Issue Date September 30, 2002 Audit Case Number 2002-PH-1007 TO: Charles H. Williams, Director, HUD’s Office of Multifamily Housing Assistance Restructuring, HY FROM: Daniel G. Temme, Regional Inspector General for Audit, Mid-Atlantic, 3AGA SUBJECT: AUDIT MEMORANDUM – Congressionally Requested Audit of the Outreach and Training Assistance Grant awarded to the Legal Aid Bureau, Incorporated, Grant Number FFOT98012MD Baltimore, Maryland INTRODUCTION We completed an audit of the Legal Aid Bureau, Incorporated $160,000 Outreach and Training Assistance Grant. The objectives of the review were to determine if the Legal Aid Bureau, Incorporated used Section 514 grant funds for only eligible activities as identified in the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA), their agreements, and/or other requirements to further the Mark-to-Market Program. Also we wanted to determine if the Legal Aid Bureau expended Section 514 funds for any lobbying activities. MAHRA specifically identified lobbying as an ineligible activity. The audit identified that the grantee: assisted ineligible projects; could not provide adequate support for $107,834 in disbursements it made for salaries and fringe benefits; and did not properly support $51,121 in indirect costs. In addition, the grantee charged an additional $1,044 of ineligible expenditures to the grant. We also noted the grantee did not comply with other requirements of the Office of Management and Budget’s (OMB) Circular A-122, Cost Principles for Non-Profit Organizations, which included using grant funds to participate in various lobbying activities. Our report contains nine recommendations to address the issues identified in the report and to strengthen the grantee’s management controls. 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 Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA). The directive would include the Outreach and Training Assistance Grants (OTAG) and Intermediary Technical Assistance Grants (ITAG) administered by the Office of Multifamily Housing Assistance Restructuring (OMHAR). Consistent with the Congressional directive, we reviewed the eligibility of costs with particular emphasis on identifying ineligible lobbying activities. In conducting the audit, we reviewed the grantee’s accounting records and interviewed responsible staff. We also 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 costs for nonprofit grantees. The audit covered the period January 1999 through August 2001 for the OTAG grant awarded to Legal Aid Bureau, Inc. We performed the fieldwork at the Office of Legal Aid Bureau, Incorporated, located at 500 East Lexington Street, Baltimore, MD during June through August, 2002. We conducted the audit in accordance with Generally Accepted Government Auditing Standards. We held an exit conference with the Executive Director of Legal Aid Bureau on September 6, 2002. We appreciate the courtesies and assistance extended by the personnel of the Legal Aid Bureau, Incorporated during our review. In accordance with HUD Handbook 2000.06 REV-3, within 60 days please provide us, for each recommendation without a management decision, a status report on: (1) the corrective action taken; (2) the proposed corrective action and the date to be completed; or (3) why action is considered unnecessary. Additional status reports are required at 90 days and 120 days after report issuance for any recommendation without a management decision. Also, please furnish us copies of any correspondence or directives issued because of the audit. Should you or your staff have any questions please contact me or Christine Begola at (410) 962- 2520. SUMMARY We found that Legal Aid Bureau, Incorporated (Legal Aid) did not maintain adequate accountability over its OTAG funds in accordance with OMB Circular A-122. Specifically, the grantee assisted ineligible projects, did not maintain personnel activity reports to support $107,834 in salaries and fringe benefits, and disbursed $1,044 in ineligible lobbying expenditures from the grant. In addition, the grantee did not prepare a cost allocation plan per the guidance in OMB Circular A-122, Attachment A, thus causing $51,121 in unsupported costs to be allocated to the grant. Also, according to the grantee’s reports to OMHAR, the grantee participated in a number of teleconferences and conferences that included sessions on how to lobby legislators. Further, we identified instances where the OTAG coordinator met with a Congressman and Local City Counsel Delegates to discuss particular properties in the Mark-to-Market Program. Under OMB Circular A-122, these activities are prohibited and any associated costs are considered ineligible. 2 However, since the grantee did not maintain detailed time records, we could not determine the actual amounts of time and associated costs expended for all of these ineligible activities. 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 40 grantees (a total for 83 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 provide 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 state 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. 3 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. 