oversight

Congressionally Requested Audit of the Outreach and Training Assistance Grants Awarded to the National Housing Trust

Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-12-09.

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

                                                  Issue Date: December 9, 2002
                                                  Audit Case Number: 2003-AO-1002




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

              [Signed]
FROM: Saundra G. Elion, Director, Headquarters Audits Division, GAH


SUBJECT: Congressionally Requested Audit of the Outreach and Training Assistance Grants
          Awarded to the National Housing Trust


                                      INTRODUCTION

We completed an audit of the Outreach and Technical Assistance Grants (OTAGs) awarded to
the National Housing Trust (NHT). The audit identified that NHT properly accounted for the
direct costs charged to the OTAGs. However, NHT overcharged the OTAGs over $29,000 for
employee services and included indirect costs in its billing rates that had not been approved. In
addition, NHT did not maintain records to account for non-billable hours and received $946 in
duplicate payments. However, we did not identify any costs related to lobbying activities. Our
report contains seven recommendations to address the issues identified in the report and other
recommendations to strengthen management controls over the grantees.

Section 1303 of the FY 2002 Defense Appropriations 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 OTAGs and Intermediary Technical Assistance Grants (ITAG) administered by the
Office of Multifamily Assistance Restructuring. Consistent with the Congressional directive, we
reviewed the eligibility of costs with particular emphasis on identifying ineligible lobbying
activities.

Our objective was to determine whether NHT expended Section 514 grant funds for only eligible
activities as prescribed in MAHRA, the Notice of Funding Availability (NOFA), the Grant
Agreement, or other HUD requirements to further the Mark-to-Market Program. Because
Section 514 specifically prohibits the use of grant funds for lobbying Congress, we also
evaluated whether NHT expended funds for 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 NOFA, the OTAG
grant agreements, 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.
Additionally, we reviewed: applicable sections of the FY 2002 Department of Defense
Appropriations Act; IRS Publication 557, “Tax Exempt Status for Your Organization;” NHT’s
applications, project activities, and quarterly and financial reports.

NHT was awarded $474,800 for 21 grants to conduct outreach and technical activities in 14
states. We reviewed a representative selection of 11 of the 21 grants (52 percent) awarded to
NHT. During our audit period NHT expended $336,660 of OTAG funds for activities related to
all 21 grants. Of the $336,660, $172,235 or 51 percent was expended on OTAG activities for the
11 grants in our sample. We also reviewed the salaries charged to all 21 OTAGs.

The audit covered the period October 1, 1998, through May 31, 2002. We performed the
fieldwork at NHT’s Office in Washington, DC, from June through 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 NHT during our
review.

We provided our draft report to NHT for their comments on November 18, 2002. On
November 25, 2002, NHT provided their written comments. NHT acknowledges and concurs
with the report findings, is prepared to repay all ineligible funds that they received, and has
engaged a CPA firm to establish its indirect cost rate. In addition, NHT will not make any draw
down request under the OTAG program until OMHAR approves its indirect cost rate. We
summarized NHT’s written comments to our draft report after each finding and included the
complete text in Appendix B.

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 at (202) 708-1342.

                                         SUMMARY

Our audit identified that NHT properly accounted for the direct costs charged to the OTAG.
However, NHT: (1) overcharged the OTAGs over $29,000 for employee services; (2) included
unallowable and questionable costs in its indirect cost pool; (3) did not maintain records of
employee’s total activities; and (4) received $946 in a duplicate payment. We did not find any
activity or cost related to lobbying.




                                               2
                                        BACKGROUND

The Multifamily Assisted Housing Reform and Affordability Act of 1997 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 NOFA in FY 1998 and a second in FY 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 NOFA 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 their
jurisdictions. The OTAG NOFAs 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.

