oversight

Congressionally Requested Audit of Section 514 Outreach and Training Assistance Grants Awarded to Tenants United for Housing, Inc.; Chicago, Illinois; Grant Numbers FFOT00013IL and FFOT98007IL

Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-10-29.

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

                                                                Issue Date
                                                                        October 29, 2002
                                                                Audit Case Number
                                                                        2003-CH-1003




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


FROM:          Heath Wolfe, Regional Inspector General for Audit, Region V

SUBJECT:       Congressionally Requested Audit of Section 514 Outreach and Training
               Assistance Grants Awarded to Tenants United For Housing, Inc.; Chicago,
               Illinois; Grant Numbers FFOT00013IL and FFOT98007IL

                                       INTRODUCTION

We completed an audit of Tenants United for Housing, Inc.’s Section 514 Outreach and Training
Assistance Grants. The audit identified that Tenants United for Housing: (1) did not establish a
cost allocation plan to allocate costs to the Grants; (2) failed to maintain time records for staff
that specifically show the time they spent working on the Grants’ activities; and (3) needed to
return $6,900 in Grant funds to pay for two meetings that were canceled. Our report contains
four recommendations to address the issues identified in this audit.

Section 1303 of the 2002 Defense Appropriation Act, Public Law 107-117, directed HUD’s
Office of Inspector General to audit all activities funded by Section 514 of the Multifamily
Assisted Housing Reform and Affordability Act of 1997. The directive included the Outreach
and Training Assistance Grants and Intermediary Technical Assistance Grants administered by
HUD’s Office of Multifamily Housing Assistance Restructuring. 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 Tenants United for Housing’s policies and procedures for the
period October 1, 1998 through April 1, 2002. We also reviewed and evaluated Tenants’:
management controls over the Outreach and Training Assistance Grants; reliability of computer-
processed data; organizational structure; Board of Directors’ meeting minutes; property files; the
method used for allocating costs; and the Independent Auditor’s Report for July 1, 1999 to June 30,




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2001. In addition, we reviewed bank statements, cancelled checks, cash receipts and
disbursements journals, the Multifamily Assisted Housing Reform and Affordability Act’s
requirements, HUD’s Notices of Funding Availability and Grant Agreements for the Outreach
and Training Assistance Grants, 24 CFR Part 84, and Office of Management and Budget
Circular A-122. We tested 208 of the 597 (35 percent) financial transactions totaling $148,682
that Tenants’ charged to the Grants.

We reviewed Tenants United for Housing’s records and HUD’s records for Tenants. We
interviewed Tenants’ staff and key staff from HUD’s Office of Multifamily Housing
Assistance Restructuring. Our audit covered the period October 1998 through April 2002 for
the two Outreach and Training Assistance Grants that Tenants received. We performed our
on-site audit work between June and August 2002. We conducted the audit in accordance
with Generally Accepted Government Auditing Standards.

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 have them contact Thomas Towers,
Assistant Regional Inspector General for Audit, at (313) 226-6280 extension 8062 or me at
(312) 353-7832.

                                        SUMMARY

Tenants United for Housing, Inc. did not administer its Outreach and Training Assistance
Grants in full compliance with Federal requirements. Specifically, Tenants United for
Housing needed to:

   ·   Prepare a cost allocation plan in accordance with Office of Management and Budget
       Circular A-122;
   ·   Maintain time records that specifically cite charges to the Outreach and Training
       Assistance Grants; and
   ·   Return to HUD unused Outreach and Training Assistance Grant funds.

The Executive Director for Tenants United for Housing said HUD’s Office of Multifamily
Housing Assistance Restructuring did not provide guidance on the proper allocation of costs
or specific record keeping requirements for the Outreach and Training Assistance Grants. As
a result, Tenants could not directly support all charges made to the Grants and needed to
return $6,900 in unused Grant funds. Our report contains recommendations to address these
issues and to strengthen Tenants’ management controls over the Grants.