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 OMB Circular A-122, Cost Principles for Non- Profit Organizations, in determining the allowability of costs 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 costs 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 activities. Simply stated, the use of Federal funds for any lobby activity is unallowable. OMB Circular A-122 identifies some example 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 introduction, enactment or modification of any pending legislation by propaganda, demonstrations, fundraising drives, letter writing, or urging members of the general public either for or against the legislation (Grassroots Lobbying). Legal Aid applied for an OTAG grant in fiscal year 1998 for $160,000, and received the authorization for the funding in January 1999. As of August 2001, $159,999 was expended against the grant. We reviewed the entire grant. Legal Aid received annual financial audits for their activities for the periods ending December 31, 1999, 2000 and 2001. The auditor provided an unqualified opinion for each of the three years. In addition to the OTAG grant, Legal Aid received grants from other Federal and non-Federal sources. For example, from non-Federal sources, Legal Aid’s operations are funded through grants from the Maryland Legal Services Corporation. During fiscal year 2001, Maryland Legal Services Corporation provided Legal Aid $3,808,740 in funding. During the same period, an organization funded by a non-profit corporation established by Congress, Legal Services Corporation, provided Legal Aid with $3,461,370 in funds. Legal Aid’s total funding from all sources for fiscal year 2001 was $14,367,308. FINDING: The Grantee Did Not Comply With HUD and OMB Requirements Legal Aid assisted ineligible projects, did not maintain adequate time records to support salary and benefit costs charged to the grant, and did not maintain adequate documentation, as was required under OMB Circular A-122, to support the cost allocation method it used to charge indirect costs to the grant. In addition, we identified a number of ineligible lobbying expenditures charged to the grant. This occurred because the grantee simply did not have a full understanding of requirements under the grant and related Federal Regulations. As a result, Legal Aid charged against the grant $107,834 in unsupported salaries and benefits, $51,121 in unsupported allocated indirect costs, and $1,044 ineligible lobbying expenditures. However, we could not determine 4 the complete amount of lobbying activities because Legal Aid did not maintain adequate time records for its staff. When asked why the grantee did not follow OMB A-122, the Controller stated because they followed OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, they were not required to maintain a cost allocation plan, as noted in OMB Circular A-122. We could not determine how the Controller came to this incorrect conclusion. Project Eligibility Section 514 (f) of the Multifamily Housing Assistance and Restructuring Act of 1997 provided funds to assist and provide an opportunity for tenants of the project, residents of the neighborhood, the local government, and other affected parties to participate effectively and on a timely basis in the restructuring process established by MAHRA. Section 512 of MAHRA defines the term eligible multifamily housing project to generally mean a property consisting of more than four dwelling units with rents that, on an average per unit or per room basis, exceed the rent of comparable properties in the same market area. Section 512 also requires that the project be covered in whole or in part by a contract for HUD project-based assistance under one of a number of HUD programs and be financed by a mortgage insured or held by the Secretary under the National Housing Act. MAHRA also specifically excluded certain HUD projects, for example Section 202 projects. Given the Section 512 definition of eligible projects, we obtained a listing from HUD of the possible eligible projects. According to HUD’s records, approximately 24,525 projects receive project-based assistance and are HUD insured or held by the Department. Of those projects, 446 are located in Maryland. Legal Aid maintained a listing of projects assisted with the OTAG grant. We compared the identified assisted projects to the list provided by HUD. Based on that comparison, we identified 5 of the 95 projects the grantee assisted in the Maryland area were not eligible for assistance under MAHRA. Due to the lack of detailed salary records we could not determine the total amount of Section 514 assistance provided to these ineligible projects. At the exit conference, the grantee advised us that the list of eligible properties provided by HUD was not complete. The grantee provided us various lists of properties to show why they felt the five properties we were questioning were eligible to be assisted under the Mark-to-Market Program. In addition, the grantee stated that in the beginning of the process, HUD did not always have the most up to date information, thus they relied on other lists obtained from various organizations, including the properties themselves in order to determine which properties could be assisted. Since there were a number of listings provided by various sources, we will have to refer this matter to OMHAR to make the final decision on the eligibility of the properties. 