oversight

Congressionally Requested Audit of the Outreach and Training Assistance Grant awarded to the Housing Rights Committee of San Francisco/Tides Center, San Francisco, CA Grant Numbers FFOT98004CA and FFOT00005CA

Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-09-26.

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

                                               Issue Date: September 26, 2002
                                               Audit Case Number: 2002-SF-1005




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 Outreach and
              Training Assistance Grants Awarded to the Housing Rights Committee of San
              Francisco/Tides Center, San Francisco, CA, Grant Numbers FFOT98004CA and
              FFOT00005CA.


                                       INTRODUCTION

We completed an audit of the Housing Rights Committee of San Francisco (HRCSF) and Tides
Center’s Outreach and Training Assistance Grants. The Tides Center monitors the HRCSF’s
OTAG activities and performs all grant administration on behalf of the HRCSF. The audit
identified that the grantees did not comply with administrative and accounting requirements
under the applicable Notices of Funds Availability (NOFA), Office of Management and
Budget’s (OMB) Circulars, Codes of Federal Regulations (CFR), and the grant agreements. In
addition, the grantees participated in conferences that included lobbying activity, but there was
no information to show the grantees violated the enabling legislation or OMB Circular A-122,
Cost Principles for Non-Profit Organizations. Our report contains five recommendations to
address the issues identified in the report and strengthen the management controls of the
grantees.

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 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 OMB Circular guidance on the allowability of cost for nonprofit grantees.

The audit covered the period of October 1998 through June 2002 for the OTAG grant. We
performed the fieldwork at the Housing Rights Committee of San Francisco and the Tides Center
offices located in San Francisco, California, between May and July 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 HRCSF and Tides
Center 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 you staff have any questions please contact me at (415) 436-8101.


                                          SUMMARY

The HRCSF and the Tides Center jointly submitted a grant application to HUD, and were
awarded grant FFOT00005CA. HUD had actually awarded grant FFOT98004CA to the Los
Angeles Center for Affordable Tenant Housing (LACATH), but the funds were transferred to the
HRCSF and Tides Center with HUD’s approval. Our audit identified the grantees did not
maintain salary records in accordance with OMB Circular A-122. Instead, the grantee charged
payroll costs based on a predetermined budget amount, resulting in an apparent overcharge of at
least $4,114. The grantees also did not maintain general ledger accounting records in accordance
with OMB Circular A-110 or 24 CFR 84.21. The grantee did not submit timely quarterly
progress reports to HUD in the format required by the grant agreements, the NOFA, OMB
Circular A-110, or 24 CFR Part 84. Finally, the HRCSF participated in conferences and
teleconferences conducted by the National Alliance of HUD Tenants (NAHT) which included
lobbying related activity and discussions. However, there was no information to show the
grantees participated in or charged the grant for any material lobbying related activity. Our
report contains recommendations to address the issues identified in the report and strengthen
management controls.




                                                                                           Page 2
                                        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 notice in fiscal year
2000 to provide opportunities for nonprofit organizations to participate in the Section 514
programs. HUD provided two types of grants: (1) the Intermediary Technical Assistance Grant
(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.




                                                                                            Page 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 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, 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 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
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 HRCSF has been in operation for 23 years. Its goal is to "empower tenants to secure
fundamental rights to habitable and widely affordable housing in San Francisco.” The HRCSF is
currently a Tides Center project. The Tides Center is a California nonprofit, tax-exempt
501(c)(3) organization, established in 1996. The Tides Center provides project management,
financial, administrative, and human resources services to charitable and educational
organizations for a fee. The Tides Center currently provides services to around 350
organizations, including the HRCSF.

Grant FFOT98004CA for $110,000 was provided to the HRCSF through the LACATH in 1998
[Note: OTAG and ITAG grants awarded to LACATH were reviewed under a separate concurrent
audit]. The HRCSF began expending funds for OTAG grant activity in January 1999. The
HRCSF directly applied to HUD for OTAG funding in May 2000, and was awarded $400,000
under grant FFOT00005CA. As of June 17, 2002, the HRCSF had withdrawn $108,115 from
grant FFOT98004CA and $85,465 from grant FFOT00005CA for expenditures up through
September 30, 2001. In June 2002, the Tides Center and the HRCSF were in the process of
generating requests of funds for the period of October 1, 2001 through March 31, 2002. The
Tides Center received annual financial audits of their activities for the year ending December 31,
1999 and 2000. The auditor provided an unqualified opinion for each of the two years. The
HRCSF did not receive a financial audit, nor was one required.

The HRCSF performs tenant outreach, organization, and training to Mark-to-Market projects
under the OTAG grant. The HRCSF also performs activity unrelated to the grant, funded from
non-Federal sources, including tenant counseling and local lobbying. For example the HRCSF
received $117,660 from the State of California.



