Issue Date
January 11, 2008
Audit Report Number
2008-AT-1005
TO: Maria R. Ortiz, Director of Community Planning and Development, Miami Field
Office, 4DD
FROM: James D. McKay, Regional Inspector General for Audit, 4AGA
SUBJECT: The City of Fort Lauderdale, Florida, Did Not Properly Administer Its
Community Development Block Grant Program
HIGHLIGHTS
What We Audited and Why
We audited the Community Development Block Grant (CDBG) program
administered by the City of Fort Lauderdale, Florida (City). The objective of the
audit was to determine whether the City administered its CDBG program in
accordance with applicable U.S. Department of Housing and Urban Development
(HUD) requirements. We selected the City for review because the HUD Miami
Office of Community Planning and Development ranked it as high risk in its
fiscal years 2005 and 2006 risk assessments. In addition, a previous HUD on-site
monitoring review identified concerns with the City’s administration of the
CDBG program.
What We Found
The City did not administer its CDBG program in accordance with applicable
HUD requirements. It did not provide supporting documentation or did not
maintain adequate supporting documentation to demonstrate that CDBG activities
met national objectives. As a result, it had no assurance that more than $5 million
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in expended CDBG funds achieved the intended national objective or met
program requirements.
The City did not accurately report CDBG financial information in accordance
with HUD requirements. The City’s CDBG financial information in its Financial
Accounting Management Information System did not agree with financial
information reported to HUD. The City also failed to report CDBG program
income to HUD for one project. As a result, there is no assurance that the City
reported accurate CDBG financial information to HUD in accordance with HUD
regulations.
The City improperly allocated 100 percent of its vehicle expenditures to the
CDBG program without adequate supporting documentation demonstrating the
use of the vehicles. As a result, there is no assurance that $98,967 in vehicle
expenses allocated to the CDBG program was accurate and CDBG program
related.
What We Recommend
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to (1) provide documentation to support that
CDBG program requirements were followed and national objectives were met for
the 20 public facility activities and 11 public service activities or reimburse its
program $2.3 million from nonfederal funds; (2) provide an action plan for
development of land parcels to include how national objectives will be achieved
and if not developed within 90 days, reimburse its program the greater of $2.6
million or the fair market value of the property from nonfederal funds; (3)
maintain supporting documentation that CDBG program requirements were
followed and national objectives were met for the 20 public facility activities and
11 public service activities according to 24 CFR 570.506 to allow $722,377 in
unused funds to be put to better use by ensuring that the City effectively uses
these funds for the intended clientele; and (4) update, implement, and enforce
written monitoring policies and procedures to ensure effective performance and
compliance with federal regulations for meeting CDBG national objectives.
The Director should also require the City to (1) reconcile its Financial Accounting
Management Information System with the HUD Integrated Disbursement and
Information System and notify HUD of the adjustments and (2) report rental and
interest income for one project as CDBG program income.
In addition, the Director should require the City to reimburse the program $98,967
from nonfederal funds, since there is no assurance that vehicle use was CDBG
program related.
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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
We discussed the findings with the City during the audit. We provided a copy of
the draft report to City officials on November 6, 2007, for their comments and
discussed the report with the officials at the exit conference on November 20,
2007. The City provided its written comments to our draft report on November
29, 2007. In its response, the City generally agreed with finding 1 and 2, but did
not agree with finding 3.
The complete text of the City’s response, along with our evaluation of the
response, can be found in appendix B of this report. Attachments to the City’s
comments were not included in the report, but are available for review upon
request.
