Issue Date July 29, 2005 Audit Report Number 2005-PH-1013 TO: Nadab Bynum, Director, Office of Community Planning and Development, Philadelphia Regional Office, 3AD FROM: Daniel G. Temme, Regional Inspector General for Audit, Philadelphia Regional Office, 3AGA SUBJECT: Review of the Commonwealth of Pennsylvania’s HOME Investment Partnership Program, Harrisburg, Pennsylvania HIGHLIGHTS What We Audited and Why In response to a request from the former assistant United States attorney of the Commonwealth of Pennsylvania, we audited Pennsylvania’s Department of Community and Economic Development’s (Commonwealth) administration of the HOME Investment Partnership Program (HOME). Our audit objectives were to determine whether the Commonwealth is 1) adequately monitoring localities to ensure HOME funds are expended on allowable HOME activities, and 2) properly allocating its staff’s time for the administration of the HOME program in accordance with applicable U.S. Department of Housing and Urban Development (HUD) and other federal regulations. What We Found The Commonwealth is not adequately monitoring its localities to ensure HOME funds are expended on eligible HOME activities and is improperly allocating its staff’s time for the administration of the HOME program. Three of the four localities we reviewed had spent a portion of their HOME funds on ineligible expenses/activities, which totaled $79,070. This occurred because the Commonwealth did not develop or implement an adequate monitoring program to oversee its localities. The Commonwealth had accumulated more than $6.9 million in administrative fees from the program by obligating more funds than it spent to administer its HOME program. These excess funds should have been used to strengthen the Commonwealth’s monitoring program and to fund additional eligible HOME projects. Doing so would have enabled the Commonwealth’s HOME program to better meet its main goal of providing affordable housing for low-income households. In addition, we found the Commonwealth is improperly allocating its staff’s time for the administration of the HOME program. Instead of maintaining accurate timesheets, the Commonwealth follows an unwritten policy that requires staff time to be split equally between the HOME and Community Development Block Grant (Block Grant) programs. As a result, the Commonwealth is unable to ensure HOME funds are only being used to pay for the administration of the HOME program. What We Recommend We recommend that the director of Community Planning and Development, Philadelphia Regional Office, require the Commonwealth to recover $79,070 in ineligible fees from the localities we reviewed. In addition, the Commonwealth should use the accumulated $6,930,916 in administrative fees to improve its monitoring program and recommit the funds to eligible HOME projects. We also recommend that the director of Community Planning and Development, Philadelphia Regional Office, require the Commonwealth to establish proper time allocations that meet the requirements of Office of Management and Budget Circular A-87. For each recommendation without a management decision, please respond and provide status reports in accordance with HUD Handbook 2000.06, REV-3. Please furnish us copies of any correspondence or directives issued because of the audit. Auditee’s Response The complete text of the Commonwealth’s response, along with our evaluation of that response, can be found in Appendix B of this report. 2 TABLE OF CONTENTS Background and Objectives 4 Results of Audit Finding 1: The Commonwealth Does Not Ensure HOME Funds Are Expended 5 on Eligible HOME Activities Finding 2: The Commonwealth Is Improperly Allocating Staff Time to Its 12 HOME and Block Grant Programs Scope and Methodology 14 Internal Controls 15 Appendixes A. Schedule of Questioned Costs and Funds To Be Put to Better Use 16 B. Auditee Comments and OIG’s Evaluation 17 3 BACKGROUND AND OBJECTIVES The HOME Investment Partnership Program (HOME) is authorized under Title II of the Cranston-Gonzalez National Affordable Housing Act, as amended, and is regulated by Code of Federal Regulations, title 24, part 92. HOME is the largest federal block grant provided to state and local governments and is designed to create affordable housing for low-income households. HOME funds are awarded annually as formula grants to participating jurisdictions. State governments are automatically eligible for HOME funds and receive either the greater of $3 million or the amount calculated under their formula allocation. Participating jurisdictions may choose among a broad range of eligible activities