HUD regulations at 24 Code of Federal Regulations part 84 contain the uniform administrative
requirements for grants between HUD and nonprofit organizations. The regulations (24 CFR

                                                 3
84.27) require that nonprofit grantees utilize the Office of Management and Budget (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 cost charged to the grant, the Circular establishes restrictions for indirect
costs, and specific methods and record keeping to support the allocation of costs.

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

NHT was established in January 1986 to preserve the existing stock of federally assisted housing
throughout the United States for long-term low and moderate income use. NHT received 21
OTAGs (7 in FY 1998 and 14 in FY 2000) to provide outreach and technical assistance activities
in 14 states. The total amount awarded for the grants in FY 1998 was $255,000 and $219,800 in
FY 2000. The period of performance for the grants was 3 years.

The grantees’ requirements were defined in the NOFA. OTAG grantees had to identify their
specific jurisdiction and the activities they would undertake to accomplish their objectives.
Some of the activities included:

   §       Identifying residents and resident groups living in eligible Mark to Market and
           enforcement properties with rents greater than market rents;

   §       Providing outreach and training to tenants to explain the Mark to Market Program and
           residents’ homeownership options;

   §       Organizing residents of eligible low-income housing so the tenants can effectively
           participate in the Mark to Market process;

   §        Establishing an information clearinghouse as a resource to resident organizations,
           community groups, and potential purchasers within their assign jurisdiction; and

   §       Assisting tenants and others approved by HUD to understand their rights under the
           Section 8 renewal or opt-out process.

In addition to the OTAGs, NHT received four ITAGs and $1,617,000 from non-Federal sources.
The majority of NHT’s support came from grants, consulting income, and interest on notes
receivables. For example, NHT received $585,000 from the Fannie Mae Foundation and
$735,000 from the Ford Foundation.

NHT received annual financial audits of their activities for the years ending June 30, 1998,
through 2001. The auditor rendered an unqualified opinion for each of the four years.


                                                 4
                                  FINDING 1
                OVERCHARGES OF INDIRECT COSTS MADE TO GRANTS

NHT overcharged the OTAGs for employee services. These overcharges occurred because NHT
used budgeted amounts for the indirect costs included in the billable rate calculations for each
employee. As a result, $29,436 of OTAG funds were improperly used.

In accordance with OMB Circular A-122, Attachment B, Paragraph 7, “Compensation for
Personal Services,” reasonable compensation and fringe benefits to employees are grant-
fundable costs. Compensation for employees on federally sponsored work will be considered
reasonable to the extent that it is consistent with that paid for similar work in the organization's
other activities. OMB Circular A-122 also states that budget estimates do not qualify as support
for charges to the grant.

NHT overcharged the OTAGs because the billing rates charged to the grants exceeded the actual
billing rates1 as determined by NHT. The individual billing rates NHT used to charge the
OTAGs were based on NHT’s projected operating budgets, not actual expenses. However,
during our review, NHT realized it should have made adjustments to its billing rates (to reflect
actuals) and took action to correct this deficiency. NHT’s corrective action resulted in the
preparation of new billing rate schedules2 that were based on the actual costs incurred for
indirect activities. Table 1 shows the difference between the OTAG charges and the actual
billing rates that caused NHT to overcharge the OTAGs by $29,436 during the period July 1998
through March 2002.




1
 NHT’s methodology for calculating actual billing rates is discussed in Finding 2.
2
 On August 20, 2002, NHT prepared four new billing rate schedules for the period July 1998 through June 2002.
The schedules included the billing rates for all NHT professional staff (these schedules were not restricted to
employees who charged the OTAGs).