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                                       BACKGROUND

The Multifamily Assisted Housing Reform and Affordability Act of 1997 authorized HUD’s
Secretary to establish procedures to provide an opportunity for tenants of projects and other
affected parties to participate effectively and on a timely basis in the restructuring process
established by the Act. Section 514(f)(3)(A) of the Act states in part that the Secretary may
make obligations to tenant groups, nonprofit organizations, and public entities for building
the capacity of tenant organizations for technical assistance in furthering any of the purposes
of the Act and for tenant services.

The Multifamily Assisted Housing Reform and Affordability Act of 1997 established HUD’s
Office of Multifamily Housing Assistance Restructuring to administer the Mark-to-Market
Program. The Office of Multifamily Housing Assistance Restructuring works with property
owners, participating administrative entities, tenants, lenders, and others with a stake in the
future of affordable housing.

HUD issued Notices of Funding Availability in Fiscal Years 1998 and 2000 to provide
opportunities for nonprofit organizations to participate in the Section 514 Grants program.
HUD awarded two types of Grants—the Intermediary Technical Assistance Grant and the
Outreach and Training Assistance Grant. The Notices of Funding Availability for the
Intermediary Technical Assistance Grant program states that the program provides funds
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 eligible projects throughout its jurisdiction. The Notices of
Funding Availability for the Outreach and Training Assistance Grant program states that the
program is to provide technical assistance to tenants of eligible Mark-to-Market properties so
that tenants can: (1) participate meaningfully in the Mark-to-Market Program; and (2) affect
decisions about the future of their housing.

Tenants United for Housing incorporated in February 1998 as a nonprofit tenant advocacy
organization. Tenants works in collaboration with the Chicago Rehab Network and the
National Housing Law Project for the preservation of expiring project-based Section 8
housing stock in the City of Chicago, Illinois. Tenants’ Executive Director is Denice Irwin
and its offices are located at 10 West 35th Street, Chicago, Illinois.

There are about 137 properties with approximately 14,359 units providing affordable housing
for some of the State of Illinois' lowest income households. The 20-year Section 8 Program
contracts on these properties began to expire, or will expire, over the next few years. Most of
these properties are owned by for-profit businesses and have few incentives to renew their
Section 8 contracts. These owners may opt-out of the Section 8 Program and rent their units
at market rates or choose to sell the properties. The Outreach and Training Assistance Grant
program provides for outreach and training in the area of those properties with expiring
Section 8 Program contracts in which rents are above the fair market rent and eligible for the
Mark-to-Market Program.



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The Outreach and Training Assistance Grant Agreement for Fiscal Year 1998, between
Tenants United for Housing and HUD, for $350,000 was signed on October 1, 1998. On
January 9, 2001, the Outreach and Training Assistance Grant Agreement for Fiscal Year
2000 in the amount of $450,000 was signed. On March 18, 2002, HUD’s Office of
Multifamily Housing Assistance Restructuring notified Tenants that the authorized amount
for the Fiscal Year 2000 Grant was reduced from $450,000 to $270,000. As of January 23,
2002, Tenants expended $349,780 and $84,643 of the Fiscal Years 1998 and 2000 Grants,
respectively.

The Outreach and Training Assistance Grants represented 43 percent of the total funding
received by Tenants United for Housing. In addition to the funds received from the Outreach
and Training Assistance Grants, Tenants received $527,738 from non-Federal sources as of
June 30, 2001. As required by Office of Management and Budget Circular A-133, Audits of
States, Local Governments, and Nonprofit Organizations, Tenants received an annual
financial audit of its activities for the two-year period ending June 30, 2001. The audit report
contained an unqualified opinion and did not identify that Tenants lacked a cost allocation
plan to allocate indirect costs to the Grants.

                                 FINDING
 Management Over The Outreach And Training Assistance Grants Needs Improvement

Tenants United for Housing, Inc.’s administration of its Outreach and Training Assistance
Grants needs to be improved. Specifically, Tenants United for Housing did not: (1) prepare a
cost allocation plan to allocate costs to the Grants; (2) annotate on its employees’ time records to
show their time spent working on the Grants; and (3) return unused Grant funds in the amount
of $6,900. As a result, Tenants could not be assured that all legitimate costs attributed to the
Grants were claimed for reimbursement.