using HOME funds. These activities may include providing home purchase or rehabilitation financing assistance to eligible homebuyers, building or rehabilitating housing for rent or ownership, or obtaining property to make way for HOME-assisted developments. As a participating jurisdiction, the Commonwealth of Pennsylvania administers its HOME program through the Department of Community and Economic Development (Commonwealth). The Commonwealth received $92,228,850 in HOME grants from the U.S. Department of Housing and Urban Development (HUD) over a three-year period. Grant Year Grant Amount 2002 $28,828,000 2003 $30,165,304 2004 $33,235,546 Total $92,228,850 Of these funds, the Commonwealth awarded at least 33.3 percent for each of these years to the Pennsylvania Housing Finance Agency. An additional 10 percent was obligated to the Commonwealth for administrative costs. The remaining HOME funds were then awarded to approximately forty-five local governments each grant year in amounts ranging from $5,000 to $550,000. In early 2002, a suit was filed by a former Commonwealth employee, along with the United States of America, acting on behalf of HUD, against the Commonwealth. The suit claimed the Commonwealth falsely charged time to the HOME program for employees having no relationship with the program. A full and final settlement was reached between the Commonwealth and the United States of America in early 2002. As a result, the Commonwealth agreed to pay the United States $1,696,000 in damages. Our overall objective was to determine whether the Commonwealth is properly administering its HOME program by 1) adequately monitoring localities to ensure HOME funds are expended on allowable HOME activities, and 2) properly allocating its staff’s time for the administration of the HOME program in accordance with applicable HUD and other federal regulations. 4 RESULTS OF AUDIT Finding 1: The Commonwealth Does Not Ensure HOME Funds Are Expended on Eligible HOME Activities The Commonwealth is not adequately monitoring its localities to ensure HOME funds are expended on eligible HOME activities. Three of the four localities we reviewed violated some provision of the HOME requirements. The Commonwealth failed to ensure • A nonprofit entity operating as a community housing development organization was set up properly, • An operating budget contained only eligible operating expenses, and • Program income was used only for eligible activities. This occurred because the Commonwealth did not develop or implement an adequate monitoring program to oversee its localities. As a result, the three localities spent $79,070 of their HOME funds on ineligible expenses/activities that the Commonwealth did not detect. The Commonwealth had accumulated more than $6.9 million in administrative fees from the program by obligating more funds than it spent to administer its HOME program. These excess funds should have been used to strengthen the Commonwealth’s monitoring program and to fund additional eligible HOME projects. Doing so would have enabled the Commonwealth’s HOME program to better meet its main goal of providing affordable housing for low-income households. HOME Funds Were Not Always Spent on Eligible Activities In three of the four localities we reviewed, the Commonwealth failed to ensure HOME funds were expended only on eligible HOME activities. Our review focused on HOME grants provided during 2002, 2003, and 2004 to the following localities: Carlisle Borough, Franklin County, Monroe County, and Lebanon County. During our review, we wanted to determine whether the HOME funds provided to each locality were expended on eligible HOME activities. The detailed results of our review follow. Franklin County Mid-Atlantic Coalition Was Not Properly Set Up as a Community Housing Development Organization The Mid-Atlantic Coalition for Housing Opportunities (Mid-Atlantic) violated federal HOME regulations in operating as a community housing development 5 organization. Mid-Atlantic’s financial advisor plans Mid-Atlantic’s HOME- funded projects, which are then awarded to a for-profit construction firm (G. Keith Construction) in which the financial advisor is the owner. Code of Federal Regulations, title 24, part 92.2 defines a community housing development organization as “a private nonprofit organization that is neither controlled by, nor under the direction of, individuals or entities seeking to derive profit or gain from the organization.” Thus, by the owner of the for-profit construction company also serving as Mid-Atlantic’s financial advisor, there is no assurance that Mid- Atlantic