oversight

The Division of Grants Management, City of Hartford, Connecticut, Paid $1,039,296 for Ineligible Community Development Block Grant Activities and Failed to Return Income to the Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2005-10-07.

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

              AUDIT REPORT




 The Division of Grants Management, City of Hartford,
 Connecticut, Paid $1,039,296 for Ineligible Community
Development Block Grant Activities and Failed to Return
                 Income to the Program

                    2006-BO-1001

                   October 7, 2005




               OFFICE OF AUDIT, REGION 1
                   Boston, Massachusetts
                                                                  Issue Date
                                                                         October 7, 2005
                                                                  Audit Report Number
                                                                         2006-BO-1001




TO:        Mary Ellen Morgan, Director, Office of Community Planning and Development,
             Hartford, Connecticut, Field Office, 1ED



FROM:      John Dvorak, Regional Inspector General for Audit, 1AGA

SUBJECT: The Division of Grants Management, City of Hartford, Connecticut, Paid
           $1,039,296 for Ineligible Community Development Block Grant Activities
           and Failed to Return Income to the Program


                                   HIGHLIGHTS

 What We Audited and Why

             We audited the City of Hartford’s (City) Division of Grants Management’s
             administration of the Community Development Block Grant (Block Grant)
             program. The audit was initiated based on an Office of Inspector General (OIG)
             Hotline complaint. The objectives were to determine whether the City (1)
             awarded grants to subrecipients for eligible activities and adequately monitored
             their performance to ensure its subrecipients were paid in accordance with the
             contract terms and met contract objectives, and (2) properly accounted for
             Emergency Demolition and Repair program income.


 What We Found


             The City did not always award grants to subrecipients for eligible activities. This
             occurred because the City’s evaluation and award process did not include steps to
             ensure that the subrecipient’s activities were eligible under the Block Grant
                    program. As a result, the City paid $1,039,296 in ineligible costs associated with
                    five of the 17 activities we reviewed. Of the $1,039,296 in ineligible costs,
                    $831,796 related to activities ineligible under the Block Grant program and
                    $207,500 related to an activity that was ineligible under the cited eligibility
                    category. We also identified funds to be put to better use for an additional
                    $394,461 allocated for ineligible activities for the City’s Block Grant program
                    year beginning July 1, 2005. 1 In addition, the City paid subrecipients in
                    accordance with the contracts, but we could not always determine whether the
                    contract objectives were met because the City did not have formalized monitoring
                    procedures that documented whether the contract objectives were being met.

                    The City also did not properly account for Block Grant program income generated
                    through its Emergency Demolition and Repairs program because the City did not
                    have adequate controls to ensure repayments from Block Grant-assisted properties
                    were properly returned to the program account. We identified $62,515 in
                    program income that was not returned to the program and an additional $85,581
                    in receipts that were credited to the City’s general fund, for which the City was
                    unable to provide a breakdown by property. Without a breakdown, we could not
                    determine how much of the $85,581 represents program income. We also noted
                    that an additional $525,900 in receivables is at risk of not being returned because
                    of the ineffective internal controls over the program receipts.


    What We Recommend


                    We recommend that the Hartford Office of Community Planning and
                    Development require the City to

                        •    Develop and implement procedures to ensure that only eligible activities
                             meeting Block Grant program objectives are funded.

                        •    Repay the Block Grant program account the $831,796 in ineligible costs
                             from nonfederal sources or through future grant reductions.

                        •    Repay $207,500 in costs that were improperly classified as direct
                             homeownership assistance category by applying an offsetting lower public
                             service cap in future grant years.

                        •    Reprogram the $394,461 allocated for ineligible activities in the program
                             year beginning July 1, 2005.


1
    These funds were associated with three of the 17 activities we reviewed.




                                                            2
              •      Repay $62,515 in Emergency Demolition and Repair program income
                     from the City’s general fund.

              •      Identify the source of funding for the $85,581 in unsupported Emergency
                     Demolition, Repair program repayments, and repay applicable income to
                     the Community Development Block Grant program.

           For each recommendation in the body of the report 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 auditee’s response, along with our evaluation of that
           response, can be found in appendix B of this report. For finding 1, the city
           concurred that three of the grants we questioned were completely ineligible
           activities and one other (Riverfront Recapture) was partially ineligible. In
           addition, the city agreed that the final activity (HART program) was ineligible as
           classified. However, the city did not concur with the recommended monetary
           sanctions. For finding 2 the city concurred with our finding that program income
           should be returned to the Emergency Demolition & Repair program and is
           working to strengthen financial management controls over the program.