Instead of relying on the provisions of the Multifamily Assisted Housing Reform and
Affordability Act of 1997, Tenants’ Executive Director relied on HUD to provide detailed
guidance on program requirements that included how to establish a cost allocation plan for the
Outreach and Training Assistance Grants. The Executive Director said she believed the Mark-
to-Market Activity Reports that Tenants maintained satisfactorily met Federal record keeping
requirements and claimed that HUD’s Office of Multifamily Housing Assistance Restructuring
did not provide any other guidance. We could not determine if any lobbying activities by
Tenants’ staff occurred since time records did not categorize this as a cost, but nothing came to
our attention that indicated any lobbying expenses were paid with Grant funds. Tenants’
Executive Director said she was aware of the prohibition against lobbying activities and
disallowed a portion of travel expenses from the Grant funds to attend a National Alliance for
HUD Tenants conference in 2001.

                                     Federal Requirements

24 CFR Part 84.27 states for each kind of recipient, there is a set of Federal principles for
determining allowable costs. Allowability of costs will be determined in accordance with the
cost principles applicable to the entity incurring the costs. The allowability of costs incurred



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by nonprofit organizations is determined in accordance with Office of Management and
Budget Circular A-122, Cost Principles for Nonprofit Organizations.

Attachment A of Office of Management and Budget Circular A-122, paragraph 4, states that
costs are allocable to a particular cost objective, such as a grant, contract, project, service, or
other activity in accordance with the relative benefits received. Costs are allocable to a
Federal award if they are treated consistently with other costs incurred for the same purpose
in like circumstances and if they: (1) are incurred specifically for the award; (2) benefit both
the award and other work; (3) can be distributed in reasonable proportion to the benefits
received; and (4) are necessary to the overall operation of the organization although a direct
relationship to any particular cost objective cannot be shown. Any costs allocable to a
particular award or other cost objective under these principles may not be shifted to other
Federal awards to overcome funding deficiencies, or to avoid restrictions imposed by law or
by the terms of the award.

Circular A-122, paragraph 25 of Attachment B, states that lobbying places additional
limitations on the use of Federal funds. The Circular states that grant recipients may not use
Federal funds to: (1) attempt to influence any Federal or State legislation through an effort to
affect the opinions of the general public or any segment thereof. This includes the
introduction of Federal or State legislation; or the enactment or modification of any pending
Federal or State legislation by preparing, distributing or using publicity or propaganda, or by
urging members of the general public or any segment thereof to contribute to or participate in
any mass demonstration, march, rally, fundraising drive, lobbying campaign or letter writing
or telephone campaign (Grassroots lobbying); (2) attempt to influence any legislation
through communication with any member or employee of a legislative body or with any
government official or employee who may participate in the formulation of legislation (direct
lobbying); and (3) provide a technical and factual presentation of information on a topic
directly related to the performance of a grant, contract, or other agreement through hearings,
testimony, statements, or letters to the Congress or a State legislature, or subdivision,
member, or cognizant staff member thereof, except in response to a documented request
made by the recipient member, legislative body, or subdivision.

                           Cost Allocation Plan Was Not Prepared

Tenants United for Housing did not prepare a cost allocation plan to support costs charged to
the Outreach and Training Assistance Grants program. Monthly the Executive Director of
Tenants calculated how much to charge the Grants from Mark-to-Market Activity Reports
submitted to HUD’s Office of Multifamily Housing Assistance Restructuring with each
voucher claim request. However, the method used was not consistent and time records were
not maintained to indicate the number of hours charged to the Outreach Grants. Furthermore,
Tenants did not have a policy or procedures for allocating costs. Instead, Tenant’s Executive
Director wrote comments on each check stub to identify the funding sources to be charged.
As a result, Tenants’ accounting system did not clearly identify those expenditures to be
charged to the Outreach Grants.




