oversight

Review of Boston Affordable Housing Coalition Outreach and Training Assistance Grants FFOT98014MA and FFOT00018MA.

Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-08-29.

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

 Telephone: 617-994-8380       http://www.hud.gov/oig/oigindex.html                   Fax: 617-565-6878



                                                  U.S. Department of Housing and Urban Development
                                                  New England Office of Regional Inspector General
                                                     for Audit, 1AGA
                                                  Thomas P. O’Neill, Jr. Federal Building
                                                  Room 370
                                                  10 Causeway Street
                                                  Boston, Massachusetts 02222-1092

                                                 Memorandum Number: 2002-BO-1802
                                                 Issue Date: August 29, 2002


MEMORANDUM FOR: Charles H. Williams, Director HUD’s Office of Multifamily Housing
                Assistance Restructuring, HY



FROM: Barry L. Savill, Regional Inspector General, Office of Audit, 1AGA


SUBJECT: Review of Boston Affordable Housing Coalition
         Outreach and Training Assistance Grants
         FFOT98014MA and FFOT00018MA.


                                        INTRODUCTION

We completed an audit of the Outreach and Training Assistance Grants (OTAG) awarded to
Boston Affordable Housing Coalition (BAHC) doing business as Massachusetts Alliance of
HUD Tenants. The overall objective of the review was to determine if BAHC used Section 514
grant funds for only eligible activities as identified in the Multifamily Assisted Housing Reform
and Affordability Act of 1997 (MAHRA), Notices of Fund Availability and grant agreements
between HUD and BAHC to further Mark-to-Market Program. The audit disclosed that BAHC
used Section 514 grant funds for eligible activities to further the Mark-to-Market Program in
accordance with the applicable Notices of Fund Availability and their grant agreements.

Section 1303 of the 2002 Defense Appropriation Act (Public Law 107-117) requires the HUD
Office of Inspector General to audit all activities funded by Section 514 of the MAHRA. The
directive would include the Outreach and Training Assistance Grants (OTAG) and Intermediary
Technical Assistance Grants (ITAG) administered by the Office of Multifamily Assistance
Restructuring (OMHAR). Consistent with the Congressional directive, we reviewed the
eligibility of costs with particular emphasis on identifying ineligible lobbying activities.

We appreciate the courtesies and assistance extended by the personnel of the BAHC during our
review. Should you or your staff have any questions, please contact Cristine M. O’Rourke,
Assistant Regional Inspector General for Audit or me at (617) 994-8380.
                                   BACKGROUND
The Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA) established
the Office of Multifamily Housing Assistance Restructuring (OMHAR) within HUD. Utilizing
the authority and guidelines under MAHRA, OMHAR’s responsibility included the
administration of the Mark-to-Market Program, which included the awarding, and oversight of
the Section 514 Outreach and Training Assistance and Intermediary Technical Assistance Grants.
The objective of the Mark-to-Market Program was to reduce rents to market levels and
restructure existing debt to levels supportable by these reduced rents for thousands of privately
owned multifamily properties with federally insured mortgages and rent subsidies. OMHAR
worked with property owners, Participating Administrative Entities, tenants, lenders, and others
to further the objectives of MAHRA.

Congress recognized, in Section 514 of MAHRA, that tenants of the project, residents of the
neighborhood, the local government, and other parties would be affected by the Mark-to-Market
Program. Accordingly, Section 514 of MAHRA authorized the Secretary to provide up to $10
million annually ($40 million total) for resident participation, for the period 1998 through 2001.
The Secretary authorized $40 million and HUD staff awarded about $26.6 million to 38 grantees
(a total for 81 grants awarded). Section 514 of MAHRA required that the Secretary establish
procedures to provide an opportunity for tenants of the project and other affected parties to
participate effectively and on a timely basis in the restructuring process established by MAHRA.
Section 514 required the procedures to take into account the need to provide tenants of the
project and other affected parties timely notice of proposed restructuring actions and appropriate
access to relevant information about restructuring activities. Eligible projects are generally
defined as HUD insured or held multifamily projects receiving project based rental assistance.
Congress specifically prohibited using Section 514 grant funds for lobbying members of
Congress.