                                             3
                            TABLE OF CONTENTS

Background and Objectives                                                         5

Results of Audit
      Finding 1: The City Paid $1,039,296 for Ineligible Block Grant Activities   6
      Finding 2: The City Did Not Always Properly Account for Income from the     11
                    Emergency Demolition and Repairs Program

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




                                            4
                     BACKGROUND AND OBJECTIVES

The City of Hartford, Connecticut (City), as an entitlement community, receives annually from the
U.S. Department of Housing and Urban Development (HUD) a formula-driven grant of Community
Development Block Grant (Block Grant) program funds. The City expended $14,511,797 in
Block Grant program funds during the period July 1, 2002, through June 30, 2004. The
$14,511,797 amount included $12,485,054 awarded by the City to subgrantees, including City
departments and competitive Block Grant projects and programs funded to subrecipients. The
remaining $2,026,743 was expended on Block Grant administration costs.

The City’s annual action plans show that during our audit period, the City allocated $5,704,879
in Block Grant program funds to its competitively funded Block Grant projects and programs.
Subrecipients submit proposals to the City for funding from the City’s competitively funded
Block Grant projects and programs. Competitively funded projects are awarded funding based
on an annual notice of funds availability application process conducted by the City. The process
involves the advertising of requests for proposals, the evaluation and related ranking of the
application by grants management staff, and the recommendation for funding provided to the
mayor, who may make changes. Following a 30-day public comment period and a public
hearing before City Council, funding recommendations are finalized and adopted by the Mayor
and the City Council.

Under the Emergency Demolition and Repairs program, the city demolishes or repairs blighted
and unsafe properties. The Emergency Demolition and Repair program uses three funding
sources for remediation costs, including the Block Grant, the general fund, and the Capital City
Economic Development Authority. After the work is complete, the City bills the property owner
for the costs. Repayments by the owners of Block Grant-assisted properties should be returned
to the Block Grant program as program income. The Emergency Demolition and Repairs
program has received Block Grant funding since 1991. During our audit period, the City
reported $575,395 in expenditures attributed to properties assisted with Block Grant funds under
the Emergency Demolition and Repairs program. During this same period, City records show
receipts totaling $430,029 for remediation project costs, which were originally incurred
throughout the duration of the program. These reimbursements were credited to the City’s
general fund lien demolition account.

We audited the City’s administration of the Block Grant program funds. Our audit had two specific
objectives, including (1) determine whether the City awarded grants to subrecipients for eligible
activities and adequately monitored their performance to ensure its subrecipients were paid in
accordance with the contract terms and met contract objectives, and (2) determine whether the
City properly accounted for Emergency Demolition and Repair program income.




                                                5
                                      RESULTS OF AUDIT

Finding 1: The City Paid $1,039,296 for Ineligible Block Grant Activities

Five of the seventeen activities we reviewed did not meet Block Grant eligibility requirements.
The City

      1) Paid $831,796 in ineligible operating and maintaining costs under the public facilities and
         improvements category, 2
      2) Improperly paid $207,500 for the costs of a homeownership counseling program under
         the direct homeownership assistance category,2 and
      3) Did not adequately document monitoring efforts to ensure that the activities met Block
         Grant program and contract objectives.

This occurred because the City’s evaluation and award process did not include steps to ensure that
subrecipients’ activities were eligible under the Block Grant program. In addition, the City did not
have a formalized monitoring policy in place to document achievement of contract objectives. As a
result, the City paid $1,039,296 ineligible activities as indicated in the table below and could not
assure that contract objectives were met as follows

           Subrecipient          Block Grant citation        Why questioned                           Amount
    Riverfront Recapture, Inc.   Public Facilities &         A portion of the costs were
                                 Improvements                ineligible under Block Grant
                                                             citation                                $310,171
    Hartford Proud and           Public Facilities &         Ineligible under Block Grant
    Beautiful Litter Clean Up    Improvements                citation
                                                                                                     $369,625
    Hartford Proud and           Public Facilities &         Ineligible under Block Grant
    Beautiful Hartford Blooms    Improvements                citation
                                                                                                      $50,000
    Knox Park Foundation         Public Facilities &         Ineligible under Block Grant
                                 Improvements                citation
                                                                                                      102,000
                                             Subtotal – public facilities and improvements           $831,796

    Hartford Area Rally          Homeownership               Ineligible under Block Grant
    Together                     Assistance                  citation                                 207,500
                                                                          Total questioned        $1,039,296



2
 According to 24 Code of Federal Regulations 85.20, 570.201(c), 570.201(n), and 570.207(b)(2); and the Block
Grant Guide to National Objectives and Eligible Activities for Entitlement Communities.