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Tenants United for Housing received funding from both private and Federal agencies. For
example, Tenants received $150,000 from the MacArthur Foundation in 2001. Like the
Outreach and Training Assistance Grants program, funds from the MacArthur Foundation
could be used to fund Mark-to-Market activities. Together, the MacArthur Foundation and
the Outreach and Training Assistance Grants accounted for 62 percent of the funds received
by Tenants. Therefore, it was imperative that expenditures related to all funding sources be
separately identified. Eligible Outreach Grant activities were different from the activities
allowed by other grantors, especially on lobbying activities. Tenants failure to segregate
costs made it difficult to determine which funding source paid any lobbying costs and the
eligibility of other costs. Tenant’s Executive Director said Tenants lacked the specific
accounting expertise necessary to prepare a cost allocation plan. In addition, the Executive
Director said Tenants was not provided proper guidance from HUD’s Office of Multifamily
Housing Assistance Restructuring regarding the allocation of costs and specific record
keeping requirements of the Grants.

               Records Did Not Show Staff’s Time Spent Working On The Grants

Tenants United for Housing’s staff time sheets did not identify time spent on the Outreach
and Training Assistance Grants. Therefore, we were unable to identify specific salary
charges to the Grants. The Executive Director of Tenants said she used estimates in lieu of
actual documented time charges to submit monthly voucher claims to HUD for
reimbursement. The Director derived total expenses for work done on all grants1 from Mark-
to-Market Activity Reports that gave details on the number of hours of worked by the
different staff members on four listed activities. The activities included Mark-to-Market,
other programs, administration, and the clearinghouse. Tenants’ Executive Director then
computed a percentage applicable to the Outreach and Training Assistance Grants and
applied this to the individual’s salary. The Director annotated on monthly invoices for all
other expenses to determine the amounts eligible as Grant expenses and added the two costs
together. Since Tenants failed to maintain time sheets to document the exact number of
hours spent by its staff on the Outreach Grants, we were unable to determine the actual
amount of salary to be allocated.

Tenants’ Executive Director said she did not get any specific guidance or training regarding
the proper segregation of costs pertaining to the Outreach and Training Assistance Grants
from HUD’s Office of Multifamily Housing Assistance Restructuring. She said she planned
to recruit a part-time accountant to take care of the accounting issues on a regular basis. In
addition, Tenants was in the process of having a consultant develop a system that will allow
the Executive Director to code expenses that are allocable to the Grants.

                               Unused Grant Funds Were Not Returned

Tenants United for Housing received $8,000 in Outreach and Training Assistance Grant
funds to conduct town hall meetings that were originally scheduled for September 15 and 22,
2001 in Springfield, Illinois. For these meetings, the Executive Director for Tenants

1
    We identified seven non-Federal grants and other miscellaneous grants and contributions received by Tenants
    in addition to the Outreach and Training Assistance Grants.


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estimated the monthly expenses applicable to the Grants and submitted these to HUD’s
Office of Multifamily Housing Assistance Restructuring prior to incurring the expenses. The
meetings were subsequently cancelled due to a lack of interested parties after the September
11, 2001 terrorist attacks. However, Tenants had already incurred $1,100 in nonrefundable
hotel deposits. HUD’s Office of Multifamily Housing Assistance Restructuring instructed
Tenants’ Executive Director to make adjustments by reducing future voucher claims by
$6,900 ($8,000 less $1,100).

            Attendance At National Alliance For HUD Tenants’ Conferences

Tenants United for Housing sent tenant representatives to attend two national conferences in
June 2000 and June 2001 organized by the National Alliance for HUD Tenants in
Washington, DC. The National Alliance for HUD Tenants is an organization involved in
helping tenants and lobbying Congress. The two conferences each covered a four-day period
with the last day devoted to lobbying activities that included meeting members of Congress
to advocate tenant issues. Tenants took the initiative to disallow one-day in travel costs for
the 2001 conference because one of the conference days had lobbying activities scheduled.
However, Tenants lacked documentation to determine whether any lobbying activities
actually took place or the amount attributed to those activities. As a result, we did not
question any of the Outreach and Training Assistance Grant funds used to attend the two
conferences. HUD’s Office of Multifamily Housing Assistance Restructuring did not
question the funding requests, perform any on-site reviews of Tenants’ activities, or review
Tenants’ methods used for charging the Grants.