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3
TABLE OF CONTENTS
Background and Objectives 5
Results of Audit
Finding 1: The City Did Not Demonstrate Compliance in Meeting National
Objectives 6
Finding 2: The City Did Not Accurately Report CDBG Financial Information
to HUD 12
Finding 3: The City Improperly Allocated Vehicle Expenditures to the CDBG
Program 16
Scope and Methodology 18
Internal Controls 20
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 21
B. Auditee Comments and OIG’s Evaluation 22
C. Criteria 43
D. Schedule of Questioned Costs and Funds to Be Put To Better Use for Public
Facility Activities 46
E. Schedule of Questioned Costs and Funds to Be Put To Better Use for Public
Service Activities 47
4
BACKGROUND AND OBJECTIVES
The City of Fort Lauderdale, Florida (City), receives annual Community Development Block
Grant (CDBG) program funds from the U.S. Department of Housing and Urban Development
(HUD). HUD awards annual grants to entitlement cities to develop viable urban communities by
providing decent housing and a suitable living environment and by expanding economic
opportunities, principally for low- and moderate-income persons. An activity that receives
CDBG funds must meet one of three national objectives:
• Benefit low- and moderate-income families,
• Aid in the prevention or elimination of slums or blight, or
• Meet community development needs having a particular urgency because existing
conditions pose a serious and immediate threat to the health or welfare of the community
and when other financial resources are not available.
The City Housing and Community Development Division administers the CDBG program. This
division administers programs intended to improve the character of existing neighborhoods and
to provide quality housing for all of its citizens. Some of the services provided include
administration, management, and coordination of CDBG activities, rental rehabilitation
programs, the Emergency Shelter Grants Program, and other federal and state programs. The
division is located at 1409 Northwest 6th Street, Fort Lauderdale, Florida.
The HUD Integrated Disbursement and Information System reported that the City expended
CDBG funds of more than $6.3 million for program years 2004 (October 1, 2004, to September
30, 2005) and 2005 (October 1, 2005, to September 30, 2006).
We selected the City for review because the HUD Miami Office of Community Planning and
Development ranked it as high risk in its fiscal years 2005 and 2006 risk assessments. In
addition, a previous HUD on-site monitoring review identified concerns with the City’s
administration of the CDBG program.
Our audit objective was to determine whether the City administered its CDBG program in
accordance with applicable HUD requirements.
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5
RESULTS OF AUDIT
Finding 1: The City Did Not Demonstrate Compliance in Meeting
National Objectives
The City did not demonstrate compliance with HUD requirements in meeting national
objectives. It did not provide supporting documentation or did not maintain adequate supporting
documentation to demonstrate that public facility, public service, and land acquisition activities
met national objectives. This condition occurred because the City lacked effective management
controls over its CDBG activities and disregarded HUD requirements. As a result, it had no
assurance that more than $5 million in expended CDBG funds achieved the intended national
objective or met program requirements.
Supporting Documentation
Lacking or Inadequate
Regulations at 24 of CFR [Code of Federal Regulations] 570.200(a) state that
CDBG-funded activities must meet one of the national objectives: benefit low-
and moderate-income families, prevent or eliminate slums or blight, or meet
urgent community development needs. Regulations at 24 CFR 570.506 state that
records must be maintained to demonstrate that each activity undertaken meets
one of the national objective criteria.
The City did not provide supporting documentation or did not maintain adequate
supporting documentation to demonstrate that public facility, public service, and
land acquisition activities met national objectives.
Public facilities – Regulations at 24 CFR 570.506(b)(2) require that for each
activity determined to benefit low- and moderate-income families (area benefit),
the grantee must provide documentation showing (1) the boundaries of the service
area; (2) the income characteristics of families and unrelated individuals in the
service area; and (3) if the percentage of low- and moderate-income persons in the
service area is less than 51 percent, data showing that the area qualifies.
Regulations at 24 CFR 570.506(b)(3) require that for each activity determined to
benefit low- and moderate-income families (limited clientele), the grantee must
provide documentation showing (1) that the activity is designed for and used by a
segment of the population presumed by HUD to be principally low and moderate
income, (2) the nature of the services and how they were used predominantly by
low- and moderate-income persons, or (3) the size and annual income of the
family of each person receiving the benefit.
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6
The City informed us that 29 public facility activities were awarded more than
$4.3 million in CDBG funds during the period October 1, 2000, through May 31,
2007. The City indicated that these public facility activities included senior
services and infrastructure projects such as street improvements, parks, and
recreational facilities. The national objective established for these 29 activities
was to benefit low- and moderate-income families (area benefit or limited
clientele).
