oversight

Congressionally Requested Audit of the Intermediary Technical Assistance Grants awarded to the Low Income Housing Fund, Oakland, CA Grant numbers FFIT98003LF and FFIT98004LF

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)

                                              Issue Date: September 30, 2002
                                              Audit Case Number: 2002-SF-1004




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

               //SIGNED//

FROM:         Mimi Y. Lee, Regional Inspector General for Audit, 9AGA

SUBJECT:      Audit Memorandum - Congressionally Requested Audit of the Intermediary
              Technical Assistance Grants awarded to the Low Income Housing Fund, Oakland,
              CA, Grant Numbers FFIT98003LF and FFIT98004LF.


                                       INTRODUCTION

We completed an audit of the Low Income Housing Fund’s (LIHF) Intermediary Technical
Assistance Grants (ITAG). Under the ITAG program, the LIHF reviews applications, distributes
grant sub awards, and monitors sub grantee activity for a fee. The audit identified the grantee
did not comply with reporting and monitoring requirements under the applicable Notice of Funds
Availability (NOFA), Office of Management and Budget’s (OMB) Circulars, Codes of Federal
Regulations (CFR), and the grant agreements. Our report contains four recommendations to
address the issues identified in the report and strengthen the management controls of the grantee.

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 grantees accounting records and monitoring files, and
interviewed responsible staff. We also reviewed the requirements in MAHRA, the applicable
NOFA, the ITAG grant agreements, HUD’s requirements for grant agreements for nonprofit
entities, and OMB Circular guidance on the allowability of cost for nonprofit grantees.

The audit covered the period February 1999 through June 2002 for the ITAG grants. We
performed the fieldwork at the LIHF office located in Oakland, California, between July and
August 2002. We conducted the audit in accordance with Generally Accepted Government
Auditing Standards.

We appreciate the courtesies and assistance extended by the personnel of the LIHF during our
review.

In accordance with the 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 at (415) 436-8101.


                                          SUMMARY

The LIHF submitted grant applications to HUD for ITAG funding and was awarded grants
FFIT98003LF and FFIT98004LF. The LIHF has subsequently awarded sub grants to other
entities. Our audit identified the grantee did not adequately monitor the sub grantees’ activity
and expenses in accordance with NOFA; OMB Circular A-122, Cost Principles for Non-Profit
Organizations; and 24 CFR Part 84, Uniform Administrative Requirements for Grants and
Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit
Organizations. This included not confirming expenses by requiring adequate supporting
documentation, confirming allocation methods, requiring sufficient payroll records, or ensuring
sub grantees did not charge lobbying related activity to their sub grants. In addition, the LIHF
did not submit timely quarterly progress reports to HUD in the format required by the grant
agreements; the NOFA; OMB Circular A-110, Uniform Administrative Requirements for Grants
and Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit
Organizations; or 24 CFR Part 84. Our report contains recommendations to address the issues
identified in the report and strengthen management controls.


                                        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.


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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 notice in fiscal year
2000 to provided opportunities for nonprofit organizations to participate in the Section 514
programs. HUD provided two types of grants: (1) the ITAG, and (2) 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 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.

The HUD’s regulations at 24 CFR 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 OMB Circular A-122 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 lobbying activity is
unallowable. OMB Circular A-122 identifies some examples of unallowable lobbying activities.
These include any attempt to influence an elected official or any Government official or


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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 LIHF is a community development financial institution which supplies affordable capital
and technical assistance to nonprofit organizations working to alleviate poverty in low-income
neighborhoods. LIHF is also involved in childcare, education, workforce development, and
community facilities. LIHF loans money and makes grants to community organizations that
serve low-income populations. Housing funds are used to develop: affordable housing (rental
and homeownership), homeless shelters, housing for seniors and mentally ill, housing for people
living with HIV/AIDS, and nonprofit office space. LIHF helps borrowers by offering flexible
underwriting standards and accepting nontraditional forms of collateral. LIHF also provides
technical assistance to the borrowers to increase the chances of obtaining loans.