                                 AUDITEE COMMENTS

We provided our draft audit memorandum report to Tenants United for Housing’s Executive
Director and HUD’s staff during the audit. Tenants’ Executive Director provided her comments
on the draft report on October 14, 2002. The Executive Director for Tenants declined our offer
to hold an exit conference. We included the comments from Tenant’s Executive Director in
Appendix B of this report. Tenants’ Executive Director was provided with copies of the audit
memorandum report.

[Excerpts paraphrased from the comments provided by Tenants United for Housing’s
Executive Director on our draft audit memorandum report follow. Appendix B, pages 15 to
17, contains the complete text of the comments for the draft report.]

OIG’s draft audit memorandum report suggests that Tenants United for Housing did not
administer or use its Outreach and Training Assistance Grant funds for only eligible
purposes. Tenants’ finds this misleading and untrue, and believes the Grant funds were used
for only eligible items.

Tenants’ partially disagrees with the finding regarding the cost allocation plan in the draft
report. Tenants always had a cost allocation plan to assure only proper costs were charged to
the Outreach and Training Assistance Grants. Tenants’ agrees that its cost allocation plan
should be more formalized and documented. However, Tenants’ disagrees that it did not



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have an adequate plan in place. The effectiveness of Tenants United for Housing’s system is
evident in the fact that the OIG auditors spent eight weeks at Tenants’ offices and only noted
one $6,900 exception that Tenants brought to the auditors’ attention.

As noted in OIG’s draft audit report, Tenants had only 597 Grant transactions. That equals
about 120 per year or 10 per month. Consequently, Tenants made a conscious decision to not
spend very limited resources on developing a detailed accounting procedures manual because
the volume and complexity of Tenants’ transactions could not be any simpler. However, in
response to OIG’s concerns, Tenants developed and documented a formalized cost allocation
plan to ensure direct and indirect costs are properly charged to the Grants. The plan, which
was never requested by HUD, is being submitted to HUD’s Office of Multifamily Housing
Assistance Restructuring for approval. Hopefully, this will avoid further suspension of funds
that would only delay reimbursing the $6,900 in unspent funds, continue to take away
tenants’ voices, and impede Tenants’ ability to do its job.

Tenants strongly disagrees that unused Outreach and Training Assistance Grant funds were
not returned to HUD because the facts are not clearly stated and subsequently misleading.
Tenants had valid cost proposal estimates for the town hall meetings and submitted the
quotes for payment. With the September 11, 2001 crisis, the town hall meetings were
cancelled. Tenants United for Housing asked HUD’s Office of Multifamily Housing
Assistance Restructuring how to handle the reimbursement of these funds and were told to
subtract the balance from Tenants’ next voucher request. The next voucher request would
have been attached to Tenants’ October 2001 report. Subsequently, HUD placed a hold on
all Grant funding and Tenants never had the opportunity to submit another payment voucher
to offset the reimbursement. Tenants is owed thousands more under the terms of the Grants
than the $6,900 cited in OIG’s report.

Tenants brought the $6,900 reimbursement to the attention of the OIG auditors. The auditors
did not find the reimbursement. The $6,900 reimbursement has nothing to do with the
adequacy of Tenants’ accounting system or the concerns over its cost allocation plan. If
Grant funding was not postponed for seven months, Tenants’ Executive Director had not
become seriously ill, and Tenants’ staff was not required to spend most of their time
preparing and being available for the OIG audit, the reimbursement would have been settled
months ago and not been an issue in OIG’s audit.

OIG’s draft report states that Tenants’ Executive Director said she uses estimates in lieu of
actual expenses to submit monthly voucher claims to HUD. This is not true. What the
Director said was Tenants had estimates and quotes for the town hall meetings that were
submitted to HUD for funding. The Executive Director never said Tenants only used
estimates for each monthly voucher claim. Tenants always had actual invoices for its
activities charged to the Outreach and Training Assistance Grants. OIG’s auditors saw the
invoices, contracts, and/or bills. The only time Tenants ever used estimates or quotes were
for the town hall meetings and HUD approved them. Tenants’ monthly report also stated the
costs were estimated.




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Tenants strongly disagrees with OIG’s finding regarding salary and time records in the draft
audit report. The statement that Tenants failed to maintain salary and time records is simply
not true. Tenants’ has extensive salary and time records. Tenants’ staff hours were also
recorded in the monthly reports submitted to HUD.

