58,724 in 2001-SE-251-1001 8 Finding 1 salary costs for eight administrative staff and the Associate Director of Employment, and $3,481 in office space costs. The YWCA charged the entire salary and occupancy costs for the eight administrative staff to the project. However, the Associate Director of Employment Services said that about 85 percent of these employees time (amounting to $51,968) related to administrative activities and not direct supportive services activities. The estimated office space charges related to the eight staff for 85 percent of their time totaled $3,481. The YWCA’s contract with the Workforce Development Council did not allow administrative costs. In addition, the Associate Director of Employment said that about 10 percent of his own time did not relate to supportive services activities, which amounted to $6,756. The Seattle Conservation Corps charged the entire salary of the Lead Case Counselor/Manager to the project. However, the Lead Case Counselor/Manager said she spent about 10 percent of her time working on administrative duties not directly related to providing supportive services. The estimated $8,162 in costs associated with these administrative activities (representing 10 percent of the Lead Case Counselor/Manager’s salary) are not eligible supportive services costs under the grant. Timely and adequate The project sponsors and providers could not adequately financial reviews could explain why they incurred the questionable costs. have prevented Nevertheless, it was the City’s responsibility to properly questionable costs oversee grant expenditures of the sponsors and providers. We found that the City did not perform financial monitoring reviews adequately or often enough to ensure that activities and costs charged to the grants met Federal requirements. City officials said they perform programmatic as well as comprehensive reviews of project sponsors: • A programmatic review is to be done annually. This review looks at whether the project is operating as proposed in the application and as reported in the Annual Performance Reports. The review includes target population, people served, services provided, and level of capacity. Also, the reviewer must examine the participant’s progress toward the program objectives for each of the three HUD goals: residential stability, increased skills or income, and greater self-determination. 9 2001-SE-251-1001 Finding 1 • A comprehensive review is to be performed every three years, and includes reviewing the financial management of an agency or a project sponsor. We found that the City performed one comprehensive review of the Fremont Public Association grant more than two years into the grant period, and performed no comprehensive reviews of the Workforce Development Council grant. Further, the City’s comprehensive review of the Fremont Public Association grant noted no questionable expenditures. Based on the audit results, we concluded that the City does not perform financial reviews of its Supportive Housing Program grants adequately or often enough to ensure compliance with program requirements. As such, the City did not perform its post award responsibility, which is to adequately monitor the Supportive Housing Programs activities or functions to provide reasonable assurance that these were carried out in accordance with Federal rules and regulations. Given that our audit only covered two of 23 Supportive Housing grants awarded to the City of Seattle for fiscal years 1996, 1997, and 1998, similar problems may exist in its other grants. Auditee Comments The City does not agree with the finding that its monitoring of grantees is inadequate. The City took very specific steps well before the Office of Inspector General (OIG) visit to strengthen this aspect of its programming. The City believes it has a thorough compliance monitoring policy regarding the Supporting Housing Program that is implemented consistently and works to assure grant activities comply with program requirements. Many of the costs listed by the OIG as ineligible, particularly staff training for the YWCA and some elements in the Workforce Development Council (WDC) cost allocation plan, had already been resolved and reimbursed as the result of a regularly scheduled HUD monitoring of the WDC on September 27, 2000. Further, the unsupported costs attributed to the Workforce Development Council partner agencies seem to be based on brief conversations with program staff. 2001-SE-251-1001 10 Finding 1 OIG Evaluation of Auditee The audit results found that the City neither adequately Comments implemented its comprehensive review policy nor performed timely monitoring. This is clearly shown where the City's comprehensive review of the Fremont Public Association chose not to test eligibility of program costs and participants. Additionally, we found that the City performed a comprehensive review of the Fremont Public Association grant more than two years into the grant period, and performed no comprehensive review of Workforce Development Council grant. Further, the City did not conduct yearly onsite monitoring as required. We confirmed that the City of Seattle resolved HUD’s finding on $1,502 of the ineligible costs. In May 2001, HUD took corrective action by reducing the City’s May 2001 drawdown of Supportive Housing Program funds from grant WA19B97-0828 to compensate for $1,502 in ineligible grant expenditures. The draft report did not discuss this because HUD’s corrective action was taken after our audit fieldwork. We revised our report to decrease the ineligible costs by $1,502. OIG staff performed adequate audit work, including reviewing accounting records and interviewing auditee and provider staff, to determine whether costs were ineligible or unsupported, and unallowable under the grant and Federal rules and regulations. Recommendations: We recommend that HUD require the City to: 1A. Reimburse the appropriate Supportive Housing Program grants $97,038 from non-federal funds for ineligible costs paid from grant funds. 