                                                        5
                                   Table 1: Overcharges to OTAGs

                                   Actual     Rate
                                   Billing   Billed to                  Hours
        Year      Employee         Rate 1    OTAGs 2 Difference         Billed    Overcharges 3
        1999            1         $ 59.00     $ 70.00      $ 11.00      167.80      $ 1,845.80
                        2          120.00      130.00        10.00       38.46           384.60
                        3           71.00       70.00        (1.00)      20.50           (20.50)
                        4**                     60.00        60.00        1.40            84.00
        2000            1           63.00       70.00         7.00      430.46         3,013.22
                        1~          63.00       80.00        17.00       99.25         1,687.25
                        2          138.00      130.00        (8.00)     138.06        (1,104.48)
                        5           97.00      130.00        33.00       16.00           528.00
        2001            1           62.00       80.00        18.00      999.10       17,983.80
                        2*         148.00      130.00       (18.00)     202.32        (3,641.76)
                        3           78.00       85.00         7.00       15.00           105.00
                        4**                     60.00        60.00       16.00           960.00
        2002            1           67.00       80.00        13.00      667.33         8,675.29
                        2*         141.00      130.00       (11.00)     195.56        (2,151.16)
                        3           87.00      100.00        13.00       83.00         1,079.00
                        5          119.00      120.00         1.00        7.80             7.80

       Total                                                                        $ 29,435.86

       **Administrative Staff salaries and benefits are included in Indirect Costs.
        ~ Employee #1 charged 2 different rates.
       * Rate excludes car allowance.
       1
           Rate NHT calculated based on actual costs.
       2
           Rate NHT charged OTAGs based on projected operating budgets. The billing rate
           includes the annual salary, fringe benefits and payroll taxes, and indirect costs for
           NHT’s employees.
       3
           Charges through March 2002.




These funds could have been used to further the Mark-to-Market Program by providing training
to residents and tenant organizations.

                                          AUDITEE COMMENTS

The Executive Director for NHT agrees with our audit finding regarding the overcharges and
unallowable costs and is prepared to immediately repay $29,436 to HUD.

In regard to Recommendation1B, the Executive Director states that he believes this
recommendation has been resolved by the program methodology established by NHT in
cooperation with its CPA firm, Reznick, Fedder and Silverman (RF&S). Actual expenses, rather
than budgeted expenses will be utilized in establishing NHT’s indirect cost rate. RF&S will
perform an annual audit of this rate for compliance with the OMB Circular and NHT will submit
this rate to OMHAR for approval. With OMHAR approval and the use of actual audited

                                                          6
expenses, NHT intends to meet its burden of controls. In addition, NHT will not make any draw
requests under the OTAG program prior to obtaining OMHAR approval on its cost allocation
plan.

                    OIG EVALUATION OF AUDITEE COMMENTS

We believe the actions NHT has taken and plans to take should correct the identified
deficiencies; therefore, we revised Recommendation 1B.

                                 RECOMMENDATIONS

We recommend that the Director of OMHAR:

1A. Require NHT to repay the $29,436 in overcharges made to the OTAGs.

1B. Obtain documentation assuring that NHT has developed an indirect cost rate in compliance
    with OMB Circular A-122 as outlined in their response. If you are unable to obtain such
    assurances in a timely manner, consider suspending future grant funding.




                                             7
                                FINDING 2
        INDIRECT COSTS NOT IN COMPLIANCE WITH OMB CIRCULAR A-122

NHT’s indirect cost pool included unallowable and questionable costs. This occurred because
NHT did not comply with the requirements of OMB Circular A-122. As a result, we could not
determine the extent to which the indirect costs may have been overstated.

OMB Circular A-122 provides that if a nonprofit organization decides to claim indirect costs, it
must have an approved indirect cost rate. A nonprofit organization, such as NHT, which has not
previously established an indirect cost rate with a Federal agency, must submit an indirect cost
proposal to that agency immediately after notification of an award, and in no event should the
proposal be submitted later than 3 months after the effective date of the award. OMB Circular
A-122 also describes the types of allowable costs that may be included in indirect costs, the
conditions under which costs may be claimed, and the various methods that nonprofit
organizations can use for allocating indirect costs.