OIG’s draft report indicates that its auditors had difficulty identifying time spent on lobbying
activities. As Tenants United for Housing explained during the audit, it is Tenants’ policy to
not perform any type of lobbying activities under the Outreach and Training Assistance
Grants program. Consequently, Tenants’ disagrees with the finding. In an effort to respond
to OIG’s concern, Tenants reviewed its policies and procedures for keeping time sheets and
will emphasize the importance to all personnel in keeping detailed and thorough time sheets.
Tenants also added a lobbying activity code on its time sheet.

                    OIG EVALUATION OF AUDITEE COMMENTS

Based upon the comments from Tenants United for Housing’s Executive Director, we modified
our audit memorandum report to indicate that Tenants needs to make improvements to its
Grants administration. Tenants should implement the recommendations cited in this audit
memorandum report to ensure that it follows Federal requirements regarding the use of
Outreach and Training Assistance Grant funds.

Tenants did not establish a cost allocation plan as required by Office of Management and
Budget Circular A-122. Tenants’ actions to implement a formal cost allocation should
improve its Grants administration, if the plan meets the Circular’s requirements.

Tenants did not return the $6,900 in unused Outreach and Training Assistance Grant funds to
HUD. While HUD’s Office of Multifamily Housing Assistance Restructuring suspended
Grant funding from October 2001 to March 2002, Tenants failed to take the necessary steps
to return the unused Grant funds once funding was reinstated. Tenants should immediately
return the unused Grant funds to HUD.

We clarified the audit memorandum report to specify that Tenants’ time records did not show
the amount of time its staff spent on the Outreach and Training Assistance Grants. Tenants’
actions to emphasize the importance that its staff keeps detailed and thorough time sheets
should improve its administration of the Grants, if the sheets identify the specific time spent
by the staff on Grant activities.

                                  RECOMMENDATIONS

We recommend that HUD’s Director of Multifamily Housing Assistance Restructuring
require Tenants United for Housing, Incorporated to:

1A.      Implement a cost allocation plan to properly identify Outreach and Training
         Assistance Grant costs through its accounting system.




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1B.      Implement procedures and controls to follow HUD’s regulation and/or Office of
         Management and Budget Circular A-122 regarding: maintaining a cost allocation plan
         to allocate costs; keeping time records to show the specific time staff spent working
         on the Outreach and Training Assistance Grants; and returning unused Grant funds
         promptly to HUD.

1C.      Reimburse HUD $6,900 from Federal funds for the Outreach and Training Assistance
         Grant funds not used for the town hall meetings.

We also recommend that HUD’s Director of Multifamily Housing Assistance Restructuring:

1D.      Consider suspending funding until Tenants United for Housing, Inc. implements a
         cost allocation plan to ensure that only eligible costs receive funding and the
         documentation for each expenditure complies with Office of Management and Budget
         Circular A-122.




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                               MANAGEMENT CONTROLS

In planning and performing our audit, we considered the management controls of Tenants
United for Housing, Inc. to determine our auditing 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 the following management controls were relevant to our audit objectives:


·   Program Operations - Policies and procedures that management has implemented to
    reasonably ensure that a program meets its objectives.


·   Validity and Reliability of Data - Policies and procedures that management has
    implemented to reasonably ensure that valid and reliable data are obtained, maintained, and
    fairly disclosed in reports.


·   Compliance with Laws and Regulations - Policies and procedures that management has
    implemented to reasonably ensure that resource use is consistent with laws and regulations.


·   Safeguarding Resources - Policies and procedures that management has implemented to
    reasonably ensure that resources are safeguarded against waste, loss, and misuse.

We assessed all of the relevant controls identified above.

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 upon our review, we believe the following items are significant weaknesses:

·   Program Operations

Tenants United for Housing did not manage the Outreach and Training Assistance Grants
according to program requirements. Specifically, Tenants did not: (1) establish a cost allocation
plan in accordance with Office of Management and Budget Circular A-122 to allocate indirect
costs to the Grants; and (2) promptly return $6,900 in unused Grant funds for estimated costs
related to two meetings originally planned for September 2001 that were subsequently cancelled
(see Finding).