1B. Provide supporting documentation or reimburse the appropriate Supportive Housing Program grants $70,367 from non-federal funds for questionable costs paid from grant funds. 1C. Develop and implement an adequate financial monitoring plan that will ensure that grant expenditures, including expenditures by project sponsors and supportive service providers, are eligible and supported. 1D. Perform at least annual financial reviews of all Supportive Housing Program expenditures. 11 2001-SE-251-1001 Finding 1 1E. Require project sponsors and providers to revise their cost allocation practices and procedures to prevent future allocations of ineligible costs to the grants. We also recommend you: 1F. Periodically review City grant expenditures, including expenditures by project sponsors and providers, to ensure costs are eligible and supported. 2001-SE-251-1001 12 Finding 2 Supportive Housing Program Providers Did Not Have Evidence to Support Homeless Eligibility Supportive Housing Program providers did not always have evidence to support the homeless status of individuals who were living with relatives and friends when they entered the program. Consequently, the Supportive Housing Program projects may not have served the intended population and may have used grant funds to assist ineligible participants. This occurred because the City of Seattle and providers were not fully aware of HUD requirements related to participant eligibility and documentation. For purposes of the McKinney Act (Section 103), the term HUD homeless eligibility “homeless” or “homeless individual or homeless person” requirements includes: • an individual who lacks a fixed, regular, and adequate nighttime residence; and • an individual who has a primary nighttime residence that is – (a) a supervised publicly or privately operated shelter designed to provide temporary living accommodations (including welfare hotels, congregate shelters, and transitional housing for the mentally ill); (b) an institution that provides a temporary residence for individuals intended to be institutionalized; or (c) a public or private place not designed for, or ordinarily used as, a regular sleeping accommodation for human beings. Comments to the Final Rule (24 CFR 583) published in the July 19, 1994, Federal Register, demonstrates HUD’s clear intent that individuals staying with family and friends are not part of the population to be served. In responding to commenters that felt HUD should expand the definition of homelessness, including a commenter who recommended that the definition include individuals living with family and friends, HUD responded that it “…does not believe that the current interpretation of homelessness need be expanded as suggested. The Department’s focus remains on serving the most needy. This is most readily determined by the test that a person is homeless if, without HUD 13 2001-SE-251-1001 Finding 2 assistance, she or he would have to spend the night in a shelter or in a place not meant for human habitation.” The SHP grants may have We reviewed 129 of 1,427 participant files maintained by paid for ineligible the supportive service providers to determine (a) whether participants participants qualified as homeless and, if applicable, disabled, and (b) whether the providers were tracking individuals who had left the program. We found that the providers kept track of participants who left the program. However, the participant files did not always show that the individuals qualified as homeless; specifically, we found that of the 129 participants reviewed: • 96 were eligible. The files of these participants contained adequate documentation to support their eligibility to participate in the program; and • 33 were ineligible. The files of these participants contained documentation showing they were living with friends and relatives at the time they entered the program.2 SHP Grant Providers Numbers Participants Total Eligible Ineligible Fremont Public Association WA19B96-0801 27 23 50 Washington State Employment Security Department WA19B97-0828 17 2 19 Seattle Conservation Corps WA19B97-0828 20 0 20 FareStart WA19B97-0828 15 5 20 YWCA WA19B97-0828 17 3 20 96 33 129 The City and providers Based on the interview results, it appeared that the City and were not fully aware of supportive service providers were not fully aware of homeless eligibility HUD’s eligibility requirements. The City thought that requirements providers could simply accept an individual’s statement that they were being evicted from a relative’s or friend’s residence without obtaining any confirming documentation. Fremont Public Association staff said they believed that clients staying with friends and families were eligible for the program. They said they had served this population 2 HUD’s Policy Guide or Supportive Housing Program Desk Guide states that, for persons being evicted by their family, there should be a statement describing the reason for eviction signed by the family member. In other cases where there is no formal eviction process and for circumstances beyond the