HUD awarded the LIHF two ITAG grants FFIT98003LF and FFIT98004LF for $1.8 million
each, in February 1999. The LIHF acts as an intermediary, reviewing and approving sub grantee
applications and monitoring grant activity. Grant FFIT98003LF was to cover the Southwest
Region, including: Arizona, Arkansas, California, Louisiana, Nevada, New Mexico, Oklahoma,
and Texas. Grant FFIT98004LF was to cover the Southeast Region, including: Alabama,
Caribbean, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee,
and Virginia. The LIHF requested start up fees of $40,000 under each grant, on April 12, 1999
and November 8, 1999. The LIHF also receives fees of five percent of the sub grantee draw
requests, and $600 for rejected sub grantee applications. The LIHF awarded 18 sub grantees 35
sub grants totaling $1,076,560, including eight Predevelopment Grants (PDG), one Resident
Capacity Grant (RCG), and 26 Public Entity Grants (PEG). These grants provide funds for
activities including tenant outreach, predevelopment, organization, and training for tenants of
eligible properties. The LIHF began requesting draws on behalf of sub grantees on November 7,
2000. As of July 31, 2002, the LIHF had withdrawn $433,122 from grant FFIT98003LF and
$394,380 from grant FFIT98004LF.

The LIHF received annual financial audits of their activities for the two years ending June 30,
2000 and 2001. The auditor provided an unqualified opinion for each of the two years. The
LIHF received separate reports on Compliance for Federal Awards for fiscal years ending June
30, 2000 and 2001. The 2001 report included a finding that the LIHF had not submitted
quarterly progress reports to HUD.




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                                      FINDING
             The Grantees Did Not Comply With HUD and OMB Requirements

The LIHF did not adequately monitor sub grantee activities and charges to the ITAG
grants. This included the LIHF not consistently requiring supporting documentation for
sub grantee expenses, confirming allocation methods, confirming payroll records, or
confirming sub grantees did not charge the grant for lobbying related activities. In
addition, the LIHF did not submit timely or complete quarterly reports to HUD. As a
result, the LIHF obtained insufficient support to confirm $256,860 charged to the ITAGs.
Also, the LIHF did not ensure an indeterminate amount of costs related to possible
National Alliance of HUD Tenants lobbying activity was not charged to the grant. This
occurred because the LIHF was not sufficiently knowledgeable concerning program
requirements.

Inadequate Sub Grantee Monitoring

The grant agreements FFIT98003LF and FFIT98004LF between HUD and the LIHF state the
Intermediary agrees to carry out grant activities in compliance with MAHRA, NOFA, and other
applicable laws, regulations, and requirements. The Intermediary agrees to accept responsibility
for compliance by any other entities to which it makes grant funds available. The Intermediary
must monitor the activities of sub-recipients under the grant, including compliance under the
grant agreement, throughout the term of the grant.

The 1998 NOFA states the Intermediary is responsible for the award and administration of grants
to sub-recipients. The Intermediary must monitor activity under the grant, including compliance
under the grant agreement. The NOFA states payments for fees for lobbying services are
ineligible. Activities not directly related to eligible activities listed in the NOFA are ineligible.

Federal regulations at 24 CFR 84, part 51, provide that recipients are responsible for managing
and monitoring each project, program, sub award, function or activity supported by the award.
Recipients must monitor sub awards to ensure sub recipients have met the audit requirements.

OMB Circular A-122, Attachment A, prescribes cost allocation methods including direct and
indirect. Allowable indirect cost allocation methods include the simplified allocation method
and the multiple allocation base method. 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. The grantee must maintain reports that account for the total activity an employee is
compensated for in fulfillment of their obligations to the organization. The reports must reflect
an after the fact determination of actual activity for each employee. Budget estimates do not
qualify as support for charges to the grant. Grantees must also maintain reports reflecting the
distribution of activity of each employee (professionals and nonprofessionals) whose
compensation is charged, in whole or in part, directly to awards. The Circular also requires the
report to be signed by the employee or a reasonable supervisor. In addition, in order to support
the allocation of indirect costs, such reports must also be maintained for other employees whose



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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.