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·   Validity and Reliability of Data

Tenants United for Housing did not establish a cost allocation plan to allocate indirect costs to
the Outreach and Training Assistance Grants or maintain detailed time records to show staff’s
time spent working on the Grants (See Finding).

·   Compliance with Laws and Regulations

Tenants United for Housing did not follow Office of Management and Budget Circular A-122
regarding the establishment of a cost allocation plan (see Finding).

·   Safeguarding Resources

Tenants United for Housing did not promptly return to HUD $6,900 in Outreach and
Training Assistance Grant funds for anticipated expenses related to meetings originally
planned for September 2001 that were subsequently cancelled (see Finding).




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                         FOLLOW-UP ON PRIOR AUDITS

This is the first audit of Tenants United for Housing, Inc. by HUD’s Office of Inspector
General. The latest Independent Auditor’s Report for Tenants United for Housing covered
the two-year period ending June 30, 2001. The Report contained no findings.




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                                                                                  Appendix A

                          SCHEDULE OF INELIGIBLE COSTS


        Recommendation
           Number                             Ineligible Costs 1/

               1B                                   $6,900
              Total                                 $6,900


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.




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                                                                                   Appendix B

                                  AUDITEE COMMENTS


                                      October 14, 2002


Thomas M. Towers
Assistant Regional Inspector General for Audit
477 Michigan Ave., Room 1790
Patrick McNamara Federal Building
Detroit, MI 48226-2592

       Re: Response to OIG Audit Final Report

Dear Mr. Towers:

       After reviewing the OIG audit draft final report, our comments are as follows:

Summary/Page 2
The first sentence under summary suggests that TUFH did not administer or use their OTAG
funds for only eligible purposes. We find this statement incredibly misleading and untrue.
We believe the OTAG funds have indeed been used for only eligible items. Listed below are
our comments addressing the cost allocation plan, returning unused funds, and salary and
time records.

Cost Allocation Plan
We partially disagree with the auditor’s findings in the report. We have always had a cost
allocation plan to assure only proper costs have been charged to the OTAG grant. We agree
with the auditors that our cost allocation plan should be more formalized and documented,
especially as we grow as an organization. However, we disagree that we have not had an
adequate plan in place. The effectiveness of our system is evident in the fact that the auditors
spent eight weeks in our offices and only noted the one $6,900 exception that we brought to
their attention to begin with.

As noted in the audit report, we have had only 597 transactions in our entire history. That
equals about 120 per year or 10 per month. Consequently, we made a conscious decision to
not spend our very limited resources to this point on developing detailed accounting
procedure manuals and documents because the volume and complexity of our transactions
could not really be any simpler. However, in response to the auditors’ concerns, and as
already noted in our findings response letter, we have developed and documented a
formalized plan and system for assuring direct and indirect costs are properly charged to the
grant. This plan (which previously was never asked for by OMHAR) is being submitted to
OMHAR for approval and hopefully will avoid further suspension of funds that would only



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delay reimbursing the $6,900 in unspent funds, continue to take away the tenants voice, and
impede TUFH’s ability to do their job.

Unused Funds Were Not Returned to HUD
We strongly disagree with the presentation of this finding in the report because the facts are
not clearly stated and subsequently, are misleading.

We had valid cost proposal estimates for the September and October town hall meetings and
those quotes were then submitted for payment. With the September 11th crisis the town hall
meetings scheduled for September 15th and October 13th had to be cancelled. As stated
before, we asked OMHAR how to handle our reimbursement of these funds and were told to
subtract the balance from our next voucher request. In this case, the next voucher request
would have been attached to the October 2001 report. In the meantime, the hold was put on
all OTAG grant funding, so we never had the opportunity to submit another payment voucher
and offset the reimbursement. In actuality, we were owed thousands more under the terms of
the grant than the $6,900 cited in the report.