is not being controlled by an individual who seeks to gain a profit from the organization. Furthermore, Mid-Atlantic’s executive secretary prepares and signs checks for both Mid-Atlantic and G. Keith Construction. In 1996, Mid-Atlantic’s board gave its executive secretary the authority to supervise and direct the management and operation of the corporation. In 1997, Mid-Atlantic’s executive secretary signed a power of attorney in which G. Keith Construction appointed her as attorney-in- fact to deposit or withdraw funds held in G. Keith Construction’s account. Thus, Mid-Atlantic’s executive secretary is also acting as an agent for G. Keith Construction, which is a violation of the regulation. Monroe County Sub-recipient Included Ineligible Expenses in Its Operating Budget to Obtain a Larger Grant Than It Was Eligible The Commonwealth failed to identify ineligible operating expenses on the Shepherds of Monroe County’s (Shepherds) 2004 operating budget, which allowed the Shepherds to receive a higher operating grant in 2004. The Shepherds’ operating budget contained a $16,000 interest expense, incurred on the payment of the loan used to purchase land for the Shepherds’ future HOME- funded project. Code of Federal Regulations, title 24, part 92.206(g) classifies costs relating to the payment of loans, including interest for such loans, as a project cost. Therefore, the $16,000 is an ineligible operating expense and should not have been included in the operating budget. In addition, the Shepherds optimistically budgeted the executive director’s salary as $55,000, which includes potential bonuses offered to the executive director as an incentive to obtain grants from local vendors. However, the Commonwealth did not review the actual year- end operating expenses showing the executive director’s salary was only $32,666 in 2004. Code of Federal Regulations, title 24, part 92.300(f) states a certified community housing development organization is allowed an operating grant between the 6 greater of $50,000 or 50 percent of its operating budget. Shepherds received its 2004 operating grant of $75,000 based upon an operating budget of $150,420, which included the ineligible operating expense of $16,000 and an over-inflated executive director’s salary by $22,334. As a result, Shepherds overstated its operating budget by $38,334 and received $18,957 in additional HOME funds. 1 Lebanon County Lebanon County Redevelopment Authority Improperly Spent Program Income From June 2003 through January 2005, the Lebanon County Redevelopment Authority (Authority) improperly spent $60,113 of $262,448 (23 percent) in program income on administrative costs. Code of Federal Regulations, title 24, part 92.503(a) allows the Authority to retain program income for additional HOME-eligible projects pursuant to the Authority’s contract with the Commonwealth. However, appendix C, (2)(j), of the Commonwealth’s HOME contract with the Authority directly prohibits the use of program income for administrative costs. Therefore, the Authority violated the Commonwealth’s program income provisions. The Commonwealth Did Not Develop and Implement an Adequate Monitoring Program The Commonwealth was not able to identify violations of HOME and/or Commonwealth regulations because it did not develop and implement an adequate monitoring program. The Commonwealth conducts infrequent and limited monitoring visits of its grantees, has minimal staff, and is not fully using $6,930,916 in obligated administrative fees to ensure current monitoring procedures are effective. The Commonwealth Performs Infrequent and Limited Monitoring Reviews of Its Grantees Code of Federal Regulations, title 24, part 92.201 provides the Commonwealth must conduct reviews and audits of its State Recipients as may be necessary to determine whether the State Recipient has met the HOME regulations. Our review of the Commonwealth showed that the Commonwealth did not always 1 Adjusted operating budget of $112,086 (reduced by $38,334 to account for over-inflated salary of $22,334 and $16,000 in ineligible interest expense) times .50 = $56,043. Adjusted grant amount was calculated by subtracting $56,043 from the $75,000 amount that was received. 