A December 3, 1999 letter issued by HUD's Director of OMHAR stated that expenses related to
any days in which lobbying occurred at national conventions are not eligible to be charged to the
grant.

The LIHF did not adequately monitor and review the activity and expenses of sub grantees. The
LIHF did not consistently require sub grantees to submit enough supporting documentation to
confirm requests for grant funds. This included not consistently requiring sub grantees to
submit: timesheet and pay rate information to support payroll, invoices and bills to support travel
related disbursements, agendas to determine if lobbying took place during conferences, or
indirect cost allocation support. In a few instances, no back up was submitted by sub grantees
for entire draws. As a result, there was insufficient support obtained to confirm sub grantees
only charged the grant for eligible disbursements. The following issues were identified where
the LIHF failed to obtain sufficient back up documentation from sub grantees:

The Florida Housing Coalition (FHC):

   1. There was no support submitted for the amounts requested by the FHC under PEG 01-
      001-21-01. Costs included staff time of $12,007 and general and promotional costs of
      $7,993. There was nothing to confirm staff time or rates charged to the grant.
   2. There was no backup documentation submitted by the FHC for travel expenses of
      $18,243 requested under PEG 00-009-21-01, or to show what was done with the airline
      tickets of “no-show” participants.
   3. The LIHF required no support for an overhead allocation of $1,601 to the PEG 01-016-
      21-01.
   4. There was also no support submitted for a $572 hotel meeting room expense charged to
      01-016-21-01.
   5. The FHC only submitted a spreadsheet to support the staff time and benefits expenses of
      $6,848 charged to PEG 01-016-21-01. The LIHF did not require timesheets to be
      submitted or confirmation of payroll rates.

The Shoreview Residents Association (SRA):
   1. The SRA also charged the grant for vendors not originally requested under their approved
      application for PDG 01-014-03-02. There was no information available to show the
      LIHF questioned the change in vendors.

The New Mexico Public Interest Education Fund (NMPIEF):
   1. There was insufficient support provided to show per diem expenses of $1,242 for the
      2000 NAHT conference were paid to participants under PEG 00-003-06-01.
   2. There was insufficient support provided to confirm the $2,500 in costs requested from
      grant 01-021-06-01 to prepare an audit report. There was a pre-engagement letter but no
      actual bill required by the LIHF.
   3. The LIHF did not require information to confirm the rates charged by the NMPIEF for
      payroll expenses of $19,680 to PEG 00-004-06-01 and $500 to PEG 00-021-06-01.


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National Housing Trust (NHT):
   1. The NHT did not submit the actual bills, receipts, or invoices for travel costs for PDG
       grant 01-020-25-02 of $2,511 ($2,807 reduced by a $296 write-down to budget), and
       PEG grants 01-002-21-01 of $1,399 and 01-015-21-01 of $942. Only credit card
       statements were available, which provided limited information.
   2. In addition, there was no support for $784 of travel costs associated with a December 4,
       2000 trip, and there was no receipt to confirm airfare costs of $827 for a May 16, 2001
       trip charged to PDG 01-028-26-01.
   3. The LIHF required no information to confirm payroll rates of staff charged to PDG grant
       01-020-25-02 of $15,000 ($17,690 reduced by a $2,690 staff expense write-down), and to
       PDG 01-028-26-01 of $8,634 ($9,540 reduced by a $906 staff expense write-down).
       Likewise, the rates were not confirmed for staff costs of $33,562 ($39,756, less a $6,194
       staff expense write-down) charged to PEG grants 01-002-21-01 and 01-015-21-01.
       Although time reports provided detail concerning activities performed, there was no
       information to show they were prepared monthly, staff did not sign the documents, and
       total hours worked were not identified.

       Information we obtained from another source, the Amador-Tuolumne Community Action
       Agency (ATCAA) ITAG Intermediary, showed NHT payroll rates included mark-up
       costs and other allocated costs. Although the ATCAA required the NHT to remove the
       mark-up costs, the LIHF never inquired into the rates to determine this was the case.
       However, the NHT wrote off a substantial amount of payroll costs which exceeded
       budget. Since payroll rates could not be confirmed for all NHT staff charged to the grant
       based on the information available, we could not determine whether the amounts written
       off exceed the mark-up amounts.