                                                                                            Page 4
                                      FINDING
             The Grantees Did Not Comply With HUD and OMB Requirements

The HRCSF and Tides Center charged payroll to the grant based on budget instead of
actual time spent on grant activities. The grantees also did not maintain adequate general
ledger accounting records, and did not submit timely or complete quarterly reports to
HUD. As a result, the grantee overcharged the grant $4,114 in payroll costs for sample
months tested, and there is no assurance payroll charged to other months was reasonable.
The grantees believed the reporting and records maintained complied with HUD’s
requirements.


Payroll

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. 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 employee or a reasonable
supervisor sign the reports. 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.

The HRCSF and Tides Center did not charge the grant for HRCSF’s payroll based on actual time
spent on OTAG activity as required by OMB Circular A-122. Instead, the Tides Center
allocated HRCSF’s payroll to the grant based on percentages pre-designated by the HRCSF for
each employee, based on the amount of time the employee was budgeted and assigned to spend
on the OTAG program.

Although the Tides Center does not require its projects to produce timesheets, the HRCSF did
maintain activity reports showing hours spent on OTAG activities. However, all activity reports
for staff were not consistently available. Activity reports were not available for 1999, and only a
summarized listing for one staff member was available for January 1999 through September
1999. Likewise, in year 2000 there were only intermittent activity reports available for the same
employee, and no reports were prepared for other staff spending time on the OTAG program.
Although activity reports were available for HRCSF staff in 2001, staff only listed time spent on
OTAG activity and not on other activities.

The Tides Center was in the process of reconciling HRCSF’s payroll during our review.
However, their calculations were still partially based on budgeted percentages of time employees


                                                                                             Page 5
were supposed to spend on the OTAG program. As a result, the Tides Center reconciliation
could not be relied upon to determine appropriate payroll charges.

A review of three sample months in 2001 showed the Tides Center approved excessive HRCSF
payroll charges to the OTAG. We determined the HRCSF’s payroll costs that should have
charged to the grant were $18,814, based on available activity reports and actual salary and
benefits expenses for a sample of three months, including March, June, and September 2001.
However, the HRCSF and Tides Center drew $22,928 in HRCSF payroll from the OTAG grants
for the same period. As a result, the grant was overcharged $4,114 during the sample period, as
summarized in the following table:

                       Month         Charged          Actual      Difference
                     March 2001       6,814           6,709      $ 105
                     June 2001        7,960           7,402      $ 558
                     Sept. 2001       8,154           4,703      $ 3,451
                      TOTAL:      $ 22,928        $ 18,814       $ 4,114

Although the HRCSF and Tides Center charged the grant for payroll expenses incurred, portions
of the expense should have been allocated to non-OTAG funds. As a result, less funding was
available for other eligible OTAG activities. Since all time sheets were not available, actual time
spent on OTAG activities during the entire term of both grants could not be determined.
Therefore, we are uncertain whether the total payroll charged to the grants over the entire term
was greater than the amounts that should have been charged.

This occurred because the HRCSF and Tides Center officials had an alternate understanding of
OMB requirements. The HRCSF believed activity reports should be prepared, but payroll
charged to the grant did not have to reflect the time listed in those reports. Both Tides Center
and HRCSF staff believed charging payroll costs based on budgeted and assigned allocations
was an acceptable method for computing payroll. The grantees also believed if the entire term of
the grants were reviewed, the amounts charged to the grant would be less than the actual payroll
attributed to the grant. In addition, HRCSF claimed HUD staff verbally informed them charging
payroll based on budget was an acceptable. However, no written approval from HUD was
available.

General Ledger Accounting Records

OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and other Non-Profit Organizations, Standards of
Financial Management, Section 21, requires grantees to maintain financial management systems
to provide accurate, current and complete disclosure of financial results; records that adequately
identify source and application of funds; and effective control over and accountability for all
funds. Likewise, 24 CFR 84.21 include the same requirements and also states records must
contain information pertaining to Federal awards, authorizations, obligations, unobligated
balances, assets, outlays, income, and interest.



                                                                                            Page 6
Although all significant expenses charged to the grant were actual costs incurred by the HRCSF,
our review of the HRCSF general ledgers, prepared by the Tides Center, showed the
expenditures listed did not match amounts requested for reimbursement from the grant. As a
result, the general ledger was unreliable for determining expenses applicable to the OTAG
program.