NHT established annual billing rates for each of its program staff members3 as a means of
recovering operating costs. The billing rates included annual salary, benefits, and payroll taxes
as well as a pro rata share of indirect costs for each program staff member. These costs (direct
and indirect) were divided by 1600 hours, the annual billable hours, to determine the individual
billing rates. We concluded that the direct costs (annual salary, benefits, and payroll taxes) were
reasonable and supported; however, we could not verify the reasonableness of the indirect costs
claimed and the base used to calculate the billable rates.

Initially, NHT used budgeted amounts for indirect costs, but during our review, revised those
costs to show actual expenses, and to comply with OMB Circular A-122. However, after making
these corrections, NHT still did not submit an indirect cost proposal to OMHAR for approval as
required by the Circular.

NHT’s indirect cost consisted of an overhead pool that included the expenses shown in Table 2.




3
 Program staff included all professional personnel. Administrative and temporary staff were included as indirect
costs.

                                                         8
                     Table 2: Indirect Costs Included in the Billing Rates

                                            1999           2000       2001       2002
               Office Rent/Storage        $ 50,261       $ 58,227   $ 81,477   $ 97,491
               Administrative Staff         11,209         40,716     59,347     72,233
               Administrative Temps         19,495          8,778     10,454     18,099
               Consultants-Personnel                                              2,922
               Computer Assistance           5,643          3,863      2,608     10,365
               Maintenance/Rent/Repair       1,813          1,984      2,146      3,000
               Legal/Accounting/Payroll      4,841          8,802     25,520     18,358
               Insurance                     5,112          5,389      5,835      7,064
               Travel/Meetings              17,199         14,441     11,431      9,153
               Subscriptions/Dues/Misc.      4,796          5,226      4,767      5,933
               Telephone                     6,321          8,053     15,123     13,563
               Office Supplies               8,900         13,655      9,978      9,886
               Postage/Shipping              2,102          1,651      2,735      2,352
               Printing & Copying            2,090          9,420      7,187     12,156
               State Franchise Taxes           195            325        190        417
               Resident Services            16,326         48,638                28,763
               Interest on Loans            20,500         25,124     25,000     24,375
               Depreciation                  7,200          7,224      8,183      8,183

               Actual Indirect            $184,003       $261,516   $271,981   $344,313
               Costs


While we did not examine supporting documentation for each line item in NHT’s indirect cost
calculation, we did identify certain costs that should not have been included in the indirect cost
pool.

   ·   Unallowable Costs. OMB Circular A-122 states that interest on loans is unallowable;
       therefore, the interest ($94,999) should be excluded from the indirect cost pool.
   ·   Questionable Costs. NHT billed the OTAGs directly for telephone, travel and meetings,
       and printing and copying expenses. The OTAGs included in our sample were charged
       $30,884 for these costs. These and any other similar costs directly charged to specific
       funding sources should be excluded from the indirect cost pool before allocating them to
       all projects.
   ·   Allocation Bases. More than one base may be appropriate for NHT. For example, a
       more reasonable base for allocating office rent would be square footage, in lieu of equally
       distributing it among professional employees. Also, allocating indirect costs based on
       1600 hours may have inflated the billing rates. NHT used 1600 hours as the base for
       calculating the annual billable rates for each employee. We believe NHT should have
       used 2,080 (the total annual billable hours an employees can work) less the actual time
       for vacation, holiday, sick, and personal leave as the base for determining each
       employee’s annual billing rate.

NHT should obtain an approved indirect cost rate because NHT has multiple funding sources,
many of which are not on a reimbursable basis such as the OTAGs and ITAGs. HUD is NHT’s
only Federal funding source. Private entities, such as the Ford Foundation and the Fannie Mae
Foundation, are not charged the same billing rates as those charged to the OTAGs. According to

                                                     9
the NHT Controller, the grants from private sources have different rates because they are not cost
reimbursable. Consequently, we have no assurance that the indirect costs charged to the OTAGs
represent a fair and equitable distribution of NHT’s costs.

As a result of these deficiencies, we could not determine the reasonableness of the indirect costs
(included in the billing rates) that NHT charged to the OTAGs.