Jacksonville Area Legal Aid (JALA):
   1. The PEG grants 01-034-21-01 and 01-033-21-01 were charged $12,787 and $12,920
       respectively, for travel related expenses associated with attending the NAHT 2001
       conference in Maryland. There was no information to show the costs were reduced to
       avoid charging the grant for lobby day activity associated with the conference.
   2. JALA allocated indirect charges of $5,918 to PEG grants 01-018-21-01 and 01-017-21-
       01, determined as 34.47 percent of salary and benefits. JALA claimed the allocation
       method was approved by the applicable cognizant agency. The LIHF did not confirm the
       appropriateness or approval of the allocation method.
   3. For PEG grants 01-018-21-01 and 01-017-021-01 the LIHF accepted summary time
       report information for payroll costs of $17,170. However, there was no evidence to show
       staff signed the reports, that they were prepared monthly, or that total time worked was
       identified.
   4. For PEG grants 01-034-21-01 and 01-033-21-01 JALA did not submit information to
       support an allocation of 10 percent to each grant for payroll of three administrative staff,
       resulting in charges of $5,419. In addition, no support was submitted to confirm the
       salary or benefits of these persons.




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Housing Rights
   1. The LIHF accepted credit card statements instead of requiring receipts for $1,022 of
      airfare and $1,066 of hotel costs to send participants to a NAHT conference under the
      PEG 01-027-03-01. There was no information submitted to show the grant was not
      charged from lobby day activity associated with the conference.
   2. Housing Rights charged $894 to PEG 01-026-03-01 to sponsor a March 23, 2001 NAHT
      teleconference. The LIHF required no information relating to the teleconference
      concerning the agenda and material to be discussed. However, we obtained the agenda in
      question from another source. Review of the agenda showed the teleconference included
      a discussion of lobbying activities, including those with three U.S. Senators.
   3. There was inadequate confirmation of payroll rates for $10,155 charged to the PEG 01-
      026-03-01. This included inadequate timesheet information available for the Executive
      Director.

National Housing Law Project (NHLP):
   1. The NHLP submitted timesheets tracking hours spent on the grant. However, they were
       not signed, did not identify total hours worked, there was nothing to show they were
       prepared monthly, and they were not signed by the staff. There was also no information
       to support the payroll rates charged to PEG grants 00-010-03A-01 and 00-010-03B-01
       totaling $30,094.

California Housing Partnership Corporation (CHPC):
   1. The LIHF did not require payroll rate information to confirm $12,920 in staff time
       charged to PEG 01-013-03-01. Only a spreadsheet was submitted to show hours worked,
       and the LIHF required no timesheets.
   2. In addition, no bills were submitted to support consultant charges of $2,998.

The North Carolina Low Income Housing Coalition (NCLIHC):
   1. The NCLIHC did not submit information to confirm the payroll rates charged to PEG 01-
      025-26-01 totaling $8,652.

The monitoring issues are summarized in the following table:

Sub                   Grant #            Amount         Expense    Issue
FHC                01-001-21-01          12,007         Payroll    No support
FHC                01-001-21-01           7,993         General    No support
FHC                00-009-21-01          18,243         Travel     No support
FHC                01-016-21-01           1,601        Overhead    No support
FHC                01-016-21-01             572          Travel    No support
FHC                01-016-21-01           6,848         Payroll    No support
                       Total:            47,264

NMPIEF             00-003-06-01           1,242          Travel    No support
NMPIEF             01-021-06-01           2,500           Audit    No support
NMPIEF             00-004-06-01          19,680          Payroll   Rate Confirmation

                                                                                        Page 8
NMPIEF          00-021-06-01             500      Payroll   Rate Confirmation
                    Total:            23,922

NHT             01-020-25-02           2,511      Travel    Insufficient Support
NHT             01-002-21-01           1,399      Travel    Insufficient Support
NHT             01-015-21-01             942      Travel    Insufficient Support
NHT             01-028-26-01             784      Travel    No Support
NHT             01-028-26-01             827      Travel    Insufficient Support
NHT             01-020-25-02          15,000      Payroll   Rate Confirmation
NHT             01-028-26-01           8,634      Payroll   Rate Confirmation
NHT            01-002-21-01 & 01-     33,562      Payroll   Rate Confirmation &
                   015-21-01                                Insufficient Timesheets