person’s control, the grantee must obtain a signed statement from the participant and also make efforts to confirm that the circumstances are true. 2001-SE-251-1001 14 Finding 2 since the beginning of the program, and were aware of other McKinney Act’s Supportive Housing Program providers that served this same population. Washington State Employment Security Department staff stated it has been using the Department of Labor requirements for homelessness. Auditee Comments The City states it follows reasonable and sound practices to document homelessness based on its years of experience and using the information received from HUD. The City is confident that both programs were administered in compliance with all HUD guidelines on the subject of participant eligibility available to it for the time period under review by the OIG. The City stated that in October 2000, the local HUD office conducted a one-day Operations Workshop where they introduced a HUD Supportive Housing Program Desk Guide, which the City had never seen before. The Desk Guide made clear for the first time the type of documentation the City needed to maintain for persons with no fixed regular nighttime residence, but able to stay with friends and family. Both programs immediately implemented the clarification received from HUD and the City continues to work with all of its project sponsors on this issue. OIG Evaluation of Auditee The City generally concurs with our finding but contends Comments that the type of documentation of homelessness needed was not clear until HUD introduced the Supportive Housing Program Desk Guide in October 2000. HUD has provided the City and subgrantees enough information during and after executing the grant agreements. Such information included the SHP grant agreements, Supportive Housing Program rules and regulations, memoranda and notification letters that describe homeless eligibility requirements and how to document the eligibility of prospective homeless program participants. Additionally, the McKinney Act or the 24 CFR 583 is clear on the SHP eligibility requirements on homeless individuals. The City, as the grantee of the SHP grants, has the responsibility to ensure that project sponsors and providers maintain adequate source documentation for program participant costs charged to grants. 15 2001-SE-251-1001 Finding 2 Recommendations: We recommend that HUD require the City to: 2A. Ensure that providers maintain adequate documentation to support homeless eligibility, especially as regards to individuals living with relatives and friends. 2B. Require its project sponsors to provide technical assistance to providers and ensure the providers maintain adequate documentation on homeless eligibility, especially as regards to individuals living with relatives and friends. 2001-SE-251-1001 16 Finding 3 The City Charged Questionable Administrative Costs to Supportive Housing Program Grants The City used grant funds to pay for questionable administrative costs that are not directly related to Supportive Housing Program activities. For the two Supportive Housing Program grants reviewed, the City had charged $72,523 in questionable costs at the time of our review. In our opinion, this occurred because the City did not always adhere to HUD regulations regarding eligible administrative costs. HUD regulations, 24 CFR 583.135, Administrative Costs Eligible administrative state: costs “Up to five percent of any grant awarded under this part may be used for the purpose of paying costs of administering the assistance. Administrative costs include the costs associated with accounting for the use of grant funds, preparing reports for submission to HUD, obtaining program audits, similar costs related to administering the grant after the award, and staff salaries associated with these administrative costs.” The City’s share and use of Under the Solid Ground project (SHP grant WA19B96- administrative funds 0801), the Fremont Public Association waived the use of administrative funds, thus making these funds available to the City. As of December 2000, the City had drawn down $95,052 of these funds. Of the $95,052, the City spent $45,625 for administrative costs directly related to the project and $49,427 for questionable administrative costs. For the Homeless Intervention Project (SHP grant WA19B97-0828), the City agreed to share administrative funds with the Workforce Development Council (WDC). As of October 2000, the grant had been charged $62,436 for administrative costs. Of the $62,436, the City’s and WDC’s share was $23,096 and $39,340, respectively. The City used its share to pay for questionable costs associated with administering grants. The $49,427 and $23,096 in indirect cost that the City Indirect costs may not be allocated to the Solid Ground and Homeless Intervention eligible administrative Project grants, respectively do not directly relate to costs administration of the Supportive Housing Program grants. The indirect costs are general operating costs of the City 17 2001-SE-251-1001 Finding 3 and as such HUD has no assurance that these are administrative costs related to the Supportive Housing Program activities. The City indicated it has always followed this practice. The regulations regarding administrative costs are clear. We therefore concluded that the City did not always adhere to HUD requirements regarding eligibility of administrative costs. The City of Seattle does not concur with the finding that it Auditee Comments used $72,523 in administrative funds to pay for ineligible costs not