The Tides Center allocated HRCSF costs to different programs in the general ledger. General
ledger account numbers included those established for the OTAG grants (0929 200 and 0929
201) and the HRCSF general account (0929 999). Review of the general ledger showed a
number of expenditures attributed to OTAG accounts were not requested from the OTAG grant.
These costs were never reversed or adjusted in the general ledger to show they were not
withdrawn from the grants. A complete reconciliation of the general ledger could not be
performed during the course of our review, but the following examples of unclaimed costs were
identified:

   ·   AMTRAK train expense of $416 posted to the OTAG 0929 200 account in the general
       ledger on June 30, 2000.
   ·   Airline ticket costs of $776 posted to the OTAG 0929 200 account on October 31, 2000.
   ·   Airline tickets costs of $751 posted to the OTAG 0929 200 account on May 8, 2001.
   ·   Professional services of $293 posted to the OTAG 0929 200 account on April 30, 2001.
   ·   USPS Bulk costs of $2,780 posted to the OTAG 0929 200 account on May 11, 2001.

Conversely, in some cases, costs reimbursed by the OTAG grant exceeded the amounts recorded
as OTAG expenses in the general ledger. All OTAG related expenses were not consistently
allocated to the OTAG accounts in the general ledger. This included office rent requested for
reimbursement from the grant, but was never listed as OTAG expense in the general ledger. The
draw requests show the HRCSF allocated a reasonable portion of monthly office rent costs to the
grant. HRCSF included $825 per month on draws submitted to HUD for the months of January
2001 through September 2001. However, the Tides Center only recorded office rent costs of
$800 to OTAG general ledger account 0929 201 on July 1, 2001, August 1, 2001, and September
1, 2001. No rent was recorded under the other six months. The resulting amounts reimbursed by
the grants far exceeded the amounts attributed to the grants in the general ledger.

Likewise, the HRCSF charged the OTAG grant $360 per month for a portion of office rent
between January 2000 and June 2000, then $720 per month between July 2000 and November
2000. The amounts charged to the grant were reasonable, and increased due a charge in the
location of HRCSF’s office. However, these amounts did not correspond to the monthly rent
allocated in the general ledger under OTAG account 0929 200 between January 2000 and
September 2000, which was only $300.

Discrepancies occurred because Tides Center staff performed the accounting function and
prepared the general ledger while the HRCSF prepared the requests for grant funds. Consistent
reconciliations were not performed by the Tides Center or the HRCSF to ensure the amounts in
the general ledger corresponded to the withdrawals from the grant. The Tides Center also did not
have sufficient staff to monitor Federal grants, or place sufficient emphasis on ensuring the
general ledgers matched the amounts requested from the grants. The Tides Center has recently


                                                                                          Page 7
hired additional staff to monitor grant activity, which it believes will help resolve any accounting
deficiencies.

Quarterly Progress Reports

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

The grant agreement for grant FFOT00005CA was signed by the HRCSF and the Tides Center in
January 2001. The agreement requires 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.

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

The HRCSF and Tides Center did not submit timely quarterly progress reports to HUD in a
consistent manner. In addition, standard forms SF 269 and SF 424A were not completed and
submitted to HUD. Progress report narratives were only submitted with draw requests for funds.
As a result, progress reports were not submitted timely for the period of January 1999 through
December 1999 and January 2001 through June 2001. The following table summarizes which
reports were submitted timely and whether standard forms were included:

      Quarter                       Progress Report         Report    Submitted Submitted
                                   Submitted to HUD         Timely     SF 269   SF 424A
      Jan. 1999 – March 1999          2/4/00                  No         No        No
      April 1999 - June 1999          2/4/00                  No         No        No
      July 1999 - Sept. 1999          2/4/00                  No         No        No
      Oct. 1999 - Dec. 1999           3/2/00                  No         No        No
      Jan. 2000 – March 2000     3/2/00 & 4/14/00             OK         No        No
      April 2000 - June 2000      5/00 & 7/12/00              OK         No        No
      July 2000 - Sept. 2000  8/00, 9/00, & 10/3/00           OK         No        No
      Oct. 2000 - Dec. 2000      11/00, 12/18/00              OK         No        No
      Jan. 2001 – March 2001 Jan submitted 9/4/01, others     No         No        No
                                     prepared 10/29/01

      April 2001 - June 2001       Prepared 10/29/01          No          No          No
      July 2001 - Sept. 2001       Prepared 10/29/01          OK          No          No

Due to the lack of complete and timely reporting, there was insufficient information available for
HUD to monitor the program and track progress. However, there was also no information
available to show HUD attempted to enforce compliance by holding funds due to non-

                                                                                             Page 8
submission, and only issued correspondence to the grantee concerning this matter in January
2002. Both the HRCSF and the Tides Center maintain they received little guidance or input
from HUD on the report submission. As a result, the HRCSF and the Tides Center believed it
was sufficient to only submit progress information as part of their draw requests, and standard
forms were not required.