The City was able to demonstrate compliance in meeting national objectives for
nine activities. However, it lacked supporting documentation for 20 activities. It
did not provide us with any supporting documentation for the 20 activities despite
many requests for the records. As a result, it was unable to confirm whether a
national objective was met for 20 public facility activities provided more than $1
million in CDBG funds. The remaining $620,158 in unspent CDBG funds for
these 20 activities could be used effectively if the City can support that the
activities met a national objective.
Public services – Regulations at 24 CFR 570.506(b)(8) require that for each
activity determined to prevent or eliminate slums or blight, the grantee must
address one or more of the conditions which qualified an area as a slum or
blighted area, the boundaries of the area, and a description of the conditions
which qualified the area at the time of its designation in sufficient detail to
demonstrate how the area met the qualifying criteria.
The City informed us that nine public service activities administered by City
departments and two activities administered by subrecipients were awarded more
than $1.3 million in CDBG funds during the period October 1, 2000, through May
31, 2007. The City indicated that these public service activities provided youth
and general services. The national objectives established for these 11 activities
were to benefit low- and moderate-income families (limited clientele) and prevent
or eliminate slums or blight.
The City lacked supporting documentation or provided inadequate supporting
documentation for the 11 public service activities. It lacked supporting
documentation for two activities administered by City departments. The City did
not provide us with any supporting documentation for these two activities because
it could not locate the records. In addition, it provided inadequate supporting
documentation for seven activities administered by City departments and two
subrecipient activities.
The following two examples illustrate the lack of or inadequate supporting
documentation.
• The national objective established for one activity was to prevent or
eliminate slums or blight in a designated area. The purpose of this activity
was to reduce graffiti through community involvement and educational
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initiatives. The application in the file explained the geographical
boundaries of the area in which this activity was to provide services.
However, we did not find a description in sufficient detail of the
conditions that qualified the area at the time of its designation to
demonstrate how the area met the qualifying criteria. In addition, we did
not find supporting documentation indicating that the subrecipient
provided educational awareness to its citizens or other services.
• The national objective established for one activity was to benefit low- and
moderate-income families (limited clientele). The purpose of this activity
was to provide training and instruction to children participating in water
safety. The file did not contain documentation to support that the children
being served were from low- and moderate-income families. In addition,
we did not find attendance sheets in the file to support that the eligible
children participated in the activity.
In addition, the City (1) failed to monitor eight activities administered by City
departments and (2) inadequately monitored one activity administered by a City
department and the two subrecipient activities. For the three activities
inadequately monitored, monitoring reports did not provide sufficient evidence
that supported the reviewer’s conclusions. Also, the City failed to execute
agreements for the nine activities administered by City departments. Without an
executed agreement, it is difficult for the City to monitor specific tasks that need
to be accomplished to meet the national objective.
Although the City conducted monitoring of an activity administered by a City
department, 1 City officials explained that they generally did not conduct
monitoring of public service activities administered by City departments. The
City’s policies and procedures require monitoring of subrecipients but not
activities administered by City departments.
As a result, we were unable to confirm whether a national objective was met for
11 public service activities that were provided more than $1.2 million. The
remaining $102,219 in unspent CDBG funds for these 11 activities could be used
effectively if the City can support that the intended clientele benefit from CDBG
funds. In addition, it needs to execute agreements with all its subrecipients to
ensure that the objectives of the agreements are met through monitoring.
Land acquisition – Regulations at 24 CFR 570.208(d) require that if the assisted
activity is acquisition of real property, a preliminary determination of whether the
activity addresses a national objective may be based on the planned use of the
property after acquisition. Regulations at 24 CFR 570.501(b) provide that the
grantee is responsible for determining the adequacy of performance under
1
A monitoring review was conducted because technical assistance was requested. The staff from this City
department were new and did not know how to proceed with the activity.
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subercipient agreements and for taking appropriate action when performance
problems arise.