HUD issued a Notice of Fund Availability in Fiscal Year 1998 and a second in Fiscal Year 2000
to provided opportunities for nonprofit organizations to participate in the Section 514 programs.
HUD provided two types of grants: the Intermediary Technical Assistance Grant (ITAG) and the
Outreach and Training Assistance Grants (OTAG). The Notice of Fund Availability for the
ITAG states that the program provides technical assistance grants through Intermediaries to sub-
recipients consisting of: (1) resident groups or tenant affiliated community-based nonprofit
organizations in properties that are eligible under the Mark-to-Market program to help tenants
participate meaningfully in the Mark-to-Market process, and have input into and set priorities for
project repairs; or (2) public entities to carry out Mark-to-Market related activities for Mark-to-
Market-eligible projects throughout its jurisdiction. The OTAG Notices of Fund Availability
states that the purpose of the OTAG program is to provide technical assistance to tenants of
eligible Mark-to-Market properties so that the tenants can (1) participate meaningfully in the
Mark-to-Market program, and (2) affect decisions about the future of their housing.

OMHAR also issued a December 3, 1999 memorandum authorizing the use of OTAG and ITAG
funds to assist at-risk projects. OMHAR identified these as non-Mark-to-Market projects where
the owners were opting out of the HUD assistance or prepaying the mortgages.


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HUD’s regulations at 24 Code of Federal Regulation Part 84 contain the uniform administrative
requirements for grants between HUD and nonprofit organizations. The regulations (24 CFR
84.27) require that nonprofit grantees utilize the Office of Management and Budget (OMB)
Circular A-122, Cost Principles for Non-Profit Organization, in determining the allowability of
cots incurred to the grant. OMB Circular A-122 outlines specific guidelines for allowability of
charging salaries and related benefits to the grants and the records needed to support those
salaries. For indirect cost charged to the grant, the Circular establishes restrictions for indirect
costs, and specific methods and record keeping to support the allocation of costs.

The Circular also establishes the unallowability of costs associated with Federal and state
lobbying activates. Simply stated, the use of federal funds for any lobby activity is unallowable.
OMB Circular A-122 identifies some examples of unallowable activities of lobbying. These
include any attempt to influence an elected official or any Government official or employee
(Direct Lobbying) or any attempt to influence the enactment or modification of any actual or
pending legislation by propaganda, demonstrations, fundraising drives, letter writing, or urging
members of the general public either for or against the legislation (Grassroots Lobbying).

The Boston Affordable Housing Coalition (BAHC) received an annual financial audit of their
activities for year ended December 31, 1999. In the auditor’s opinion, the financial statements
present fairly, in all material respects, the financial position of the BAHC as of December 31,
1999. BAHC was not required to have annual audits in 2000 and 2001. As provided in OMB
Circular A-133 Subpart B, paragraph 200(d), grantees that expend less than $300,000 in Federal
awards are exempt from the Federal requirement that an annual audit be performed in that year.

The BAHC applied for and received OTAG grants of $250,000 in Fiscal Year 1998 and
$450,000 in Fiscal Year 2000. For the period October 1998 through June 2002, the BAHC also
received $178,541 from consulting fees, $258,170 from corporate and private donations, and
$52,007 earned income from other sources, i.e., United Way. BAHC also applied for and was
awarded ITAG grants of $99,875 in Fiscal Year 2001. The BAHC is organized and operates
exclusively for charitable, educational, and civic purposes as defined under Section 501 (c)(3) of
the Internal Revenue Code. BAHC is coalition of resident organizations in Eastern
Massachusetts concerned with the preservation and improvement of privately-owned,
multifamily housing that benefits from HUD assistance. BAHC regularly works with 35 HUD-
assisted projects comprising 6,478 units in Massachusetts.

The BAHC employs three full-time personnel and has three volunteer VISTA workers who:

   Ø Act as a resource for tenants that have technical questions about the Mark-to-Market
     program;

   Ø Create agendas, and organize tenant meetings to educate tenants about the Mark-to-
     Market program; and,

   Ø Prepare quarterly OTAG narrative reports.




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The BAHC received two OTAG grants from the Office of Multifamily Housing Assistance
Restructuring.

  Grant Number        Award Date    Amount Awarded      Amount Disbursed as of May 2002
  FFOT98014MA      10/09/98             $250,000                      $250,000
  FFOT00018MA      01/11/01             $450,000                      $160,752
            Totals                      $700,000                      $410,752


In addition, BAHC received five Intermediary Technical Assistance Grants pursuant to MAHRA
and 24 CFR Parts 401 and 402. Under each of these grants, BAHC would facilitate the provision
of the identified service to one of more tenant organizations with which BAHC does business.

                                                        ITAG           Amount Disbursed
            ITAG Activity           Award Date         Awarded         as of October 2001
 Travel to NAHT Conference           05/23/01          $20,000               $17,223
 2001
 Development Consultant for           07/30/01          $19,975                  0
 Tenant Associations
 Architectural Services - Central     07/30/01          $20,000                  0
 Massachusetts
 (1 of 2 firms used)
 Architectural Services - Eastern     07/30/01          $20,000             $11,829
 Massachusetts
 (2 of 2 firms used)
 Legal Services                       07/30/01          $19,900                0
                         Totals                         $99,875             $29,052


In October 2001, HUD suspended the Grantee’s ability to draw funding from the Line of Credit
Control System - Voice Response System. As of July 30, 2002, this ability has not been
reinstated.