                    Total:            63,659

JALA            01-034-21-01          12,787    Conference NAHT lobby day
JALA            01-033-21-01          12,920    Conference NAHT lobby day
JALA           01-018-21-01 & 01-      5,918     Indirect Allocation Support
                   017-21-01
JALA           01-018-21-01 & 01-     17,170      Payroll   Insufficient Timesheets
                   017-021-01
JALA           01-034-21-01 & 01-      5,419      Payroll   Allocation Support & Rate
                   033-21-01                                Confirmation
                     Total:
                                      54,214

Hsg. Rights     01-027-03-01           2,088      Travel    Insufficient Support & NAHT
                                                            lobby day
Hsg. Rights     01-026-03-01             894    Conference NAHT lobby Discussion
Hsg. Rights     01-026-03-01          10,155      Payroll  Rate Confirmation &
                                                            Insufficient Timesheets

                    Total:            13,137

NHLP           00-010-03A-01 & 00-    30,094      Payroll   Rate Confirmation &
                   010-03B-01                               Insufficient Timesheets


CHPC            01-013-03-01          12,920     Payroll   No Support
CHPC            01-013-03-01           2,998    Consultant No Support
                    Total:            15,918

NCLIHC          01-025-26-01            8,652     Payroll   Rate Confirmation
TOTAL COSTS:                         $256,860




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Based on our review results, the LIHF took steps to obtain additional documentation from the
sub grantees related to questionable and unsupported items. The NCLIHC submitted payroll
information to confirm the $6,893 of salary charged, but did not submit enough information to
confirm the fringe rate charged. As a result, the fringe amount of $1,759 remains questionable.

We also contacted Housing Rights concerning the NAHT teleconference. Housing Rights
maintained it participated for legislative information, and all members are required to sponsor a
teleconference. Although the actual time NAHT spent discussing lobbying could not be
determined, the associated indirect lobbying costs would not be material to the grant. In
addition, there is insufficient information available to show the Housing Rights staff activity
engaged in lobbying activity as a result of this discussion or otherwise violated program
requirements.

Quarterly Progress Reports

The 1998 and 2000 NOFAs require grantees to submit quarterly performance reports to the
Director of OMHAR. The grantees must report on the properties and number of tenants assisted
by the OTAG activities performed that quarter. The reports needs to include a narrative
identifying activities conducted, beneficiaries of assistance provided, and results achieved.

The grant agreements FFIT98003LF and FFIT98004LF require the grantee to submit progress
reports every three months, including both performance and financial progress reports. The
financial reports must be submitted on Standard Form 269 and a breakdown in costs on Standard
Form 424A or a form to be provided by HUD. The reports need to include the amounts drawn
by each sub grantee, and a narrative of accomplishments.

Federal Regulations at 24 CFR Part 84 and OMB Circular A-110, Parts 51 and 52, both provide
that quarterly performance reports shall be due 30 days after reporting period, and grantees shall
use the SF-269 or SF-269A to report the status of funds for all non-construction projects or
programs.

The LIHF did not submit timely quarterly progress reports to the OMHAR in a consistent
manner. The LIHF had not been submitting progress reports through 2001, even though it had
drawn down start up fees from the grant as early as April 12, 1999 and began requesting
withdrawal for individual sub grantees on November 7, 2000 for prior activity. This included the
LIHF not submitting a narrative, standard form SF 269, or SF 424A. As a result, there was
insufficient information available for HUD to monitor the program and track progress.

OMHAR reminded ITAG Intermediaries in writing on August 22, 2001 to submit their quarterly
progress reports. OMHAR specifically required the submission of the narrative and both
standard forms. OMHAR distributed a copy of both standard forms, which included instructions
for completing the SF 424A. The LIHF financial auditors also identified a finding that the LIHF
had not submitted quarterly progress reports to HUD as part of their review for fiscal year ending
June 30, 2001.