The City provided us with a list of 76 land parcels acquired with approximately
$4 million in CDBG funds. It directly acquired 68 parcels totaling $3.5 million,
while subrecipients acquired the remaining eight parcels totaling $521,533. We
selected five parcels directly acquired by the City totaling more than $1.1 million
and two parcels acquired by subrecipients totaling $286,077 for further review.
The table below summarizes pertinent information on the seven parcels.
No. Purchase Parcel ID/property ID Purchase National objective
date price
1 1989-92 5042 03 24 0030 $171,302 Benefit
low/moderate-
income housing;
aid in prevention or
elimination of
slums or blight;
low/moderate-
income jobs
2 1989-92 5042 03 24 0030 81,584 Same
3 1989-92 5042 03 24 0040 96,584 Same
4 1989-92 5042 03 24 0030 66,099 Same
5 2002-06 5042 04 32 0040, 50, 60 697,455 Benefit
low/moderate-
income housing
Total City acquisitions $1,113,024
6 June 27, 9234077130 145,007 Low/moderate-
2000 income area benefit
7 July 17, 203012140 141,070 Low/moderate-
2000 income area benefit
Total subrecipient $286,077
acquisitions
Total for seven $1,399,101
acquisitions
The City did not meet the national objectives for these seven parcels because it
did not complete projects within a reasonable period and did not have an action
plan or conduct monitoring to determine how the acquisitions would be
developed.
For example, one project included the acquisition of four parcels in 1989 totaling
$415,569. The City indicated that the project was to create commercial
development and housing projects. At the end of the audit period, the City was
still negotiating with a developer to determine whether the housing project would
be homeownership or rental. In addition to these four parcels, the City acquired
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31 parcels for this project. As a result, we consider all 35 parcels totaling more
than $1.3 million to be unsupported costs because the national objectives were not
met and the intended clientele did not benefit from the expenditures of CDBG
funds.
In addition, two projects included the acquisition of two parcels in 2000 totaling
$286,077. At the end of the audit period, the land was vacant. The City did not
require an action plan from the subrecipient describing the proposed development,
development schedule, or disposition according to HUD regulations and the
executed contract with the subrecipient. The contract stipulated that the term of
performance was 60 months from the date of execution of the contract. This
stipulation expired May 2006. The City did not ensure (1) that these projects
were carried out in a timely manner because it did not monitor the subrecipient for
compliance with the terms of the contract and (2) that resources were efficiently
managed and objectives were achieved in a timely manner. City officials
informed us that staff shortages precluded them from monitoring this
subrecipient. In addition to these two projects in the contract, the subrecipient
received CDBG funds for seven other projects. As a result, we consider all nine
projects totaling $641,680 to be unsupported costs because the national objectives
were not met and the intended clientele did not benefit from the expenditures of
CDBG funds.
Some of the parcels we examined are part of a larger project or contract that was
funded with CDBG funds. As a result, we questioned the total $2.6 million
acquisition cost that includes all parcels included in the project and contract
because the City has not completed projects within a reasonable period of time
and did not document whether the planned developments would meet a CDBG
program objective.
Conclusion
The City did not demonstrate compliance with HUD requirements in meeting
national objectives. It did not provide supporting documentation or did not
maintain adequate supporting documentation to demonstrate that public facility,
public service, and land acquisition activities met national objectives and program
requirements. Also, it lacked effective management controls over its CDBG
activities and disregarded HUD requirements. Specifically, the City (1) lacked
policies and procedures to ensure effective performance and compliance with
federal regulations for meeting national objectives, (2) lacked executed
agreements with other City departments, (3) did not properly monitor other City
departments and subrecipients, (4) allowed projects to remain open for an
unreasonable period without an action plan to describe how national objectives
would be met, and (5) did not maintain or lacked supporting documentation to
meet national objectives. As a result, the City had no assurance that 20 public
facility activities totaling more than $1 million, 11 public service activities
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totaling more than $1.2 million, and more than $2.6 million in land acquisitions
achieved the intended national objective or met program requirements. See
appendixes D and E for a listing of the public facility and public service activities
that did not demonstrate compliance with national objectives. The remaining
$722,377 in unspent funds from October 1, 2000, through May 31, 2007, for 20
public facility activities and 11 public service activities could be put to better use
if the City effectively uses these funds for the intended clientele to benefit from
CDBG funds.