                                   AUDITEE COMMENTS

The Executive Director and RF&S concur that interest on loans should not have been included in
NHT’s billing rates. The Executive Director further states that RF&S did not discover any other
unallowable costs in the overhead pool. Furthermore, RF&S has developed an indirect cost rate
method that complies with the OMB Circular. Upon approval by OMHAR, NHT will utilize the
rate in all applications for grant funds.

On behalf of NHT, RF&S calculated $6,329 in overcharges made to the OTAGs from 1999
through 2002 because NHT included interest on loans in its overhead pool. NHT is prepared to
repay this amount immediately as interest on loans has been deducted from all staff overhead for
the 4 years of the grant. The Executive Director states that with the help of RF&S’ compliance
audits, there will be no more recurrence of this type of misstep.

                     OIG EVALUATION OF AUDITEE COMMENTS

We acknowledge that NHT has taken preliminary corrective actions to comply with OMB
Circular A-122 and to address the intent of our finding. However, to ensure that NHT fully
implements the requirements, we revised our recommendations.

                                    RECOMMENDATION

We recommend that the Director of OMHAR:

2A. Ensure that NHT submits its indirect cost proposal for approval by December 31, 2002.

2B. Require NHT to repay the $6,329 in unallowable interest on loans charged to the OTAGs.

2C. Review NHT’s indirect cost proposal and determine the reasonableness of the proposed
    allocation methodology. Recover any additional excessive, unallowable, and unsupported
    charges to the grants (that were not specifically addressed in this report).




                                               10
                                     FINDING 3
                   EMPLOYEES’ TOTAL ACTIVITIES NOT ACCOUNTED FOR

NHT did not maintain records of employees’ total activities. Specifically, NHT did not record
non-billable hours worked by employees. This occurred because NHT only required its staff to
maintain hours that were billed and reimbursed by a client. As a result, NHT may not have
properly accounted for hours charged to OTAG activities.

OMB Circular A-122 places specific salary recordkeeping requirements on the grantee. The
grantee must maintain personnel activity reports that account for the total activity for which an
employee is compensated for in the fulfillment of obligations to the organization. The report
must reflect an after the fact determination of actual activity for each employee. 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.

Although NHT has the capacity to capture total time by employee, it only maintained records of
billable hours worked by each employee. “Timeslips” (an automated timekeeping system) was
used to record and track the professional staff members’ project-specific work for third party
clients or specific funding sources. Timeslips not only captured the hours worked but calculated
the amount to be charged to each project based on established billable rates.

NHT’s employees did not account for hours spent performing non-billable activities. According
to NHT’s President, the staff was not required to enter hours that could not be billed back to a
client as this process was time consuming and non-productive to enter hours into Timeslips for
charges that would not be reimbursed.

From July 1998 through March 2002, NHT charged a total of 3,098 hours for five4 employees
who performed activities relating to the 21 OTAGs. Table 3 shows the number of hours each
employee charged to OTAG.

                           Table 3: Total Hours Charged to OTAGs

                  Employee                           Years                       Total
                                   1999       2000        2001            2002
                       1           168        530         999             667     2,364
                       2            38        138         202             196       574
                       3            21         -           15              83       119
                       4              1        -           16              -         17
                       5            -          16          -                 8       24

                 Total Hours Charged by NHT                                       3,098

NHT’s President stated that the vast majority of the staff time was spent performing non-billable
activities that were not project specific or designated to benefit any particular funding source.
These activities included community and nonprofit educational programs and forums, fund


4
    NHT’s staff consisted of from four to eight professional employees.

                                                          11
raising, administration, and public benefit work. However, it should be noted that these activities
are indirect costs that were included in the billable rate calculation.

NHT’s policy to not require employees to account for non-billable hours is contrary to the
requirements of OMB Circular A-122 which specifically requires that all time be accounted for.
As a result, NHT employees may have charged HUD for hours spent performing activities
unrelated to the grant.