We brought the $6,900 to the attention of the auditors. They did not find it! This had
nothing to do with the perceptions regarding the adequacy of our accounting system or their
concerns over our cost allocation plan. Had funding of the grants not been postponed for
seven months, and had the executive director not become seriously ill (which was explained
to the auditors), and had we not had to spend most of our time preparing and being available
for the inspector general audit, this would have been settled months ago and not even been an
issue in the audit.

The report also states the executive director said she uses estimates in lieu of actual expenses
to submit monthly voucher claims to HUD. This is not true. What the director said was, we
had estimates and quotes for the town hall meetings and that was submitted to OMHAR for
funding. Never did the director say we only use estimates for each monthly voucher claim.
Subsequently, we always have actual invoices for our activities that are billed to the OTAG.
The auditors have seen these invoices, contracts, and/or bills. The only time we have ever
used estimates or quotes were for the town hall meetings and OMHAR approved it. Our
monthly report also stated the costs were estimated.

Salary and Time Records
Again we strongly disagree with the finding in the audit report. The statement that we
“failed to maintain salary and time records” is simply untrue. We have extensive salary and
time records, so we were very surprised to see this comment. The executive director sat with
both auditors and explained how the time sheets were used to determine staff’s hours in the
clearinghouse, M2M, other TUFH programs, and administrative columns. The staff hours
were also recorded in the monthly reports submitted to OMHAR.

The report indicates the auditors had difficulty identifying time spent on lobbying activities.
As we explained during the audit, it is TUFH’s policy to not perform any type of lobbying
activities under the OTAG grant. Consequently, we disagree with the finding. However, to
respond to the concern, we have reviewed our policies and procedures for keeping time


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sheets and will emphasize the importance to all personnel to keeping detailed and thorough
time sheets. We also have added a lobbying activity code on our time sheet.

This concludes our comments on the OIG Audit Report.

                                     Sincerely,

                                     /signed/

                                     Denice Irwin
                                     Executive Director




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                                                                             Appendix C

                         DISTRIBUTION OUTSIDE OF HUD

The Honorable Barbara A. Mikulski, Chairperson, Subcommittee on Veterans Affairs,
       HUD, and Independent Agencies, 709 Hart Senate Office Building, United States
       Senate, Washington, DC 20510
The Honorable Christopher S. Bond, Ranking Member, Subcommittee on Veterans
       Affairs, HUD, and Independent Agencies, 274 Russell Senate Office Building, United
       States Senate, Washington, DC 20510
The Honorable Joseph Lieberman, Chairman, Committee on Government Affairs, 706
       Hart Senate Office Building, United States Senate, Washington, DC 20510
The Honorable Fred Thompson, Ranking Member, Committee on Governmental Affairs,
       340 Dirksen Senate Office Building, United States Senate, 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
Andy Cochran, Committee on Financial Services, 2129 Rayburn House Office Building,
       United States House of Representatives, Washington DC 20515
Clinton C. Jones, Senior Counsel, Committee on Financial Services, B303 Rayburn Building,
       United States House of Representatives, Washington DC 20515
Sharon Pinkerton, Senior Advisor, Subcommittee on Criminal Justice, Drug Policy &
       Human Resources, B373 Rayburn House Office Building, United States Housing of
       Representatives, Washington, DC 20515
Stanley Czerwinski, Director, Housing and Telecommunications Issues, United States
       General Accounting Office, 441 G Street, NW, Room 2T23, Washington, DC 20548
Steve Redburn, Chief of Housing Branch, Office of Management and Budget, 725 17th
       Street, NW, Room 9226, New Executive Office Building, Washington, DC 20503
Linda Halliday (52P), Department of Veterans Affairs, Office of Inspector General, 810
       Vermont Avenue, NW, Washington, DC 20420
William Withrow (52KC), Department of Veterans Affairs, Office of Inspector General
       Audit Operations Division, 1100 Main, Room 1330, Kansas City, Missouri 64105-
       2112
Kay Gibbs, Committee on Financial Services, 2129 Rayburn House Office Building,
       United States House of Representatives, Washington DC 20515
George Reeb, Assistant Inspector General for Health Care Financing Audits
Jennifer Miller, Professional Staff, House Committee on Appropriations
Denice Irwin, Executive Director of Tenants United for Housing




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