directly related to the Supportive Housing Program. It further believes that it is misleading to say that the City disregarded HUD requirements regarding the eligibility of administrative costs. The administrative costs charged to the Supportive Housing Program are expenditures directly related to staff and operating costs required to administer the McKinney (homeless) grants. Because of this large volume of transactions and small dollar amount, it is more practical and efficient to record all McKinney administration costs in a single cost center for distribution to active grants. The regulations set forth in 24 CFR 85.20 (b)(5), 24 CFR 85.22 (b) and OMB Circular A-87 allow the establishment of cost pools for distributing costs when it is practical to do so. Based on these regulations, the City established a single cost center designated specifically for the collection of the direct McKinney grant administration costs. Although the administrative costs lose their line item identity in the individual grant projects, the individual transactions are still traceable to their sources and the accompanying documentation. The administrative costs charged by the City to the homeless grants are directly related to the administrative duties outlined in the technical submissions for both grants. The expenditures in the McKinney grant administrative cost center consist of the salary and benefit costs of the City staff who administer the McKinney grants plus operating costs that are associated with administering the grant. All of these costs are directly associated with the performance of the duties listed in the technical submission. 2001-SE-251-1001 18 Finding 3 Based on the City's response we revised the report to state OIG Evaluation of that the costs are questionable instead of ineligible, and the Auditee Comments City did not always adhere to HUD regulations. It is a common practice for accounting systems to distribute costs to appropriate cost centers, and the City should only charge for costs that are eligible under specific grants. The Federal regulations regarding Supportive Housing Program administrative costs are clear. Although the City’s administrative costs in its Allocation Plan were allowable under OMB Circular A-87, some of these costs were not eligible administrative costs but met the definition of operating costs under the McKinney Act or 24 CFR 583. Also, based on our review results, we determined that the City’s administrative costs charged to the SHP grants could neither be traced nor associated with the City’s performance of the administrative activities set forth in its Technical Submissions. Further, our review indicated that the City did not maintain documentation to support the specific administrative costs charged to a specific SHP grant. For example, the staff timesheets did not show the actual hours spent on a specific SHP grant but rather showed actual hours spent for all grants. HUD officials told us that they have in the past verbally notified the City that indirect costs are not allowable administrative costs. Further, the grants we reviewed are specific in what are allowable administrative costs, which normally should be direct administrative costs. The City should not be charging indirect costs to grants unless the grant provisions specifically permit this. Based on the City’s comments, we revised the recommendations to reflect the costs as questionable instead of ineligible. Recommendations: We recommend that HUD: 3A. Determine if the City’s method of charging administrative costs to Supportive Housing Program grants complies with HUD requirements. 19 2001-SE-251-1001 Finding 3 If the City’s method of charging administrative costs does not meet HUD requirements, then we further recommend HUD require the City to: 3B Reimburse from non-federal funds part or all of the $49,427 administrative costs charged to SHP grant number WA19B96-0801 as of December 2000, that HUD determines are ineligible as well as any other ineligible administrative costs charged subsequently. 3C. Reimburse from non-federal funds part or all of the $23,096 administrative costs charged to SHP grant number WA19B97-0828 as of October 2000, that HUD determines are ineligible as well as any other ineligible administrative costs charged subsequently. 3D. Comply with HUD requirements regarding eligible administrative costs for all its Supportive Housing Program grants. 2001-SE-251-1001 20 Finding 4 The City Needs to Improve Its Reviewing and Reporting of Measurable Results The City did not ensure that it reported complete and accurate information to HUD regarding measurable results of its homeless grants. Without reliable information, HUD and the City may incorrectly assess program progress and accomplishments. The City needs to improve its monitoring and review of Annual Progress Reports prior to submitting the reports to HUD. Monitoring and reporting Federal regulations at 24 CFR 85.40 state that: requirements “Grantees must monitor grant and subgrant supported activities to assure compliance with applicable Federal requirements and that performance goals are being achieved. Grantee monitoring must cover each program, function or activity….Performance reports will contain … information on comparison of actual accomplishments to the objectives established for the period….” The Agency Contracts executed between the City and its project sponsors (Fremont Public Association and Workforce Development Council) include the following provisions: Section II (Reports and Information) states: “The Agencies