7 complete adequate monitoring reviews. For example, the Commonwealth failed to perform any form of a monitoring review of Monroe County during the four-year period of 2001 through 2004. For the remaining three localities we reviewed, it performed reviews for Carlisle Borough in August 2003, Franklin County in September 2002, and Lebanon County in April 2003. The review of Lebanon County was performed for Community Development Block Grant (Block Grant) and/or HOME funds received in 1999, 2000, and 2001. The review of Franklin County was performed for HOME funds received in 2000 and 2001, and the review of Carlisle Borough was performed for HOME funds received in 2002. The Commonwealth Relies on Self-Assessments By Its Grantees When the Commonwealth does conduct reviews, they are largely based on a self- assessment by the locality. The Commonwealth sends the locality a self- assessment checklist it is requested to complete. This information is then verified during the onsite monitoring visit. However, the questions on the checklist are general in nature and have limited coverage concerning the eligibility of the costs related to the HOME program. Further, our review of the monitoring reviews of Carlisle Borough, Franklin County, and Lebanon County gave no indication the grant managers verified the information provided to them on the checklists. The Commonwealth also did not maintain documentation to support or verify the answers given by the localities. When we discussed these issues with the Commonwealth’s division chief, he explained his staff are not experts in the HOME program and do not have the expertise needed to identify many of the issues we identified from our reviews. The Commonwealth Does Not Employ Sufficient Staff to Effectively Administer Its HOME Program The Commonwealth does not have sufficient staff to administer its HOME program effectively. The Commonwealth currently has five grant managers who administer and monitor the HOME, Block Grant, and Emergency Shelter Grant programs for sixty-seven local governments. Commonwealth employees informed us that on average there are 125-150 Block Grants and 35-40 HOME grants issued in a year. Each grant manager is assigned from twelve to sixteen local governments to manage. Their responsibilities include reviewing grant applications to ensure compliance and completeness, addressing questions and/or concerns of the local governments, and monitoring each local government to ensure HOME funds are expended on allowable activities. 8 The Commonwealth is Not Fully Utilizing Its Obligated Administrative Fees Since 2001, the Commonwealth has obligated $6,930,916 in HOME funds for administrative fees in excess of its actual operating expenses. The following table shows the amount of administrative fees the Commonwealth over-obligated from the HOME program for grant years 2001 through 2005. Accumulated Administrative Fees Grant Year Amount Obligated Amount Used 2001 $1,428,362 $0.00 2002 $1,544,915 $0.00 2003 $1,518,652 $0.00 2004 $1,273,204 $0.00 2005 $1,165,783 $0.00 Total $6,930,916 $0 Although the Commonwealth obligated between $1.17 million and $1.54 million each year for administrative fees, it only expended between $570,000 2 and $772,487 of the obligated amounts each year. The following table shows the amount of administrative fees drawn by the Commonwealth from 2002 through 2004, as well as the grant years the funds were drawn from. Grant Year Calendar Year in Which Administrative Drawn Fees Were Drawn From 2002 2003 2004 1995 $ 3,500 $0 $0 1996 $ 3,025 $0 $0 1997 $ 14,568 $0 $0 1998 $278,848 $0 $0 1999 $472,546 $635,000 $172,280 2000 $0 $0 $397,720 Totals $772,487 $635,000 $570,000 As the table above shows, the Commonwealth started drawing administrative fees from the 2000 HOME grant in 2004. As of May 2005, the Commonwealth had $775,454 in obligated funds remaining from the 2000 HOME grant for administrative fees. Based on the Commonwealth’s history of administrative fee 2 The data for the 2004 administrative draws were provided to HUD’s Office of Inspector General on December 21, 2004; therefore, the $570,000 does not include any draws made from December 21 through December 31, 2004. 9 expenditures, the remaining portion of the 2000 grant should be sufficient to cover the Commonwealth’s remaining 2005 administrative expenses. As discussed above, the Commonwealth has accumulated $6,930,916 in excess administrative fees that could be used to strengthen its inadequate monitoring program. In addition, these excess obligations could be used to fund other eligible HOME projects. Therefore, any funds the Commonwealth does not use to strengthen its monitoring program should be reprogrammed for the use of HOME-eligible projects. This would help the Commonwealth ensure the HOME program’s main goal of providing affordable housing for low-income households is accomplished more efficiently. Recommendations We recommend that the Philadelphia Regional Office of Community Planning and Development 1A. Ensure the Commonwealth recovers the $18,957 in ineligible HOME funds from Monroe County. 