5 Compensation for Personal Services OMB Circular A-122, Attachment B, Paragraph 7, Compensation for Personal Services, states that reasonable compensation and fringe benefits to employees are grant fundable costs. The Circular also places specific salary record keeping requirements on the grantee. Specifically, the grantee must maintain reports that: (1) account for the total activity for which an employee is compensated for in fulfillment of their obligations to the organization; (2) reflect an after the fact determination of actual activity for each employee; and (3) reflect the distribution of activity of each employee (professionals and nonprofessionals) whose compensation is charged, in whole or in part, directly to awards and requires the employee or a responsible supervisor to sign the report. Further, the OMB Circular states that budget estimates do not qualify as support for charges to the grant. In addition, in order to support the allocation of indirect costs, such reports must also be maintained for other employees whose work involves two or more functions or activities if a distribution of their compensation between such functions or activities is needed in the determination of the organization's indirect cost rate. We found that Legal Aid did not maintain detailed supporting time records reflecting employees’ activity per OMB Circular A-122 guidance. In addition, they changed the way they were accounting for the salaries in the middle of the grant. For example, in 1999, Legal Aid charged salaries to the grant based on actual hours multiplied by the actual labor rate. However, in 2000, they charged the grant based upon a percentage rate, calculated by using the number of employees assigned to the OTAG grant divided by the number of full time employees in the Support Unit Cost Center, in which the OTAG grant is located. This rate was then applied to all salaries charged to the Support Unit Cost Center to come up with the total salaries charged to the OTAG grant. The grantee explained the decision to cost allocate the salaries out was made to provide for increased efficiency for the entire organization when it came to accounting for their multiple funding sources. When we tried to verify the allocation rate, the grantee’s Deputy Director informed us that the percentage rate used was based upon an educated guess of hours charged by the employees working on the grant. At the time of our review, only one staff member was assigned to work on the grant on a full time basis. The rest of the staff worked on the grant periodically, and their time was estimated in order to arrive at an equivalent number of full time employees assigned to the grant. For example, if two attorney’s estimate they worked on the grant 50 percent and 25 percent of the time, respectively, their time added together would equal ¾’s of a full time employee. By using this allocation method, there was no accounting for the actual number of hours charged to the grant, especially for the lawyers that only worked on the grant periodically. When we attempted to verify the hours charged by the staff, we were told that the lawyers did not track their time using the amount of detail needed to support the grant. Also, the time sheets for the OTAG coordinator provided no detail and only annotated a flat eight hours per day were charged against the grant. OMB Circular A-122 states that all of the activity and the distribution of that activity must be documented for both professional and non-professional staff assigned to the grant. Altogether, the grantee charged $107,834 in salary costs to the grant. Based upon our review of the time sheets, Legal Aid did not follow this requirement, and thus we question the entire $107,834. 6 In our review, we tested the entire amount of salaries and benefits charged against the grant. Since the grantee did not maintain detailed time records, we reviewed the grantee’s quarterly reports to OMHAR to determine the types of activities the grantee was charging against the grant and if the work was completed only on eligible properties. While reviewing these reports we noted that the grantee did assist ineligible properties. In addition, we noted the OTAG coordinator charged time against the grant for activities that appeared to be completed in previous quarters. For example, in the July 2001 Mark-to-Market Activity Report the coordinator documented she visually assessed nine properties for their likelihood of Mark-to- Market participation, charging 15 hours per property. Six of the properties listed, also appear on various 2000 Mark-to-Market reports under the same activity, with time being charged to the grant.1 The grantee disagreed with our interpretation of the information presented in the quarterly reports. The grantee said the OTAG coordinator performed different activities for the properties listed in successive reports under the category of “Analysis of Properties” and subcategory visual assessment. However, since these reports also show evidence that some of these properties are receiving “direct outreach services”, we question why the OTAG coordinator would need to document that she was still trying to make a determination as to the properties’ likelihood to participate in the Mark-to-Market Program. Based upon the OMHAR quarterly reports it appears this determination had already been made by the OTAG coordinator. Allocating Indirect Costs to the Grant The grantee also allocated certain costs to the grant that included travel, training, telephone, facilities cost and consumable supplies. OMB Circular A-122 Attachment A, provides guidance on the basic considerations for grant fundable costs and allocation