shall furnish periodic reports …including assessments of the effectiveness of the services provided, in meeting the goals and objectives….” Exhibit A-3 (Reporting Requirements) states: “The Agency and the Subcontractors will coordinate the preparation of the Annual Performance Report to HUD, collecting the necessary information from subcontractors, and will submit a completed annual report to the City which in turn will be responsible for final review of the report and submission to HUD.” The City gave the Fremont Public Association and the Workforce Development Council the administrative responsibility to prepare and complete the Annual Progress Reports (APRs) for SHP grant numbers WA19B96-0801 and WA19B97-0828, respectively. The City had the 21 2001-SE-251-1001 Finding 4 responsibility to review what FPA and WDC prepared and reported. The City did not meet all In its most recent (1998) Annual Progress Report under its planned performance Supportive Housing Program grant number WA19B97- measures or goals 0828 (the Homeless Intervention Project), the City did not implement or report on the progress of the “Customer Satisfaction” performance measure. For this measure, the City had planned to but did not survey participants contacted at follow-up regarding their satisfaction with the program, and ask the program participants how the strategy could be improved. In its most recent (1999) Annual Progress Report under Supportive Housing Program grant number WA19B96-0801 (the Solid Ground Project), the City did not implement a goal to set up a countywide housing resource database. It appears this goal was unrealistic for the program due to the nature of available housing; and the high cost of setting up such a database. However, the City did not notify HUD that this goal would not be implemented. The City did not The backup documents did not accurately support some adequately support what it of the data the City reported to HUD under the Supportive reported to HUD Housing Program grant for the Homeless Intervention Project. Data from Data supporting Referrals reported documents Number who did not enter the program 560 519 Number who entered the program 381 422 Number who refused to participate 91 50 In addition, the backup documents did not support the progress reported on the “Housing Upgrades” performance measure of this grant. The supporting document showed 44 percent progress, while the progress reported was 55 percent. Neither were the measurable results for the Solid Ground Project grant always adequately supported. Only two of nine measurable results reported in the 1999 Annual Progress Report for this grant were adequately supported. The City needs to improve The City is responsible for reviewing the Annual Progress its grant administration Reports before submitting them to HUD. According to the City’s Human Services Department Program Specialist, 2001-SE-251-1001 22 Finding 4 City staff reviews the APRs prior to submission, but does not document their review. The City’s McKinney Grant Management official said staff reviews Annual Progress Reports for completeness, compliance, accuracy, and to determine if the program is accomplishing its goals, and the right population is being served. She said the review is generally not documented however, the City notifies providers if the review discloses major deficiencies. However, based on the audit results, we believe the City needs to improve its review of Annual Progress Reports and supporting documents to ensure that the data and progress reported are accurate and adequately supported. Because the City did not provide adequate evidence of measurable results, HUD might incorrectly assess the programs’ progress and accomplishments as well as the City’s performance under the two SHP grants. The Annual Progress Report is one of the instruments HUD uses annually when (1) assessing a program’s progress and accomplishments as well as a grantee’s performance; and (2) selecting which grantees to monitor. The City of Seattle accepts the finding as presented in the Auditee Comments draft audit report. However, it does not agree with some of the conclusions drawn from the finding. The City agrees that the Workforce Development Council identified the collection of customer satisfaction surveys as a performance measure in its Supportive Housing Program grant application. As agreed, it also consistently collected and maintained the survey information for every individual contacted at follow-up. However, in reviewing its records, the City believes this measure was not viewed as a true measure of performance when negotiating the City’s contract with the WDC. As a result, it was not included in the City's contract with WDC as a reportable item to HUD. Thus, it was not set-up to be tracked in the WDC management information system. A similar situation existed with the Solid Ground program. The regional housing database was an ambitious goal complimenting Solid Ground’s regional vision for serving families. In the early stages of implementation it became clear that such a database was cost prohibitive and beyond the scope of the project. In hindsight, HUD should have been formally advised of these changes and the items should have been removed. 