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                              METHODOLOGY AND SCOPE

To accomplish the audit objectives, we

   Ø Reviewed the requirements in MAHRA, the OTAG Notice of Fund Availability, the
     OTAG grant agreement, HUD’s requirements for grant agreements for nonprofit entities,
     and Office of Management and Budget’s guidance on the allowability of cost for
     nonprofit grantees.

   Ø Interviewed the BAHC’s Executive Director and independent Certified Public
     Accountant to determine how BAHC records and segregates OTAG/ITAG funds.

   Ø Interviewed BAHC’s staff to determine their roles and responsibilities in regards to
     OTAG activities.

   Ø Reviewed 100 percent of the OTAG funds drawdowns through the Letter of Credit
     Control System for October 1998 through May 2002 to determine if the drawdowns were
     supported by documentation and were used for eligible OTAG activities.

   Ø Reviewed travel funds awarded by ITAG for Fiscal Year 2000 $20,000 and Fiscal Year
     2001 $20,000 to determine if the costs were segregated between ITAG and non-ITAG
     (lobbying) activities.

   Ø Reviewed ITAG Consultant contracts to determine if activities were related to ITAG and
     non-ITAG (lobbying) activities.

   Ø Reviewed BAHC’s cost allocation plan to determine if expenses were allocated to OTAG
     on a consistent basis.

   Ø Reviewed 100 percent of BAHC’s staff time sheets, October 1998 through June 2002 to
     determine if the time sheets contain a detailed accounting of daily routines for both
     OTAG and non-OTAG (lobbying) activities.

   Ø Reviewed telephone charges for the period October 1998 through April 2002 to
     determine if the charges related specifically to any lobbying activities.

   Ø Rreviewed the OTAG/ITAG Quarterly Performance Reports submitted to the Office of
     Multifamily Housing Assistance Restructuring (OMHAR) to determine if activities that
     actually took place and were eligible.

For transaction testing methodology, we reviewed 100 percent of the funds expended as of May
2002 under the OTAG grants. The audit covered the period October 1998 through June 2002 for
the OTAG grants and the period January through December 2001 for the Public Entity Grants ( a
Section 514 grant received from an Intermediary Techancial Assistance Grant), awarded to the



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BAHC. We performed the fieldwork at the BAHC located at 353 Columbus Avenue, Boston,
Massachusetts 02116 during July and August 2002.

Our audit was conducted in accordance with Generally Accepted Government Auditing
Standards.


                                    RESULTS OF REVIEW

Our review of the expenditures charged to the OTAG grants showed that the BAHC used Section
514 grant funds for eligible activities to further the Mark-to-Market Program. We did not find
any evidence that BAHC expended Section 514 funds for lobbying activities.

Our review of the salary expenditures charged to OTAG Line Items 6010 Regional OTAG and
Clearinghouse Activities, 6020 Project Specific Activities, and 6030 Administrative Activities
determined that these expenses were supported by time sheets. BAHC has other sources of non-
federal funds to pay for these lobbying activities. Lobbying activities were clearly segregated and
documented on these weekly time sheets. Our review of 100 percent of the time sheets showed
that BAHC did perform lobbying activities. However, BAHC did not charge OTAG for these
lobbying activities.

Our review of charges to OTAG for rent, travel, training, accounting, and translation services
determined that invoices, receipts, and checks adequately support these charges. In addition, our
review disclosed that travel expenses related to lobbying activities were clearly identified on
supporting spreadsheets and these travel expenses were not charged to either the OTAG or the
ITAG programs. Our review of telephone charges disclosed that BAHC does not charge long-
distance calls to the OTAG grant. In addition, BAHC has a reasonable and appropriate allocation
method which it applies to local telephone charges. We did not identify any telephone charges to
the OTAG grant related to their lobbying activities.




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                                     DISTRIBUTION


Larry E. McGhee, Department ALO, FMA, Room 2206

Helen M. Stackhouse, ALO-Housing, HF, Room 6232

Kenneth M. Donohue, Inspector General, G, Room 8256

James A. Heist, Assistant Inspector General for Audit, GA, Room 8286

Mary E. Dickens, OIG Central Files, GF, Room 8266

The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn Bldg.,
House of Representatives, Washington, DC 20515

The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform, 2204
Rayburn Bldg., House of Representatives, Washington, DC 20515




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