The HRCSF Participated in Activity Which Included Elements of Lobbying

MAHRA specifically prohibits the use of Section 514 funds to lobby members of Congress or
their staff. However, HRCSF staff participated in NAHT annual conferences and teleconference
calls that included elements of lobbying on a Federal level. The NAHT organization performs
lobbying on housing issues, including the development of a grass roots tenant movement to
shape housing policy. NAHT coordinates annual conferences which encourage participants to
lobby, but also include training and information pertinent to the Mark-to-Market and OTAG
program. The HRCSF staff attended the national conferences and charged the travel costs to the
OTAG grants. However, there was no evidence the HRCSF participated in lobbying activity.

NAHT also coordinates routine national teleconferences, sponsored by members.
Teleconference agendas showed NAHT scheduled brief discussions related to lobbying on a
Federal level. HRCSF participated in the teleconferences, incurring long distance telephone and
staff charges. In addition, the HRCSF sponsored a teleconference, and as of June 27, 2002,
planned to request a withdrawal of $469 from the OTAG grant as reimbursement. HRCSF staff
stated they only listened to the teleconferences for information on current legislation, and were
not lobbying. The amount of time actually spent discussing lobbying could not be determined
based on available information. However, we believe the expense involved would not be
material to the grants. There is also no information to suggest HRCSF staff were actively
involved in NAHT’s lobbying activities or the HRCSF violated program requirements.


    AUDITEE COMMENTS AND OIG EVALUATION OF AUDITEE COMMENTS

We provided our draft report to the auditees for its comments on August 30, 2002. The auditees
provided their comments on September 10, 2002. An additional response was provided on
September 23, 2002, due to the addition of recommendation 1D to the draft report. We also
obtained further clarification during an exit conference discussion with Tides Center officials on
September 24, 2002. We included the auditees’ written comments in Appendix B of the report.
The management controls response included four attachments. We did not include the 12
additional pages associated with these attachments since they were not directly relevant to our
conclusions and recommendations. The documents included information on the Tides Center’s
written procedures to ensure projects do not engage in lobbying activities, and its accounting
structure and procedures.

The HRCSF and Tides Center generally agreed with our conclusions, but they included
additional comments and requested minor adjustments to the report. We considered the auditees’
requests and appropriate changes are reflected above.



                                                                                            Page 9
The Tides Center attributed the problems with its reconciliation of grant expenses to its growth
in grant programs and search for experienced staff. However, we note the reconciliation problem
spanned the two-year period of 2000 to 2001, and had still not been resolved while the audit was
in process in June 2002. We believe the reconciliations and adjustments could have been
performed by accounting staff (whether existing or additional contracted assistance), and did not
require the auditees to wait until new government grant experienced staff were recruited. As a
result, we conclude the auditees did not attribute sufficient emphasis on ensuring the
reconciliations were performed so the general ledger would reflect the actual expenses attributed
to the grant.


                                   RECOMMENDATIONS

We recommended that you:

1A. Require the HRCSF and Tides Center to develop procedures to maintain accurate activity
    reports identifying all time spent on the OTAG program, and charge the grant for the
    payroll costs attributable to the actual time spent on OTAG activity.

1B. Require the HRCSF and Tides Center to reconcile payroll charged to the grant to the
    amounts that should have been charged based on available activity reports. Demonstrate
    amounts charged in other periods were less than actual, to offset the excessive $4,114.
    Return any excessive amounts collected to the OTAG.

1C. Require the HRCSF and Tides Center ensure amounts attributed to the OTAG in the
    general ledger correspond to amounts requested for reimbursement through the
    performance of periodic reconciliations.

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

1E. Require the HRCSF and Tides Center 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 Forms
    269 and 424A.




                                                                                         Page 10
                                MANAGEMENT CONTROLS

In planning and performing our audit, we considered the management controls relevant to the
HRCSF and Tides’ 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 and procedures over grant activities and related disbursements,
   ·   Controls and procedures over grant receipts, and
   ·   Controls and procedures over the reporting of activities and cost.

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 grant activities are properly recorded in the general ledger
       accounting system,
   ·   Lack of polices and procedures to ensure that salaries and time records met the standards
       of OMB Circular A-122, and charges to the grant are based on those records,
   ·   Lack of a procedures to ensure activities and financial information is reported to HUD in
       a timely fashion, and


                             FOLLOW-UP ON PRIOR AUDITS

The Office of Inspector General performed no previous audit of the HRCSF or the Tides Center.




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                                                                            Appendix A
                 SCHEDULE OF QUESTIONED COSTS


Recommendation                      Type of Questioned Costs
    Number                 Ineligible 1/            Unsupported 2/
      1B                                                $4,114

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 12
                   Appendix B
AUDITEE COMMENTS




                      Page 13
Page 14
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)
Amos Smith, Government Grants Administrator, Tides Center, The Presidio, P.O. Box
    29907, San Francisco, California 94129-0907
Rebecca Logue-Bovee, Executive Director, Housing Rights Committee of San Francisco, 427
    South Van Ness Avenue, San Francisco, California 94103




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