of indirect costs. The guidance provides that the grantee must support a cost allocation that takes into account all activities of the organization. Unless different arrangements are agreed to by the agencies concerned, the Federal agency with the largest dollar value of awards with an organization will be designated as the cognizant agency for the negotiation and approval of the indirect cost rates. A non-profit organization that does not have an approved cost allocation plan, must submit an initial cost allocation plan within three months of receiving the award. When we requested a copy of the cost allocation plan, the grantee’s Controller simply provided the rates used to calculate indirect costs. The grantee explained these rates were based upon the number of staff assigned to a particular job category, made up of similar projects sharing the same expenses. For example, in the first quarter of 2000, all of the project coordinator’s time and .21 full time equivalent attorney’s time was charged to the OTAG project. At the time there was 8.8 legal staff sharing costs in the support unit. Therefore, 1.2/8.8 of the costs of the unit were allocated to the OTAG grant. Although, the plan appears to be reasonable, the rate is based upon the assumption the number of full time staff assigned to work on the OTAG grant is accurate. As we 1 Of these six properties, two continue to be “visually assessed for Mark-to-Market participation” and receive “direct outreach services”, throughout the 2001 and 2002 quarterly reports to OMHAR, under the second OTAG grant received by Legal Aid. 7 previously discussed, the grantee calculates the number of full time employee equivalents working on and charged to the grant, based on an educated guess. Since both the part time and full time staff do not maintain their time in accordance with OMB Circular A-122, we question the accuracy of the calculated salaries charged to the grant. We also noted the grantee never received approval from their cognizant agency to use this plan nor had they provided a copy of the cost allocation plan to HUD. The Controller stated Legal Aid did not have to complete a cost allocation plan in accordance with OMB Circular A-122 because they received an unqualified opinion on their audit under OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and, as such, were in full compliance with all Federal requirements. We found no sound basis as to how the Controller formulated this opinion since no provision under either Circular states a grantee is exempt from completing a cost allocation plan if they receive an unqualified opinion on their audit under the Single Audit Act. The granted expended $51,121 in indirect expenditures during the audit period. The majority of these expenditures were accounted for in the categories of travel, equipment, training, management, and general type expenditures. We considered $51,121 of indirect expenditures as unsupported costs because the grantee did not maintain any detailed time records, have an approved cost allocation plan, and the allocation they did use was based upon a calculation that uses an educated guess. Lobbying MAHRA specifically prohibited the used of Section 514 funds to lobby members of Congress or their staff. OMB Circular A-122, Attachment B, Paragraph 25, Lobbying, places additional limitations on the grantee’s use of Federal funds for lobbying. However, as we identified in the background section, Legal Aid Bureau, Inc., also receives non-Federal funds from a number of other sources. The allowability and use of these funds for lobbying activities would not be restricted by the guidance in OMB Circular A-122. We reviewed the grantees quarterly reports to OMHAR, travel vouchers, and staff time sheets to identify meetings with legislative members or their staff. We also reviewed these reports to determine if the grantee worked on activities that did not meet the requirements of MAHRA and to determine if these activities were considered Grassroots lobbying. We identified two instances where the OTAG coordinator met with a Congressman and one instance where the grantee met with the Local City Council Delegates regarding the OTAG grant to discuss particular properties and resident benefits in the Mark-to-Market Program. In addition, grantee staff participated in various conferences and teleconferences sponsored by National Alliance of HUD Tenants (NAHT) which included ineligible lobbying activities. Specifically, the agendas for conferences on June 25, 1999, and December 17, 1999 involved lobby visits to Capitol Hill. Based upon our review, we noted the grantee charged the grant $322 in hotel and conference fees for these meetings. 