1B. Ensure the Commonwealth recovers the $60,113 in ineligible HOME funds from Lebanon County. 1C. Determine whether Mid-Atlantic violated either provision (3) under the Code of Federal Regulations, title 24, part 92.2 definition of a community housing development organization or the HOME conflict of interest provisions. If Mid-Atlantic violated either of these provisions, seek administrative actions against Mid-Atlantic’s financial advisor and owner of G. Keith Construction. 1D. Determine whether the Commonwealth should be allowed to continue on- site monitoring of HOME program recipients on a three-year schedule. If this schedule continues to be allowed, require the Commonwealth to establish procedures that ensure the Commonwealth reviews, at least annually, financial reports (i.e., income statement, balance sheet, general ledgers, etc.) submitted by the sub-recipients and/or contractors to ensure HOME funds are being expended on eligible activities. 1E. Require the Commonwealth to improve its monitoring procedures to include (at a minimum) i. A more comprehensive review checklist, ii. Procedures to ensure HOME funds expended (i.e., developer fees, project costs, operating costs, etc.) are valid HOME program activities, and 10 iii. Documentation stating the specific information and/or documentation used by the grant managers to verify the monitoring checklist and to complete their reviews. 1F. Require the Commonwealth to employ and/or contract additional staff to ensure its monitoring process is efficient, adequate, and in compliance with the HOME regulations. 1G. Ensure current and future Commonwealth employees receive HOME- specific training that will provide them the expertise required to effectively administer and monitor the HOME program. 1H. Require the Commonwealth to establish a procedure (on an annual basis) that will ensure future funds obligated by the Commonwealth for administrative fees are based on actual administrative costs. This procedure should ensure that any amount the Commonwealth determines is in excess of the actual expenditures should be recommitted for use on eligible HOME projects. 1I. Require the Commonwealth to recommit any portion of the $6,930,916 not used by the Commonwealth to strengthen its monitoring program for use on HOME-eligible projects. 1J. Determine if the procedures implemented by the Commonwealth are sufficient to adequately monitor its HOME program. If the Commonwealth fails to implement these procedures, seek appropriate administrative actions as described in Code of Federal Regulations, title 24, part 92. 11 Finding 2: The Commonwealth Is Improperly Allocating Staff Time to Its HOME and Block Grant Programs The Commonwealth is improperly allocating its staff’s time to the HOME and Block Grant programs. The Commonwealth has an unwritten policy that its staff’s time is to be equally divided between the HOME and Block Grant programs. As a result, the Commonwealth’s staff created timesheets to reflect this unwritten policy. Consequently, the Commonwealth is unable to ensure that approximately $660,000 3 in HOME funds spent annually on administrative fees is not expended on the administration of the Block Grant program. Also, the Commonwealth is unable to ensure it is complying with the maximum regulatory amounts of HOME and/or Block Grant funding allowed for the administration of each corresponding program. The Commonwealth Has an Unwritten Time Allocation Policy Based on the Commonwealth’s unwritten time allocation policy, seven Commonwealth employees signed annual time allocation certifications, stating 50 percent of their time is devoted to each of the HOME and Block Grant programs. However, our review found this was not always the case. When we spoke to the individual employees, we found that one employee spends approximately six months of each year solely on HUD’s McKinney Act program. In two other examples, employees stated they spend approximately 70-80 percent of their time working on the Block Grant program. However, all of their time was divided equally between the HOME and Block Grant programs. When we asked the employees why the time was split 50/50, they explained that it was done for convenience, based upon the belief that the time spent administrating the HOME and Block Grant programs would even out to 50/50 by the end of the year. Circular A-87 Requires Time Charged to an Activity to Be Supported Each certification signed by the employees states that a timesheet is required if there are changes in work assignment or changes in time distribution of the employee. Office of Management and Budget Circular A-87 requires employees working on multiple activities to support their time with a personnel activity report or equivalent documentation, which reflects an after-the-fact distribution of 3 This number is the average of the administrative fees expended on the HOME program from 2002 to 2004 ($772,487, $635,000, and $570,000) as discussed in Finding 1. 