                                   AUDITEE COMMENTS

NHT has revised its timekeeping policy to include a more comprehensive timekeeping system.
The Executive Director of NHT will require employees to maintain detailed timesheets to record
all daily activity.

                     OIG EVALUATION OF AUDITEE COMMENTS

The proposed timekeeping system appears to be comprehensive and in compliance with OMB
Circular A-122.

                                    RECOMMENDATION

We recommend that the Director of OMHAR:

3A. Ensure that NHT prepares and maintains salary recordkeeping reports in accordance with
    OMB Circular A-122.




                                                12
                                    FINDING 4
                           DUPLICATE PAYMENT RECEIVED

NHT received $846 as a duplicate payment for the same activities. This duplicate payment
occurred because adequate controls had not been established for reviewing and approving
payment requests. As a result, OTAG funds were disbursed unnecessarily, and could have been
put to better use by providing additional regional outreach activities.

24 CFR, part 84.21(3), “Standards for Financial Management Systems,” states that recipients’
financial management systems shall provide for effective controls over and accountability for all
funds, property, and other assets.

The NHT Controller advised us that she encountered problems when she initially attempted to
make an electronic draw down for $846. Because she did not believe the transaction had been
accepted, she did not send a payment voucher to OMHAR for approval. However, she did
inform the OMHAR official responsible for approving vouchers of this and was told he would
take care of the problem. OMHAR released the $846 to NHT’s account; but, according to the
Controller, NHT never received notification. Therefore, the Controller submitted the $846
voucher along with six other vouchers for payment the following month. OMHAR approved this
voucher, thereby creating the duplicate payment.

OMHAR should have controls to prevent grantees from receiving payments without submitting
vouchers.

NHT acknowledged that it received this duplicate payment and agreed to adjust its next payment
voucher by $846 to account for the overpayment.

                                   AUDITEE COMMENTS

The Executive Director concurs with our conclusion and agrees to repay $946 for the duplicate
payments received. This repayment includes an administrative error of $846 and a duplicate
billing of $100 for a conference fee charged twice to the Wisconsin OTAG.

                     OIG EVALUATION OF AUDITEE COMMENTS

We were aware of the additional $100 duplicate payment and agree that this amount should also
be included as a duplicate payment. We revised our recommendation to include this change.

                                   RECOMMENDATION

We recommend that the Director of OMHAR:

4A. Request NHT to remit $946 to HUD.




                                               13
                               MANAGEMENT CONTROLS

In planning and performing our audit, we considered the management controls relevant to NHT’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.

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:

   ·   Ineligible costs and duplicate payments charged to the grant,
   ·   Indirect cost pool included unallowable and unsupported costs, and
   ·   Salary and time records did not comply with OMB Circular A-122.

                             FOLLOW-UP ON PRIOR AUDITS

The Office of Inspector General performed no previous audit of the National Housing Trust.




                                              14
                                                                           Appendix A

                 SCHEDULE OF QUESTIONED COSTS


Recommendation                      Type of Questioned Costs
    Number                 Ineligible 1/            Unsupported 2/
      1A                     $29,436
      2B                        6,329
      4A                          946
     Total                   $36,711

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.




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                   Appendix B

AUDITEE COMMENTS




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                                                                              Appendix C

                      EXTERNAL REPORT DISTRIBUTION

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
Linda Halliday (52P), Department of Veterans Affairs, Office of Inspector General, 810
    Vermont Ave., NW, Washington, DC 20420
William Withrow (52KC), Department of Veterans Affairs, OIG Audit Operations Division,
    1100 Main, Rm 1330, Kansas City, Missouri 64105-2112
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
The Honorable Barbara A. Mikulski, Chairman, Subcommittee on Veterans Affairs, Housing
    and Urban Development and Independent Agencies, Hart Senate Office Bldg., United States
    Senate, Washington, DC 20510
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
Jennifer Miller, Professional Staff, House Appropriations Committee




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