                                                        6
                 We also identified $394,461 in funds that should be reprogrammed for the City’s
                 Block Grant program year beginning July 1, 2005, related to ineligible activities that
                 the City was planning to fund.



    Operating and Maintaining
    Costs Not Eligible under Public
    Facilities and Improvements



                 The City paid $831,796 for operating and maintaining costs for four activities
                 ineligible under the Block Grant’s public facilities and improvement activities
                 categories. We originally questioned a total of $1,118,758 related to these
                 activities. However, the city was able to obtain additional supporting
                 documentation from the subrecipients for the Riverfront Recapture activities and
                 included it in their response (See appendix B) reducing our exceptions.

                 Block Grant funds under the public facilities and improvement categories may be
                 used for acquisition, construction, reconstruction, rehabilitation, or installation of
                 public improvements or facilities. 3 However, the costs of improvements or
                 operating and maintaining public facilities were not eligible expenses under these
                 categories. 4 For instance, the City paid to Riverfront Recapture, Inc., for
                 personnel and administrative expenses associated with developing the City’s
                 riverfront. According to HUD Office of Community Planning and Development
                 staff, some salary support could possibly be funded under 24 Code of Federal
                 Regulations 570.201(c), “Public Facilities and Improvements,” but the costs
                 would be very limited in scope. For example, if there was building construction
                 in progress, a clerk of the works to oversee the construction would be an eligible
                 expense. Additionally, the costs of architecture and engineering and some other
                 soft costs directly attendant to the construction hard costs could be allowed.
                 However, the City’s files did not contain evidence to demonstrate that the
                 personnel and administrative expenses were directly tied to such activities or that
                 the activities were eligible. As indicated above, the city obtained additional
                 supporting documentation from subrecipients reducing our cost exceptions related
                 to the Riverfront Recapture activities from $597,133 to $310,171 and our total
                 exceptions from $1,118,758 to $831,796.




3
  According to 24 Code of Federal Regulations 570.201(c); and the Block Grant Guide to National Objectives and
Eligible Activities for Entitlement Communities.
4
  According to 24 Code of Federal Regulations 570.207(b)(2); and the Block Grant Guide to National Objectives
and Eligible Activities for Entitlement Communities.




                                                       7
                 The City also paid $521,625 for ineligible operating and maintaining expenses of
                 the City’s public improvement activities. The operating and maintaining
                 expenses were associated with three of the 17 activities we reviewed. They
                 included projects in which the City paid $369,625 to Hartford Proud and
                 Beautiful for the operating costs of a litter cleanup program, $102,000 to Knox
                 Parks Foundation, Inc., to maintain community gardens, and $50,000 to Hartford
                 Proud and Beautiful for operating costs related to a Hartford Blooms program that
                 placed planters throughout the City, including neighborhoods and the downtown
                 central business district. The operating costs of a litter cleanup program,
                 maintenance of the community gardens, and the Hartford Blooms program were
                 not eligible activities under the Block Grant’s public facilities and improvements
                 activities categories.



    Homeownership Counseling
    Cost Not Eligible Under Direct
    Assistance Provision


                 The City improperly classified $207,500 in costs for a homeownership counseling
                 program under the Block Grant’s direct assistance provision. 5 Block Grant funds
                 under direct assistance may be used to subsidize interest rates and mortgage
                 principal amounts, finance the costs to aquire property already occupied at an
                 affordabe price, pay all or part of the mortgage insurance premium, pay closing
                 costs and up to 50 percent of the downpayment. However, the costs of running a
                 homeownership counseling program were not eligible under the direct assistance
                 provision. Instead the activitiy should have been classified as a public service
                 program and subject to a 15 percent cap. Since the city exceeded the 15 percent
                 cap for the years we audited, the costs would not have been eligible.