Recommendations
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to
1A. Provide supporting documentation that CDBG program requirements were
followed and national objectives were met for the 20 public facility
activities and 11 public service activities according to 24 CFR 570.506 or
reimburse its program $2,339,060 from nonfederal funds.
1B. Provide an action plan for development of the land parcels to include how
national objectives will be achieved. If the action plan is not developed
within 90 days, the City should reimburse its program the greater of
$2,676,103 or the fair market value of the property from nonfederal funds.
1C. Execute written agreements with City departments to formalize requirements
such as the scope of work and timeframe to accomplish the work.
1D. Maintain supporting documentation that CDBG program requirements were
followed and national objectives were met for the 20 public facility
activities and 11 public service activities according to 24 CFR 570.506 to
allow $722,377 in unused funds to be put to better use by ensuring that the
City effectively uses these funds for the intended clientele.
1E. Update, implement, and enforce written monitoring policies and procedures
to ensure effective performance and compliance with federal regulations for
meeting CDBG national objectives.
1F. Ensure that all land acquisition files contain sufficient documentation to fully
support the basis for the purchase of the land.
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11
Finding 2: The City Did Not Accurately Report CDBG Financial
Information to HUD
The City did not accurately report CDBG financial information in accordance with HUD
requirements. The City’s CDBG financial information in its Financial Accounting Management
Information System (FAMIS) did not agree with financial information reported in HUD’s
Integrated Disbursement and Information System (IDIS). The City also failed to report CDBG
program income to HUD for one project. This condition occurred because the City lacked (1)
adequate training for both financial information systems, (2) adequate supervision, (3)
knowledge of HUD regulations for financial reporting, and (4) sufficient staffing. As a result,
there is no assurance that the City reported accurate CDBG financial information to HUD in
accordance with HUD regulations.
Inaccurate Financial
Information Reported
between HUD and the City
Regulations at 24 CFR 85.20(b)(1) state that the financial management systems of
the grantees and subgrantees must meet the following standards: accurate, current,
and complete disclosure of the financial results of financially assisted activities must
be made in accordance with the financial reporting requirements of the grant or
subgrant.
For the fiscal year ending September 30, 2005, the single audit report of the City
disclosed that an annual CDBG financial report submitted to HUD did not agree
with the amounts reported as expended on the schedule of expenditures or the
general ledger in FAMIS.
The City reports CDBG financial information in FAMIS and IDIS. We compared
an annual report generated by IDIS for fiscal years 2004 and 2005 2 against CDBG
financial information in FAMIS and found discrepancies between the systems.
Specific examples of inaccurate financial information include the following:
Unexpended CDBG program fund balances – Unexpended CDBG program
fund balances reported to HUD and the City did not agree. The City did not
report in IDIS the unexpended fund balance from program year 2003-2004 to
program year 2004-2005. This error contributed to a negative unexpended fund
balance for program year 2004-2005 reported in IDIS. In addition, the City
inaccurately reported in IDIS the unexpended fund balance from program year
2004-2005 to program year 2005-2006. It failed to provide us with accurate
2
IDIS generates reports that are part of the grantee consolidated annual performance and evaluation report that is
submitted to HUD annually. We compared the financial summaries report (PR 26) with the information in FAMIS.
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financial information from FAMIS for unexpended CDBG program fund balances
for program years 2004 and 2005.