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The LIHF finally submitted the progress report for the ten quarters of April 1999 through
September 30, 2001 on October 17, 2001. Although the SF 269 was submitted to OMHAR, the
report and subsequent quarterly submissions excluded the SF 424A. The LIHF submitted
requests for guidance on how to complete the SF 424A.

The LIHF was not sufficiently knowledgeable over grant program requirements to know it
should be submitting quarterly reports to OMHAR, or how to prepare standard forms. LIHF
staff sent to initial ITAG training, which included information on the preparation of quarterly
reports, no longer worked on the ITAG by the time the LIHF had the program underway. HUD
also did not notify the LIHF of the reporting problem until 2001, or enforce the reporting
requirement by halting draws. There is no information to indicate HUD provided technical
assistance to the LIHF on the preparation of the SF 424A, despite repeated written requests by
the LIHF. The LIHF stated it has recently obtained information from HUD on the preparation of
the SF 424A and plans to include the document as part of future quarterly reports.


    AUDITEE COMMENTS AND OIG EVALUATION OF AUDITEE COMMENTS

We provided our draft report to the auditee for its comments on August 30, 2002. The auditee
provided written comments on September 16, 2002. A revised response was provided on
September 24, 2002, due to the addition of recommendation 1D to the draft report. We also
obtained further clarification during an exit conference discussion with LIHF officials on
September 24, 2002. We included the auditee’s revised written comments in Appendix B of the
report.

The LIHF generally agreed with the audit conclusions. The LIHF stated that with the exception
of the standard form SF424A, it is current on the submission of all progress reports to OMHAR.
The LIHF has been seeking technical guidance from OMHAR in the preparation of the SF424A.
The LIHF also stated it is in the process of obtaining adequate support for all unsupported costs
identified in the report. Based on the auditee’s response, it appears to be taking steps to address
the issues cited in the report.


                                    RECOMMENDATIONS

We recommended you:

1A. Require the LIHF to comply with reporting requirements and submit future quarterly
    reports following OMB, CFR, NOFA, and grant agreement requirements, including
    submitting reports in a timely manner and using the prescribed Standard Form 424A.

1B. Require the LIHF to establish procedures to ensure, as part of future draw requests, sub
    grantees submit adequate timesheets; documentation to confirm payroll rates; conference
    and training agendas; support for allocations methods/rates of indirect costs; and invoices,
    receipts, or bills of all material expenses. The LIHF must review the submissions to



                                                                                            Page 11
     confirm the accuracy of charges and ensure no costs related to lobbying are charged to the
     grant.

1C. Require the LIHF to obtain documentation from the sub grantees to confirm the
    inadequately supported payroll and expenses already incurred. The LIHF and/or the sub
    grantees should be required to return any costs which cannot be adequately supported or are
    inappropriate, as follows:
      (a) The FHC needs to provide support for $47,264 of disbursements related to payroll,
          travel, general, and overhead costs as identified above or return costs drawn from the
          grant.
      (b) The NMPIEF needs to provide support for the $1,242 of travel and $2,500 of audit or
          return costs drawn from the grant. In addition, the NMPIEF needs to provide support
          to confirm the $20,180 of payroll charged to the grant. If actual rates are lower than
          rates claimed, the NMPIEF should return those funds.
      (c) The NHT should provide receipts and invoices to confirm travel costs of $6,463. In
          addition, the NHT needs to provide support to show actual payroll corresponds to the
          $57,196 charged to the grants. Mark up or other ineligible amounts in excess of
          payroll write-downs should be returned.
      (d) The JALA should return any portion of the $25,707 in travel costs charged to the
          grant associated with NAHT conferences, which reflects additional costs to the grant
          for lobby day activity, or provide adequate justification for those costs. The LIHF
          should also confirm JALA maintained appropriate timesheets for the $17,170 in
          payroll charged to the grant. In addition, JALA needs to provide support to confirm
          the $5,918 of indirect allocated to the grant and $5,419 of payroll allocated to the
          grant.
      (e) Housing Rights should return any amounts charged to the grant associated with
          NAHT lobby day activity, or provide adequate justification for those costs. Invoices
          and receipts should be provided to support the related travel charges of $2,088. In
          addition, Housing Rights needs to provide support for the payroll charges of $10,155.
          Any amounts charged in excess of actual should be returned.
      (f) The NHLP needs to provide support for the payroll charges of $30,094. Any amounts
          charged in excess of actual should be returned.
      (g) The CHPC needs to provide time sheets and support for the rates relating to the
          payroll charges of $12,920. In addition, bills, invoices and/or checks should be
          provided to support the consultant expenses of $2,998. Any amounts charged in
          excess of actual should be returned.
      (h) The NCLIHC needs to provide additional support for the payroll benefits charges of
          $1,759. Any amounts charged in excess of actual should be returned.