12 the actual activity of each employee. Budget estimates or other distribution percentages determined before the services are performed do not qualify as support. We were unable to locate documentation to support the actual activity completed. The Commonwealth did not make the appropriate adjustments to the employees’ time allocations as required by Office of Management and Budget Circular A-87 and its own time allocation certification requirements. Thus, the Commonwealth is unable to ensure that HOME administrative fees were used for only HOME activities. Recommendations We recommend that the Philadelphia Regional Office of Community Planning and Development 2A. Require the Commonwealth to establish proper time allocations that meet the requirements of Office of Management and Budget Circular A-87 and other applicable federal regulations. 13 SCOPE AND METHODOLOGY To accomplish the audit objectives, we • Reviewed applicable HUD regulations relating to the administration of the HOME program. • Obtained a list of grantees receiving HOME program and operating grants from the Commonwealth for fiscal years 2002, 2003, and 2004 and selected a nonrepresentative sample of four sub-recipients. The selection was based on the frequency in which the sub-recipients received HOME grants from the Commonwealth and their geographic location. Each of the four grantees received at least one grant during the audit period. • Conducted interviews with officials and employees of HUD’s Community Planning and Development Division, the Commonwealth, and sub-recipients/grantees of the HOME program. • Reviewed HOME program contracts established between the Commonwealth and the selected four grantees and obtained and reviewed contracts established among the grantees and the community housing development organizations during onsite grantee reviews. • Reviewed general ledgers, statements of income and expenses, operating budgets, bank statements, and invoices to ensure HOME program and operating grants were used for eligible HOME activities. We performed the majority of our fieldwork between October 2004 and May 2005 at the offices of the Commonwealth, located at the Keystone Building, 400 North Street, Harrisburg, Pennsylvania. In addition, we conducted fieldwork at the facilities of the following four grantees: Carlisle Borough, Franklin County, Monroe County, and Lebanon County. The audit generally covered the period of January 1, 2002, through September 30, 2004, but was expanded when necessary. We performed our review in accordance with generally accepted government auditing standards. 14 INTERNAL CONTROLS Internal control is an integral component of an organization’s management that provides reasonable assurance that the following objectives are being achieved: • Effectiveness and efficiency of operations, • Reliability of financial reporting, and • Compliance with applicable laws and regulations. Internal controls relate to management’s plans, methods, and procedures used to meet its mission, goals, and objectives. Internal controls include the processes and procedures for planning, organizing, directing, and controlling program operations. They include the systems for measuring, reporting, and monitoring program performance. Relevant Internal Controls We determined the following internal controls were relevant to our audit objectives: • Management oversight processes - Policies and procedures that management has in place to reasonably ensure that improper administrative payments would not be made or would be detected in the normal course of business. • Monitoring of HOME-eligible activities - Policies and procedures that management has in place so that adequate reviews are performed to ensure HOME grants are used for eligible activities. We assessed the relevant controls identified above. A significant weakness exists if management controls do not provide reasonable assurance that the process for planning, organizing, directing, and controlling program operations will meet the organization’s objectives. Significant Weaknesses Based on our review, we believe the following items are significant weaknesses: • Lack of management oversight. • Lack of adequate reviews performed on the sub-recipients and/or contractors. • Lack of adequate supporting documentation to support the use of administrative fees. 15 Appendixes Appendix A SCHEDULE OF QUESTIONED COSTS AND FUNDS TO BE PUT TO BETTER USE Recommendation Ineligible 1/ Funds to Be Put Number to Better Use 2/ 1A $18,957 1B $60,113 1I $6,930,916 Total $79,070 $6,930,916 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 polices or regulations. 