CDBG IDIS FAMIS IDIS FAMIS
resources 2004-2005 2004-2005 2005-2006 2005-2006
Unexpended 0.00 Not $ 2,336,925 Not
funds at end of provided provided
previous
program year
(beginning
balance)
Total ($ 1,158,102) Not $ 2,644,049 Not
unexpended provided provided
funds at end of
current program
year (ending
balance)
City officials acknowledged submitting incorrect unexpended CDBG program
fund balances to HUD with the intention of rectifying them later. They added that
this financial information was not corrected because of the continued lack of staff
and inadequate training for both systems. In addition, City officials explained that
their accounting system did not provide accurate unexpended CDBG program
fund balances because of the way in which CDBG accounts were set up in
FAMIS. The City needs to reconcile unexpended CDBG program fund balances
between FAMIS and IDIS.
Disbursements – CDBG planning and administration disbursements reported to
HUD and the City did not agree. The City understated disbursements reported to
HUD by $40,998 in fiscal year 2004 and $78,163 in fiscal year 2005. According
to the City, discrepancies were due to late withdrawals and adjustments made
after the annual report was submitted to HUD. Therefore, the amounts reported to
HUD were inaccurate, and the City did not comply with HUD reporting
requirements.
CDBG resources IDIS FAMIS IDIS FAMIS
2004-2005 2004-2005 2005-2006 2005-2006
Disbursements for $ 417,847 $ 458,835 $ 507,343 $ 585,506
planning &
administration
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In addition, the City reported other CDBG disbursements to HUD in IDIS but
failed to provide us with accurate financial information from FAMIS for program
years 2004 and 2005. According to the City, various internal, external, and state
audits of its operations and limited staff contributed to the delay in providing this
information.
CDBG resources IDIS FAMIS IDIS FAMIS
2004-2005 2004-2005 2005-2006 2005-2006
Disbursements $ 3,362,201 Not $ 2,074,663 Not
other than section provided provided
108 repayments
& planning/admin
CDBG Program Income
Not Reported to HUD
Regulations at 24 CFR 570.504 require that receipts and expenditures of program
income be recorded as part of the financial transactions of the grant program and be
subject to all applicable requirements governing the use of CDBG funds.
HUD had instructed the City to appropriately account for rental income as CDBG
program income involving a post office project. We followed up on this matter.
The City disbursed more than $4.8 million in CDBG funds to acquire land and
construct a post office. It indicated that the post office was making annual lease
payments of $170,407 for the use of the property. These payments to the City
represent CDBG program income. However, the City failed to report CDBG
program income to HUD.
The City generated more than $1.5 million in rental income from January 1998 to
April 2007. However, the City only reported $510,729 in rental income to HUD.
City officials said the remaining amount was not reported to HUD because they did
not know how to report more than $1 million from prior years and $14,201 from
fiscal year 2005 had not been received from the post office.
The City also failed to report interest on the rental income as CDBG program
income to HUD. City officials said they did not know that interest was earned on
the rental income. Based on limited CDBG financial information provided by the
City, we computed interest on rental income of approximately $16,651 as of fiscal
year 2003. Since more recent CDBG financial information was not provided by the
City, we were unable to compute an accurate amount of interest on the rental income
to be reported as CDBG program income to HUD.
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Conclusion
HUD relies on grantees to report accurate, current, and complete CDBG financial
information. The City did not accurately report CDBG financial information in
accordance with HUD requirements. It reported CDBG financial information in
FAMIS that did not correspond with IDIS financial information reported to HUD.
It also failed to report CDBG program income to HUD for one project. This
condition occurred because the City lacked (1) adequate training for both
financial information systems, (2) adequate supervision, (3) knowledge of HUD
regulations for financial reporting, and (4) sufficient staffing. As a result, there is
no assurance that the City reported accurate CDBG financial information to HUD
in accordance with HUD regulations.
Recommendations
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to
2A. Reconcile FAMIS with IDIS and notify HUD of the adjustments.
2B. Provide training and additional supervision to staff on using FAMIS and
IDIS.
2C. Report rental and interest income of $1,092,289 as CDBG program
income in accordance with 24 CFR 570.504.
2D. Ensure that all CDBG program income is properly reported for all ongoing
activities.
2E. Compute the amount of interest generated from the rental income received
for the post office.