23 2001-SE-251-1001 Finding 4 The Workforce Development Council underwent a major organizational change during the first operating year of this grant. The reporting errors cited in the OIG report are attributable to new staff not being familiar with either reporting on the Annual Performance Report (this error was caught and changed prior to approval of the APR) or the database (staff resorted to hand calculations, resulting in mathematical error). The City does not anticipate these types of errors will be repeated. The OIG audit observed that the measurable results for the Solid Ground program were not always adequately supported. The City noted in its site visit conducted in January 2000 that information in the database was difficult to retrieve. The City recommended that the client files be tied directly to the database so that information can be easily accessed and tied to participant activities and achievements. It is the City's understanding that FPA was in the process of refining its database and adding additional fields to assure this. Our review results indicated that the City could not OIG Evaluation of Auditee adequately support its reporting of measurable results. Comments This was due to its lack of adequate monitoring and review of Annual Progress Reports prior to submitting these to HUD. As required, the City must report to HUD its progress on performance measures or goals set forth in its Technical Submissions, and its reasons why a planned performance measure or a goal would not be implemented. The City must also ensure that what it claimed in its reports is complete, accurate and adequately supported. Recommendations: We recommend that HUD require the City to implement procedures to: 4A. Ensure that Annual Progress Reports include all performance measures and goals. 4B. Ensure that information reported in Annual Progress Reports is complete, accurate and adequately supported. 4C. Require its project sponsors to maintain adequate documentation and only report information that is supported. 2001-SE-251-1001 24 Appendix A Schedule of Questioned Costs Recommendation Number Ineligible Costs Unsupported 1A $97,038 1B $ 70,367 3B $ 49,427 3C $ 23,096 Totals $97,038 $142,890 Ineligible costs are costs that are clearly not allowed by law, contract, or HUD regulations or requirements. Unsupported amounts are not clearly eligible or ineligible, but warrant being contested for various reasons, such as lack of satisfactory documentation to support eligibility. 25 2001-SE-251-1001 Appendix A (This page intentionally left blank) 2001-SE-251-1001 26 Appendix B 27 2001-SE-251-1001 Appendix B 2001-SE-251-1001 28 Appendix B 29 2001-SE-251-1001 Appendix B 2001-SE-251-1001 30 Appendix B 31 2001-SE-251-1001 Appendix B 2001-SE-251-1001 32 Appendix C Distribution Deputy Secretary, SD (Room 10100) Chief of Staff, S (Room 10000) Assistant Secretary for Administration, A (Room 10110) Assistant Secretary for Congressional & Intergovernmental Relations, J (Room 10120) DAS, Office of Public Affairs, W (Room 10222) DAS for Administrative Services, Office of the Executive Secretariat, AX (Room 10139) Deputy Chief of Staff, S (Room 10226) Deputy Chief of Staff for Program and Policy, S (Room 10226) Special Counsel to the Secretary, S (Room 10226) 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, C (Room 7100) Assistant Deputy Secretary for Field Policy and Management, SDF (Room 7108) Assistant Secretary for Fair Housing and Equal Opportunity, E (Room 5100) Director, Office of Departmental Equal Employment Opportunity, U (Room 5128) Chief Procurement Officer, N (Room 5184) Chief Financial Officer, F (Room 2202) Chief Information Officer, Q (P-8206 L’Enfant) Acting Director, Enforcement Center F (Portal Building) Director, Real Estate Assessment Center, X (Portal Building) Audit Liaison Officer, A (Room 10110) Audit Liaison Officer, CFO (Room 2206) Acquisitions Librarian, AS (Room 8141) Inspector General, G (Room 8256) Assistant Inspector General for Audit, GA (Room 8286) Deputy Assistant Inspector General for Audit, GA (Room 8286) Public Affairs Officer, G (Room 8256) Counsel to the Inspector General, GS (Room 8260) Assistant Inspector General for Investigation, GI1 (Room 8274) The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, 340 Dirksen Senate Office Building, United States Senate, Washington, DC 20510 The Honorable Joseph Lieberman, Ranking Member, Committee on Government Affairs, 706 Hart Senate Office Building, United States Senate, Washington, DC 20510 The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn Building, House of Representatives, Washington, DC 20515 The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform, 2204 Rayburn Building, House of Representatives, Washington, DC 20515 33 2001-SE-251-1001 Appendix C Armando Falcon, Director, Office of Federal Housing Enterprise Oversight, 1700 G Street, NW, Room 4011, Washington, DC 20552 Cindy Fogleman, Subcommittee on Oversight and Investigations, Room 212, O’Neil House Office Building, Washington, DC 20515 Stanley Czerwinski, Associate Director, Resources, Community, and Economic Development Division, United States General Accounting Office, 441 G Street, NW, Room 2T23, Washington, DC 20548 Steve Redburn, Chief Housing Branch, Office of Management and Budget, 725 17th Street, NW, Room 9226, New Executive Office Building, Washington, DC 20503 Andrew R. Cochran, Senior Counsel, Committee on Financial Services, U.S. House of Representatives, 2129 Rayburn House Office Building, Washington, DC 20515 2001-SE-251-1001 34
Supportive Housing Program Grants Administered by the City of Seattle as Part of the Seattle-King County Continuum of Care Strategy
Published by the Department of Housing and Urban Development, Office of Inspector General on 2001-08-15.
Below is a raw (and likely hideous) rendition of the original report. (PDF)