oversight

Congressionally Requested Audit of the Outreach and Training Assistance Grant awarded to the Legal Aid Society of San Diego, Inc., San Diego, California Grant Number FFOT00006CA

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)

                                                        U.S. Department of Housing and Urban Development
                                                                      Office of Inspector General
                                                                                       Pacific/Hawaii Region
                                                                        450 Golden Gate Avenue, Box 36003
                                                                       San Francisco, California 94102-3448




                                                                        MEMORANDUM NO:
                                                                          2002-SF-1807



September 30, 2002



MEMORANDUM FOR:               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:                      Congressionally Requested Audit of the Outreach and Training
                              Assistance Grant awarded to the Legal Aid Society of San Diego,
                              Inc., San Diego, California, Grant Number FFOT00006CA


                                       INTRODUCTION

As directed by Congress, we have completed an audit of the Legal Aid Society of San Diego,
Inc. (LASSD) Outreach and Training Assistance Grant (OTAG) Number FFOT00006CA. The
primary purpose of the audit was to determine whether grant funds were expended in accordance
with the requirements of Section 514 of the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (MAHRA) and other applicable regulations and requirements.
Consistent with the Congressional directive, we reviewed the eligibility of costs with particular
emphasis on identifying ineligible lobbying activities. Although LASSD staff participated in
conference calls and attended conferences, both of which included topics that could be construed
as lobbying, there was no objective way to identify or separate costs associated with the possible
lobbying activities from other eligible OTAG business conducted during the conference calls or
at the conferences. All other grant costs appear to have been incurred in compliance with the
applicable regulations and requirements.
                                        BACKGROUND

The Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA) established
the Office of Multifamily Housing Assistance Restructuring (OMHAR) within HUD. One of
OMHAR’s responsibilities under MAHRA is the administration of the Mark-to-Market Program
including the award and oversight of the Section 514 Outreach and Training Assistance Grants
(OTAGs) and Intermediary Technical Assistance Grants (ITAGs). The objective of the Mark-to-
Market Program is 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.

Congress recognized that tenants of the affected projects, as well as residents of the
neighborhoods, the local governments, and other parties would be impacted 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 in the Mark-to-Market
process, for the period 1998 through 2001. The Secretary authorized $40 million and HUD staff
awarded grants of about $26.6 million to 38 nonprofit organization grantees (a total for 81 grants
awarded). The funds were awarded under Notices of Fund Availability (NOFAs) in fiscal years
1998 and 2000 as either OTAG or ITAG grants. The Notices of Fund Availability say the ITAG
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 Notices of Fund Availability say 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. ITAG grantees serve primarily as pass-through
agencies to sub-recipient agencies that carry out the eligible activities whereas OTAG grantees
are directly involved in carrying out the activities. ITAG sub-recipients and OTAG grantees are
primarily involved in organizing and educating tenants of affected properties. However,
Congress specifically prohibited using Section 514 grant funds for lobbing members of
Congress.

On May 30, 2000, the LASSD applied for an OTAG in the amount of $450,000. On December
13, 2000, LASSD accepted HUD’s award of an OTAG for $75,000 pursuant to Section 534 of
the fiscal year 2000 Appropriations Act. On January 5, 2001, HUD notified LASSD of a
revision to the award authorizing a total award covering a three-year period in the amount of
$225,000. However, on March 18, 2002, HUD advised LASSD that the total amount authorized
for their OTAG under the Letter of Credit Control System (LOCCS) was only $115,000. At the
time of our review, LASSD had received four draws from LOCCS on the OTAG totaling
$59,676. The $115,000 authorized OTAG represents only about 1.5 percent of currently
projected LASSD funding during the three-year grant period. LASSD receives the majority of
its Federal funding from the Legal Services Corporation and has obtained audited financial
statements annually in accordance with Office of Management and Budget (OMB) Circular A-
133. The last two audits covering the fiscal years ending June 30, 2000, and June 30, 2001, have
expressed unqualified opinions and no findings. The OTAG has not been previously monitored
onsite by anyone from HUD.


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                                METHODOLOGY AND SCOPE

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 cost
for nonprofit grantees (OMB Circular A-122). In planning and performing the audit, we
considered the relevant grantee management controls to determine our audit procedures, not to
provide assurance on the controls. Although LASSD’s management controls appear to be
effective for limiting risk, we placed no reliance on the controls to limit the scope of our review.
This was because the minimal amount of grant activity allowed us to review 100 percent of the
expenses charged to the OTAG in a relatively expeditious manner.

The audit covered the period from April 2001 through June 2002 and the fieldwork was
performed at the LASSD offices in San Diego, California. We conducted the audit in
accordance with Generally Accepted Government Auditing Standards.


                                      RESULTS OF AUDIT

For the most part, the LASSD carried out the grant program and expended grant funds in full
accord with the requirements of Section 514 of the MAHRA and other applicable regulations and
requirements. LASSD staff did participate in numerous telephone conference calls sponsored by
the National Alliance of HUD Tenants (NAHT) that may have included discussions of lobbying
activity. They also attended a NAHT sponsored national “Save Our Homes” conference in
Washington, DC and a “Housing California” conference in Sacramento, California both of which
included sessions that could be construed as relating to lobbying. However, there was no
objective way to identify or separate costs associated with the possible lobbying activities from
other eligible OTAG business conducted during the conference calls or at the conferences.
Furthermore, although the costs associated with any potential lobbying activity during the
conference calls or conferences cannot be specifically identified they would not have been
material in relation to the total $59,676 of OTAG expenditures. The $59,676 total is itself a
modest amount. We do believe the LASSD and other grantees should be provided with
clarification as to the Department’s position on the eligibility of costs associated with NAHT
conference calls, NAHT annual conferences and other conferences that include activities which
could be construed as lobbying.



                     AUDITEE COMMENTS AND OIG EVALUATION

The results of our review were discussed with LASSD staff onsite at the conclusion of our
fieldwork on June 26, 2002, and the draft report was discussed by telephone with the LASSD
Executive Director on September 16, 2002. The LASSD Executive Director expressed his full
agreement with the draft report and declined the opportunity to provide a written response.




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                                   RECOMMENDATIONS

No recommendations will be controlled under this report since the need for clarification as to the
Department’s position on NAHT conference calls, NAHT national conferences and other
conferences impacts most if not all OTAG and ITAG grantees, not just the LASSD.

Should you or your staff have any questions, please contact me at (415) 436-8101.




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                                                                            Attachment A


                       DISTRIBUTION OUTSIDE OF HUD


Board of Directors, Legal Aid Society of San Diego, Inc., 110 South Euclid Avenue, San
    Diego, CA 92114
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, Suite 709 Hart 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 Committee on Appropriations
      (jennifer.miller2@mail.house.gov)




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