2/ “Funds to be put to better use” are quantifiable savings that are anticipated to occur if an Office of Inspector General recommendation is implemented, resulting in reduced expenditures at a later time for the activities in question. This includes costs not incurred, deobligation of funds, withdrawal of interest, reductions in outlays, avoidance of unnecessary expenditures, loans and guarantees not made, and other savings. 16 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments 17 Comment 1 18 Comment 2 Comment 3 19 Comment 4 20 Comment 5 21 Comment 6 22 OIG Evaluation of Auditee Comments Comment 1 Although we acknowledge the Commonwealth has procedures to conduct closeout reviews, the Commonwealth did not perform a closeout review of Monroe County’s Operating Grant. Further, based on the evidence we gathered during the audit we question whether the Commonwealth actually completes closeout reviews. For example, the division chief stated the Commonwealth auditors recently asked the Commonwealth to provide support of audit closeouts, but the Commonwealth was not able to find or provide them with audit closeouts for the community housing development organization operating grants. Comment 2 Based upon our review, we identified $60,113 in ineligible expenditures. If Lebanon County provided additional documentation to justify eliminating some of these expenditures, HUD program staff can verify this in the audit resolution process. Comment 3 Initially the Commonwealth took some actions to certify that Mid-Atlantic was organized properly. However, as the audit showed there were several events in their dealings with Mid-Atlantic which should have led them to question Mid- Atlantic’s organizational structure. For example, Mid-Atlantic’s original executive director was asked by the Commonwealth to certify independence between his for-profit company and Mid-Atlantic. In response to that request, the executive director resigned from Mid-Atlantic, but continued to represent Mid- Atlantic in the majority of Mid-Atlantic’s dealings with the Commonwealth. Comment 4 We agree the regulations pertaining to the annual review requirements are limited to contractors and sub-recipients and adjusted the report accordingly. Although the HOME regulations do not require annual monitoring of State Recipients, Code of Federal Regulations, title 24, parts 92.201 (b)(2)(i) and (ii) provide the Commonwealth must conduct such reviews and audit of its State Recipients as may be necessary to determine whether the State Recipient has met the requirements of the HOME and other federal regulations. Based on the results of our reviews we believe the Commonwealth’s monitoring is infrequent and the Commonwealth’s overall monitoring program is not adequate to ensure the State Recipients are using HOME funds in accordance with HOME and other federal regulations. Comment 5 In addition to reviewing the monitoring checklists, we also reviewed the performance review reports provided for Carlisle Borough, Franklin County, and Lebanon County. These reports gave no indication the grant managers verified the information provided by the localities to the Commonwealth. In addition, the performance reports are vague and do not show what documents and/or support were reviewed to verify the information provided on the checklists. In fact, the Commonwealth had no findings for all three grantees we reviewed. 23 Comment 6 We disagree with the Commonwealth’s assessment that the HOME program is adequately monitored and has efficient management oversight. As our audit report demonstrates, the Commonwealth conducts infrequent and limited monitoring visits of its grantees, has minimal staff, and is not fully using the administrative funds available to manage the program. These monitoring deficiencies directly contributed to the problems we identified in how several grantees used their HOME funds 24
Review of the Commonwealth of Pennsylvania �s HOME Investment Partnership Program, Harrisburg , Pennsylvania
Published by the Department of Housing and Urban Development, Office of Inspector General on 2005-07-29.
Below is a raw (and likely hideous) rendition of the original report. (PDF)