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15
Finding 3: The City Improperly Allocated Vehicle Expenditures to the
CDBG Program
The City improperly allocated 100 percent of its vehicle expenditures to the CDBG program
without adequate supporting documentation demonstrating the use of the vehicles. This
condition occurred because City officials did not know that they were required to maintain
supporting documentation on miles driven among the City’s programs. They said they charged
all vehicle expenditures to the CDBG program because they received most of their funding from
this program. As a result, there is no assurance that $98,967 in vehicle expenses allocated to the
CDBG program was accurate and CDBG program related.
Unsupported Vehicle
Expenditures
Regulations at 24 CFR 85.32(d)(1) require that records be maintained that include
the percentage of federal participation in the cost and use of the property. Office of
Management and Budget Circular A-87, attachment A, section C(1)(a), requires that
costs be adequately documented. In addition, 24 CFR 85.20(b)(6) requires that
accounting records be supported by such source documentation as cancelled checks,
mileage logs, invoices, etc.
The City Housing and Community Development Division administers the CDBG
and other federal and state programs. It did not document mileage and other vehicle
expenditures among programs that it administered during fiscal years 1998 through
2006. At the time of our review, the Division used three City vehicles to monitor
and provide technical assistance to the CDBG program and paid a monthly fee to the
City Administrative Service Fleet department to cover fleet replacement, operation
and maintenance, and gasoline. Between fiscal years 1998 and 2006, these fees
amounted to $75,647. However, the City allocated the entire amount to the CDBG
program without adequate documentation to support that the vehicles were not used
for other federal and state programs.
In addition, supervisors from the division received a monthly vehicle allowance for
using their personal vehicles for various tasks associated with administering the
CDBG and other federal and state programs. Between fiscal years 1998 and 2006,
total allowances provided amounted to $23,320. However, the division allocated the
entire amount to the CDBG program without adequate documentation to support
that the vehicles were not used for other federal and state programs.
The City did not maintain a log documenting mileage and the purpose for using the
vehicles to determine the percentage that should have been allocated to the CDBG
program.
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16
City officials said they did not know that they were required to maintain
supporting documentation on miles driven among the City’s programs. The City
informed us that it allocated 100 percent of its vehicle expenditures to the CDBG
program because it received most of its funding from this program.
Conclusion
Since the City administers the CDBG and other federal and state programs,
vehicle use must be allocated among the programs. However, the City did not
maintain adequate documentation to support that vehicle expenditures were
properly allocated between the CDBG and other federal and state programs. As a
result, vehicle expenditures were allocated entirely to the CDBG program. This
increased administrative and planning costs and prevented the City from using the
funds for other necessary costs. The City should develop and implement policies
and procedures requiring that supporting documentation be maintained on vehicle
use for the CDBG program. We consider $98,967 allocated to the CDBG
program to be an unsupported cost since there is no assurance that the use of the
vehicles was accurate and CDBG program related.
Recommendations
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to
3A. Reimburse the program $98,967 from nonfederal funds since there is no
assurance that vehicle use was CDBG program related.
3B. Develop and implement policies and procedures requiring that supporting
documentation be maintained on vehicle use for the CDBG program.
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17
SCOPE AND METHODOLOGY
Our audit objective was to determine whether the City administered its CDBG program in
accordance with applicable HUD requirements. To accomplish our objectives, we
• Reviewed relevant HUD regulations and guidebooks,
• Reviewed HUD and City files and records,
• Interviewed HUD and City officials, and
• Accessed and reviewed various HUD and City automated systems.
We performed a cursory review of CDBG disbursements amounting to $6,467,570 from January
1, 2005, to December 31, 2006. We observed unusual and excessive payments related to
administrative/planning costs and selected seven specific CDBG expenditures totaling $61,390
based on high dollar amounts and unusual payments for further analysis.
Upon learning from the City that it did not keep adequate supporting documentation for vehicle
expenditures, we decided to review 100 percent or $98,967 of the vehicle expenditures to the
extent that information was available from fiscal years 1998 to 2006. We also compared
financial information reported in FAMIS to that reported in IDIS for fiscal years 2004 and 2005
to ensure accurate reporting.