8 In addition to the conferences noted above, the grantee participated in numerous bi-monthly teleconferences. On average, the meetings were scheduled to last one hour and thirty minutes, with a substantial amount of time devoted to discussing lobbying issues, while only five minutes related to the Mark-to-Market Program. Based on OMB’s guidance, only that portion of the activity related to the purpose of the grant can be charged to the grant. However, the grantee charged the full amount to the OTAG grant. We also noted a charge of $722 in association with teleconferences. The grantee explained that each grantee is requested to pick up the expenditure for the cost of the conference call; this charge represents the time Legal Aid picked up the charge. The grantee contends that its staff did not engage in prohibited lobbying activities. We consider the teleconference cost to be ineligible because it involved lobbying activities. We attempted to verify the grantee’s claim and determine the total amount of unallowable lobbying activities being charged to the grant including per diem expenses and travel advances. However, since Legal Aid does not maintain adequate travel and time records, with the exception of the two matters noted above, we could not determine the actual costs associated with these expenditures. AUDITEE COMMENTS We provided our draft report to the grantees for their comments on September 9, 2002. We received the grantee’s comments on September 20, 2002. A copy of the narrative portion of the grantee’s response is attached in Appendix B. However, due to the overall volume of the grantee’s response, the attachments were not included in this audit memorandum. Legal Aid strongly disagrees with the findings of our review. Specifically, they believe they assisted only eligible properties, and are in full compliance with all Federal regulations relating to their accounting for the compensation of personal services, indirect costs and lobbying type activities. Legal Aid stated they only assisted eligible properties with the OTAG funds. They explained the listing used to determine the project eligibility came from HUD and other State and Local subsidized housing lists. They believe since these listings contained the five properties questioned during the report, the finding should be dropped. Legal Aid stated they maintain appropriate and adequate documentation to support the compensation for personal services and it meets the requirements of OMB Circular A-122. They believe since the auditors did not find any evidence to support that the work completed on the OTAG project was used for any other purpose, the time is supported. Legal Aid also noted they offered to provide the documentation to the auditors after the discussion draft was issued in order to clear up the finding before the final report was issued. Further, Legal Aid stated their method of allocating costs to the grant is in compliance with OMB Circular A-122. However, they acknowledge their plan had not been submitted to their cognizant agency or HUD for approval. 9 Finally, Legal Aid strongly disagrees with our finding pertaining to lobbying activities. They state although their staff did attend NAHT conferences, they did not participate in any lobbying activities and used that time to meet with other OTAG project grantees to discuss their experiences. The grantee also contends that NAHT conference calls provide a further opportunity for the grantees to share their experiences and NAHT requested all grantees to share in the cost of the calls so everyone has the opportunity to gain from the information. Legal Aid also states that their employees did not participate in the discussions about lobbying on these calls and noted that their quarterly reports to OMHAR reflect these calls and HUD has never questioned the expense. The meetings with the Congressman represented the time the second OTAG grant was presented to them. The grantees, explained that it was basically a public relations event, which allowed the Congressman to show his constituents the Federal funding brought to the district. OIG EVALUATION OF AUDITEE COMMENTS We disagree with the grantees assessment of the review. However, based on our review of their comments and attachments, we made changes to the report where it was deemed necessary. As noted in the report, the listing of eligible properties to be assisted under the OTAG grant was obtained from OMHAR. Since the grantee believes this listing was not all inclusive and some of the listings they provided us were from outside the Department, we have requested that OMHAR review the properties to make the final determination as to the project’s eligibility. We disagree with Legal Aid’s conclusion that they maintained their salary documentation in accordance with OMB Circular A-122 and that the records were available at the time of our review. As defined in the findings, we noted the grantee did not follow OMB Circular A-122 when accounting for staff compensation and we questioned several of the activities they performed. We do acknowledge after the discussion draft was issued the grantee offered to provide us the documentation they felt would clear the finding. However, this offer entailed the grantee estimating the time by reviewing emails, calendars, correspondence, etc. to satisfy the audit issue over a two-week period. In our opinion, this estimate would still not satisfy the requirements of OMB Circular A-122. We are encouraged that the grantee has submitted their allocation plan to OMHAR for approval, and even did so prior to OMHAR making the request. However, as noted in the report we have concerns over how the calculation of full time equivalents is being calculated. Since the grantee’s full time equivalent calculation is based upon an educated guess and is used in determining the allocation of salaries and indirect costs to the grant, we believe there is a flaw in their methodology. Finally, based on the requirements of OMB Circular A-122 and grantee’s records, we believe our conclusions concerning the lobbying issues are fully supported and were presented in a balanced fashion in the report. 