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
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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)