    $394,461 Allocated in Program
    Year July 1, 2005, for Ineligible
    Activities

                 The City’s annual action plan included $394,461 in Block Grant public facilities
                 and improvement funds for the program year beginning July 1, 2005, that were
                 allocated for ineligible activities indicated above. The funding was allocated to
                 the Riverfront Recaptures, Inc. ($199,461), Hartford Proud and Beautiful
                 ($165,000), and Knox Park Foundation ($30,000).
5
 According to 24 Code of Federal Regulations 570.201(n) or 570.200(a)(2) and 570.208(a)(1); and the Block Grant
Guide to National Objectives and Eligible Activities for Entitlement Communities.




                                                       8
No Formalized Monitoring
Policy
                 The City did not have a formalized monitoring policy that assured that contract
                 objectives were met. The City’s policy required that all activities undergo an on-
                 site monitoring at least once annually. However, the policy did not formalize a
                 method or procedures for monitoring subrecipient activities, and monitoring
                 varied by contract manager. Some contacted the subrecipients by e-mail, some by
                 telephone. However, generally these contacts were not documented in the project
                 files. Fourteen of the seventeen files reviewed did not contain information
                 regarding subrecipients’ performance or achievement of contract objectives. As a
                 result, the City could not always show that subrecipient performance was
                 adequate or that contract objectives were met.


    Conclusion

                 The City paid more than $1 million for ineligible Block Grant activities and
                 planned to continue funding more than $394,461 for ineligible activities in the
                 program year beginning July 1, 2005. This occurred because the City did not
                 have adequate procedures to ensure that activities were eligible under Block Grant
                 regulations. The City’s process for awarding Block Grant funds did not provide
                 steps to ensure that the City only used the funds for activities that fell under an
                 authorized category of basic eligibility or that the activities were properly
                 classified. Instead, the City’s process only ensured that the activity met one of the
                 City’s priority needs categories. As as result, the City did not have the funds
                 available for authorized activities to further Block Grant program objectives. In
                 addition, the City did not have a formalized monitoring policy in place to assure
                 that subrecipient performance was adequate or contract objectives were met.


    Conclusion
    Recommendations

                 We recommend that the Hartford Office of Community Planning and
                 Development require the City to

                    1A.     Develop and implement procedures to ensure that only eligible
                            activities meeting Block Grant program objectives are funded.




                                                   9
1B    Repay the Block Grant program account the $831,796 in ineligible
      costs from nonfederal sources through future grant reductions.

1C    Repay $207,500 in costs that were improperly classified as direct
      homeownership assistance category to the public service category by
      applying an offsetting lower public service cap in future grant years.

1D.   Reprogram $394,461 in program year beginning July 1, 2005, Block
      Grant program funds to eligible activities.

1E.   Develop and implement a formalized monitoring plan.




                           10
                               RESULTS OF AUDIT


Finding 2: The City Did Not Always Properly Account for Income from
     the Emergency Demolition and Repairs Program

The City did not always ensure that repayments made on properties assisted under the
Emergency Demolition and Repairs program were returned to the Block Grant program account
as program income. This occurred because the City did not have effective controls in place to
ensure that program income was returned to the Block Grant program. The City also did not
always maintain its Emergency Demolition and Repair program records in accordance with
federal financial management requirements. As a result, $62,515 in program income was
improperly credited to the City’s general fund, and the City could not provide us support for
$85,581 in receipts that were credited to the general fund during our audit period. Without the
support, we could not determine how much of the $85,581 was Block Grant program income. In
addition, without adequate controls, an additional $525,900 in program receivables may not be
returned to the Block Grant program account as required.


 $62,515 in Program Income
 Improperly Credited to City’s
 General Fund

              Under the Emergency Demolition and Repairs program, the city demolishes or
              repairs blighted and unsafe properties. The City bills the property owner for the
              costs after the work is complete. Repayments by the owners of Block Grant-
              assisted properties are considered Block Grant program income. During our audit
              period, the City received $430,029 in repayments that were posted to the City’s
              general fund. During our audit period, the City expended another $575,395 in
              Block Grant funds under the City’s Emergency Demolition and Repairs program.
              Detailed information provided by the City showed that the City did not return at
              least $62,515 in repayments made on Block Grant-assisted properties to the Block
              Grant program account. The $62,515 was improperly credited to the City’s
              general fund.