1D. Consider suspending grant funding until the grantee develops and implements appropriate
    management controls to ensure only eligible activities receive funding and documentation
    for the expenditure complies with OMB Circular A-122.




                                                                                         Page 12
                                MANAGEMENT CONTROLS

In planning and performing our audit, we considered the management controls relevant to the
LIHF’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:

   ·   Controls over disbursements of grant funds,
   ·   Controls over monitoring grant sub awards,
   ·   Controls over receipt of grant funds, and
   ·   Controls over grant reporting.

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 procedures to ensure monitoring of sub grantee activities and expenditures, and
   ·   Lack of procedures to ensure activities and financial information is reported to HUD in a
       timely fashion.


                             FOLLOW-UP ON PRIOR AUDITS

The Office of Inspector General performed no previous audit of the LIHF.




                                                                                         Page 13
                                                                            Appendix A
                 SCHEDULE OF QUESTIONED COSTS


Recommendation                      Type of Questioned Costs
    Number                 Ineligible 1/            Unsupported 2/
      1C                                                $249,073

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.




                                                                                 Page 14
                   Appendix B
AUDITEE COMMENTS




                      Page 15
Page 16
Page 17
                                                                           Appendix C

                     EXTERNAL REPORT DISTRIBUTION

The Honorable Christopher S. Bond, Ranking Member, Subcommittee on Veterans Affairs,
    HUD and Independent Agencies, United States Senate, 274 Russell Senate Office
    Building, Washington, DC 20510
The Honorable Barbara A. Mikulski, Chairwoman, Subcommittee on Veterans Affairs, HUD
    and Independent Agencies, United States Senate, 274 Russell Senate Office Building,
    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
The Honorable Joseph Lieberman, Chairman, Committee on Government Affairs,
    (senator_lieberman@lieberman.senate.gov)
The Honorable Fred Thompson, Ranking Member, Committee on Governmental Affairs,
    (senator_thompson@thompson.senate.gov)
Sharon Pinkerton, Senior Advisor, Subcommittee on Criminal Justice, Drug Policy & Human
    Resources, (Sharon.Pinkerton@mail.house.gov)
Andy Cochran, House Committee on Financial Services, (Andy.Cochran@mail.house.gov)
Clinton C. Jones, Senior Counsel, Committee on Financial Services,
    (Clinton.Jones@mail.house.gov)
Kay Gibbs, Committee on Financial Services, (Kay.Gibbs@mail.house.gov)
Stanley Czerwinski, Director, Housing and Telecommunications Issues, U.S. GAO,
    (CzerwinskiS@GAO.GOV)
Steve Redburn, Chief Housing Branch, Office of Management and Budget,
    (Fredburn@omb.eop.gov)
Linda Halliday, Department of Veterans Affairs, Office of Inspector General,
    (Linda.Halliday@mail.va.gov)
William Withrow, Department of Veterans Affairs, OIG Audit Operations Division,
    (William.Withrow@med.va.gov)
George Reeb, Assistant Inspector General for Health Care Financing Audits,
    (rneddo@os.dhhs.gov)
Jennifer Miller, Professional Staff, House Appropriations Committee,
    (Jennifer.miller2@mail.house.gov)
Larry S. Liederman, Chief Financial & Administrative Officer, Low Income Housing Fund,
    1330 Broadway, Suite 600, Oakland, California 94612




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