10 RECOMMENDATIONS We recommended that the Director of OMHAR require Legal Aid Bureau, Incorporated to: 1A. Document the costs (salary, benefits, travel indirect, etc.) associated with the assistance it provided to the ineligible projects and require the grantee to refund the grant for those associated costs. 1B. Repay to HUD from non-Federal funds the $1,044 in ineligible lobbying expenditures that were charged to the grant. 1C. Maintain detailed time records in accordance with OMB Circular A-122. 1D. Provide proper support for all unsupported salary and benefit costs totaling $107,834 and repay to HUD from non-Federal funds amounts it cannot adequately support. 1E. Prepare and submit an acceptable cost allocation plan that fairly allocates indirect costs among funding sources, and based on the plan make appropriate adjustments to the $51,121 in indirect costs and repay to HUD from non-Federal funds any overcharges. 1F. Stop charging the grant for activities related to lobbying as defined by MAHRA and OMB Circular A-122. 1G. Establish policies and procedures for identifying grantees engaged in housing advocacy, to ensure Federal funds are not used to support direct or indirect lobbying activities. We recommend that the Director of OMHAR: 1H. For all future HUD funding, determine that Legal Aid has established the necessary policies and procedures to follow OMB guidance and HUD regulations before awarding any new funds to the organization. 1I. Make a determination on the lobby issues presented to determine if sanctions should be imposed as provided for in the 2002 Defense Appropriations Act. MANAGEMENT CONTROLS In planning and performing our audit, we considered the management controls relevant to the Legal Aid Bureau’s Section 514 program to determine our audit procedures, not to provide assurance on the controls. Management controls include the plan of organization, methods, and procedures adopted by management to ensure that its goals are met. Management controls include the processes for planning, organizing, directing, and controlling program operations. They include the systems for measuring, reporting, and monitoring program performance. We determined that the following management controls were relevant to our audit objectives: · Identification of projects and activities eligible for assistance, · Controls and documents to support costs of assistance provided, and · Controls and procedures over the reporting of activities and cost. 11 It is a significant weakness if management controls do not provide reasonable assurance that the process for planning, organizing, directing, and controlling program operations will meet an organization’s objectives. Based on our review, we believe the following items are significant weaknesses: · Lack of a system to fully support that only eligible projects were assisted with Section 514 funds, · Lack of policies and procedures to ensure that allocation rates meet the standards of OMB Circular A-122, · Lack of policies and procedures to ensure that salaries and time records meet the standards of OMB Circular A-122, · Lack of policies and procedures to ensure that lobbying activities are not directly or indirectly funded by Federal sources. FOLLOW-UP ON PRIOR AUDITS This was the first audit the Office of Inspector General completed on the Legal Aid Bureau Incorporated. 12 Appendix A SCHEDULE OF QUESTIONED COSTS Recommendation Type of Questioned Costs Number Ineligible 1/ Unsupported 2/ 1B $1,044 1D $107,834 1E $51,121 Total $1,044 $158,955 1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity that the auditor believes are not allowable by law, contract or Federal, State or local policies or regulations. 2/ Unsupported costs are costs charged to a HUD-financed or HUD-insured program or activity and eligibility cannot be determined at the time of audit. The costs are not supported by adequate documentation or there is a need for a legal or administrative determination on the eligibility of the costs. Unsupported costs require a future decision by HUD program officials. This decision, in addition to obtaining supporting documentation, might involve a legal interpretation or clarification of Departmental policies and procedures 13 Appendix B AUDITEE COMMENTS 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Appendix C DISTRIBUTION OUTSIDE OF HUD Sharon Pinkerton, Senior Advisor, Subcommittee on Criminal Justice, Drug Policy & Human Resources, B373 Rayburn House Office Bldg., Washington, DC 20515 Stanley Czerwinski, Director, Housing and Telecommunications Issues, U.S. 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 Bldg., Washington, DC 20503 The Honorable Joseph Lieberman, Chairman, Committee on Government Affairs, 706 Hart Senate Office Bldg., United States Senate, Washington, DC 20510 The Honorable Fred Thompson, Ranking Member, Committee on Governmental Affairs, 340 Dirksen Senate Office Bldg., United States Senate, Washington, DC 20510 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 Andy Cochran, House Committee on Financial Services, 2129 Rayburn H.O.B., Washington, DC 20515 Clinton C. Jones, Senior Counsel, Committee on Financial Services, U.S. House of Representatives, B303 Rayburn H.O.B., Washington, DC 20515 32
Congressionally Requested Audit of the Outreach and Training Assistance Grant awarded to Legal Aid Bureau, Incorporated, Grant Number FFOT98012MD Baltimore, Maryland
Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)