 Records Did Not Show Origin
 of Funding for Assisted
 Properties

              Although the City received $430,029 in repayments for expenditures before July
              2002 during our audit period, it was only able to provide details for $344,448.




                                              11
                 The City could not provide support for the remaining $85,581 in Emergency
                 Demolition and Repair program receipts that were credited to the general fund
                 during our audit period. Without the support, we could not identify how much of
                 the $85,581 was Block Grant program income. Program records must adequately
                 identify the source and application of funds provided for financially assisted
                 activities. These records must contain information pertaining to program
                 expenditures and income. 6 Federal financial management requirements also
                 required the City to have effective controls to safeguard all assets.



    $525,900 in Potential Program
    Income at Risk of Not Being
    Returned and Used on
    Authorized Purposes

                 During our audit period, the City expended $575,395 in Block Grant funds under
                 the City’s Emergency Demolition and Repairs Program. Of the $575,395
                 expended, $49,495 in Block Grant program income had been repaid to the City, 7
                 but only $16,190 had been returned to the Block Grant program. The remaining
                 $525,900 was unpaid as of April 14, 2005. Without adequate controls to ensure
                 that repayments made on Block Grant-assisted properties are properly returned to
                 the Block Grant program, there is limited assurance that all of the funds will be
                 returned to the program and used for only authorized purposes to further program
                 objectives.


    Recommendations

                 We recommend that the Hartford Office of Community Planning and
                 Development require the City to

                     2A.      Repay the $62,515 in Emergency Demolition and Repair program
                              income that was improperly credited to the City’s general fund.

                     2B.      Identify the source of funding for the $85,581 in unsupported
                              repayments and ensure that payments are properly credited to the

6
  According to 24 Code of Federal Regulations 85.20(b)(2).
7
  Of the $49,495 repaid, $16,190 was properly returned to the Block Grant program, and the remaining $33,305 was
improperly retained in the City’s general fund. The $33,305 is included in the $75,735 total that was improperly
returned to the City’s general fund (see previous page text box “$75,735 in Program Income Improperly Credited to
City’s General Fund”).
.




                                                       12
      Block Grant for any funds repaid for which the Block Grant was the
      funding source.

2C.   Develop and implement procedures to ensure that all future Block
      Grant program income, including the $525,900 unpaid as of April 14,
      2005, is properly credited to the Block Grant program account.




                          13
                         SCOPE AND METHODOLOGY

To achieve our audit objectives, we

       •   Reviewed program requirements, including federal laws and regulations, Office of
           Management and Budget circulars, and HUD’s Office of Community Planning and
           Development Community Development Block Grant Guide to National Objectives
           and Eligible Activities for Entitlement Communities;

       •   Reviewed the City’s consolidated plans, annual action plans, Consolidated Annual
           Performance and Evaluation Report, independent public accountant’s reports, and
           HUD monitoring reviews;

       •   Interviewed City and HUD personnel and officials;

       •   Reviewed Emergency Demolition and Repair program accounting records, including
           records showing repayments made during our audit period; and

       •   Selected a sample of activities that were allocated funding during our audit period.
           The sample was selected from the universe of the grants awarded by the City to
           various subrecipients per the 2002-2003 and 2003-2004 Consolidated Annual
           Performance and Evaluation Reports. The universe included 77 activities with
           funding totaling $5,704,879. Our sample included 17 of the 77 activities with
           funding totaling $2,075,672. The sample was selected by taking a few activities from
           each eligibility category. The selection was based on risk factors such as dollar value,
           whether they were recurring grants, and descriptions of the activities. We reviewed
           the project files maintained and provided by the City and documents therein to
           determine the whether the City was funding eligible activities. Our audit results only
           apply to the sample reviewed and were not being projected over the universe.

We performed our fieldwork between February and July 2005. We conducted the majority of
our fieldwork at the City’s Division of Grants Management office, located at 250 Constitution
Plaza in Hartford, Connecticut. Our audit covered the period of July 1, 2002, through June 30,
2004, but was expanded to include other periods when necessary. We performed our audit 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:

              •       Controls over eligibility determinations.
              •       Controls over payments made on contracts.
              •       Controls over monitoring subrecipient performance.
              •       Controls over the Emergency Demolition and Repairs program income.

              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:

              •       The City’s award process did not have controls to ensure that only eligible
                      activities received funding (see finding 1).
              •       The City did not have adequate controls to ensure that all subrecipients were
                      monitored and that the monitoring efforts were documented in the program
                      files (see finding 1).
              •       The City did not have controls to ensure that all program income generated
                      through the Emergency Demolition and Repairs program was properly
                      returned to the Block Grant program (see finding 2).



                                               15
Appendix A

                   SCHEDULE OF QUESTIONED COSTS
                  AND FUNDS TO BE PUT TO BETTER USE

    Recommendation              Ineligible 1/      Unsupported        Unreasonable or   Funds to be put
           number                                           2/         unnecessary 3/    to better use 4/
                   1B              $831,796
                   1C                                                                        $207,500 8
                   1D                                                                        $394,461 9
                   2A                $62,515
                   2B                                    $85,581
                   2C                                                                       $525,900 10


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/      Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
        or activity when we cannot determine eligibility at the time of audit. Unsupported costs
        require a 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.

3/      Unreasonable/unnecessary costs are those costs not generally recognized as ordinary,
        prudent, relevant, and/or necessary within established practices. Unreasonable costs
        exceed the costs that would be incurred by a prudent person in conducting a competitive
        business.

4/      “Funds to be put to better use” are quantifiable savings that are anticipated to occur if an
        Office of Inspector General (OIG) 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.




8
  Reduction in outlays – reduction in public service cap for future year(s)
9
  Avoidance of unnecessary expenditures
10
   Other savings – future repayments properly returned to Block Grant program




                                                       16
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 3




Comment 4




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 5




Comment 6




                         19
Ref to OIG Evaluation   Auditee Comments




Comment 7




Comment 8




Comment 9




                         20
Ref to OIG Evaluation   Auditee Comments




Comment 10




                         21
Ref to OIG Evaluation   Auditee Comments




Comment 11




Comment 12




Comment 13




                         22
Ref to OIG Evaluation   Auditee Comments




Comment 14



Comment 15




Comment 16




Comment 17




                         23
Ref to OIG Evaluation   Auditee Comments




Comment 18




Comment 19




Comment 20




Comment 21




Comment 22




                         24
Ref to OIG Evaluation   Auditee Comments




                         25
Ref to OIG Evaluation   Auditee Comments




                         26
Ref to OIG Evaluation   Auditee Comments




                         27
                         OIG Evaluation of Auditee Comments

Comment 1   Communications between OIG and grants management officials were ongoing
            throughout the audit process. On June 9, 2005, we met with grants management
            officials to discuss our audit results to date. Our discussion that day included both
            issues that are identified as audit findings. On July 28, 2005, we met with grants
            management officials to discuss our audit results to date and provided outlines of
            the two draft findings. The information in the finding outlines is in essence the
            same as that in the draft report.

            The September 7, 2005 memo relates to the transmittal of the draft report for
            comments on the accuracy of the findings, implementing the recommendations
            and included standard OIG language requesting written comments. Discussions
            between OIG and grants management officials subsequent to the transmittal
            disclosed a misunderstanding of the extent of what the written comments should
            cover. The September 14, 2005 letter was sent to clarify the difference between
            written comments and the audit resolution process. The City will develop a
            comprehensive corrective action plan in the audit resolution process that occurs
            between HUD Program and City officials after report issuance.

Comment 2   OIG only met one-on-one with grants management staff throughout the audit to
            obtain information as it related to our audit. OIG did not hold separate meetings
            with staff to obtain information on the administration of the program without the
            grants management official, and the official was so informed during a subsequent
            staff meeting attended by OIG. The discussion in question was a presentation of
            our entrance conference material to grants management staff that did not attend
            the entrance conference.

Comment 3   As indicated later in the City response (See Auditee Comments 11, 2nd
            paragraph and 13), the City concurred that three of the five activities were
            ineligible. The fact that the City funded such activities for years has no bearing
            on the eligibility of the activities. The City is responsible for ensuring that it
            funds only eligible activities.

Comment 4   Requesting repayment for Block Grant funds spent on ineligible activities is
            standard OIG practice and is in no way meant to be construed as liquidated
            damages.

Comment 5   The audit was expanded as necessary as it related to ineligible activities funded
            during our audit period.

            The areas of review discussed at the entrance conference related to our survey.
            Our survey results covering the areas mentioned were communicated verbally to
            grants management staff, including that testing related to the use of CDBG funds
            for non-CDBG expenses showed that the City did have adequate procedures to
            ensure that these fees/costs were reasonable and necessary. We also specifically




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              discussed that compliance with environmental regulations would not be reviewed
              as part of the audit because of an on-going review of the City’s environmental
              procedures and compliance by HUD’s CPD program staff. At the completion of
              the survey, the audit objectives were revised accordingly. During the audit,
              ongoing discussions were held periodically to communicate the findings and
              conclusions.

              An exit conference is normally scheduled for a day or two after transmittal of the
              Discussion Draft report (September 7, 2005). However, grants management
              officials were unable to attend an exit conference until September 22, 2005, after
              the September 20, 2005 date that the written comments were expected. At the
              September 22, 2005 exit conference, OIG agreed to accept a revised City response
              on September 23, 2005.

Comment 6     The City’s application process, including the evaluation of the applications, does
              not have a specific step that includes an eligibility determination. If it did, staff
              would have determined that the cited activities did not meet the eligibility criteria
              for which they were funded.

Comment 7     The City provided additional information to demonstrate the eligibility for
              $286,962 of the $597,133 expended on Riverfront Recaptures from July 1, 2002,
              through June 30, 2004. We evaluated the additional information and concur that
              the $286,962 represents eligible costs. The audit report was adjusted to reflect
              this reduction.

              In addition, after discussions with HUD staff, we agreed to revise the monetary
              recommendation related to the Hartford Area Rally. The usual sanction or
              remedy imposed by HUD for exceeding the cap is to apply an offsetting lower cap
              in a future year or period of years. Our recommendation was revised accordingly.

Comment 8     The City agreed to reprogram the cited activities in the current program year. The
              City has also revised the internal evaluation form to include an eligibility
              determination.

Comment 9     Audit testing showed that for 14 of the 17 activities reviewed, there was no
              monitoring documentation in the project files. The City agreed to increase and
              modify the monitoring process.

Comment 10 The City stated that it has controls in place, and Block Grant repayments are
           being made. However, when we told the director of the Office of Grants
           Management that Emergency Demolition and Repair program repayments were
           income that should be returned to the program, she indicated that she was
           unaware of this requirement. During our audit, we determined that the director
           had been informed by her staff that there was no structure in place to ensure
           repayments made on Block Grant-funded properties were returned to the Block




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              Grant program. Therefore, we disagree that the City had adequate controls in
              place.

              We also note that internal auditors previously addressed some of the deficiencies.

Comment 11 The City provided additional information to demonstrate the eligibility for
           $286,962 of the $597,133 expended on Riverfront Recaptures from July 1, 2002,
           through June 30, 2004. We evaluated the additional information and concur that
           the $286,962 represents eligible costs. The audit report was adjusted to reduce
           our questioned cost to $310,171.

              The City agreed that the activities by Hartford Proud and Beautiful, Hartford
              Blooms, and Knox Park Foundation were not eligible activities.

Comment 12 The City could not fund the Hartford Area Rally Together under the public
           service category since public service was already funded at the 15 percent
           statutory cap. After discussions with HUD staff, we agreed to revise the
           monetary recommendation related to the Hartford Area Rally. The usual sanction
           or remedy imposed by HUD for exceeding the cap is to apply an offsetting lower
           cap in a future year or period of years. Our recommendation was revised
           accordingly.

Comment 13 The City’s position is that the activities served the entire city. Although the
           project files do not include documentation on how the activities served the entire
           City and not just the area in which they are located (Riverfront and Central
           Business District), we agreed to remove this issue from the report.

Comment 14 Refer to OIG Evaluation of Auditee Comment number 9.

Comment 15 Refer to OIG Evaluation of Auditee Comment numbers 6 and 9.

Comment 16 Refer to OIG Evaluation of Auditee Comment numbers 6 and 9.

Comment 17 Refer to OIG Evaluation of Auditee Comment number 9.

Comment 18 Refer to OIG Evaluation of Auditee Comment number 8.

Comment 19 Refer to OIG Evaluation of Auditee Comment number 13.

Comment 20 Refer to OIG Evaluation of Auditee Comment numbers 6 and 9.

Comment 21 Refer to OIG Evaluation of Auditee Comment numbers 8 and 9.

Comment 22 The City generally agrees with this finding and has agreed to the report’s
           recommendations.




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