We selected public service activities for review because they had the largest amount of
disbursements in the CDBG program for program year 2005. We selected two public service
activities administered by subrecipients that were provided $61,162 in CDBG funds. During our
review of public service activities, we identified concerns with activities administered by other
City departments. These concerns involved the City’s not requiring written agreements with
other City departments and not monitoring activities administered by other City departments. As
a result, we asked the City to provide us with a listing of all CDBG funds administered by other
City departments for fiscal years 2000-2006 (October 1, 2000, to May 31, 2007). We were
provided a listing of 29 public facility activities that were awarded $4,315,503 and 10 3 public
service activities that were awarded $1,346,483 in CDBG funds. During our review, we learned
that one of the ten public service activities was not administered by a City Department.
However, we included this activity since we had already reviewed it before learning that it was
not administered by a City Department. Accordingly, we expanded our testing to include
reviewing these 40 activities. During our review, we learned that the 29 public facility activities
were not administered by other City departments.
3
One of the ten activities was already included in our survey. However, the City included this activity in the list since it
received funding in previous years.
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We selected land acquisitions for review because the most recent HUD monitoring review
indicated that the City had a large inventory of parcels and did not have an approved plan for
how these properties would be developed to meet national objectives. The City provided us with
a list of 76 land parcels acquired with approximately $4,022,135 in CDBG funds. City staff was
updating this list so we have no assurance that the information was complete and accurate. In
selecting land acquisitions for review, we excluded 22 parcels from a post office project that
HUD previously approved. From the remaining 54 parcels, we selected those parcels (a)
acquired by the City with the oldest purchase date and costing more than $80,000, (b) transferred
out with the oldest purchase date and costing more than $50,000, and (c) acquired by
subrecipients with the largest cost. Our selection resulted in seven parcels totaling $1,399,100.
HUD instructed the City to appropriately account for rental income as CDBG program income
on the post office project. We followed up on this matter.
We were unable to determine the reliability of computer-processed data from FAMIS.
Preliminary testing resulted in the financial records’ being incomplete. We performed additional
transaction testing and tracing to/from source documentation to determine data reliability. As a
result, we found limitations with the data because of
• Lack of supporting documentation to reconcile CDBG financial information,
• Lack of supporting documentation for vehicle expenditures prepared by the City, and
• Improper entering of CDBG financial information into the system.
The results of the audit apply only to the items selected and cannot be projected to the universe
or population.
The audit generally covered the period January 1, 2005, through December 31, 2006, and we
extended the period as needed to accomplish our objective. We conducted our fieldwork from
February through May 2007 at the City offices located at 1409 Northwest 6th Street, Fort
Lauderdale, Florida.
We performed our review in accordance with generally accepted government auditing standards.
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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 objective:
• Controls over program operations,
• Controls over the reliability of data,
• Controls over compliance with laws and regulations, and
• Controls over the safeguarding of assets.
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 did not demonstrate compliance in meeting national objectives
(see finding 1).
• The City did not accurately report CDBG financial information to HUD
(see finding 2).
• The City improperly allocated vehicle expenditures to the CDBG program
(see finding 3).
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APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Unsupported 1/ Funds to be put to
number better use 2/
1A 2,339,060
1B 2,676,103
1D 722,377
3A $ 98,967 ________
Total $ 5,114,130 $ 722,377
1/ 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.
2/ Recommendations that funds be put to better use are estimates of amounts that could be
used more efficiently if an Office of Inspector General (OIG) recommendation is
implemented. This includes reductions in outlays, deobligation of funds, withdrawal of
interest subsidy costs not incurred by implementing recommended improvements,
avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
which are specifically identified. For recommendation 1D, the $722,377 represents
unspent funds that the City could effectively use if it maintains documentation that
support these funds benefiting the intended clientele.
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Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
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Comment 1
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Comment 2
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Comment 3
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Comment 1
Comment 3
Comment 2
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Comment 1
Comment 2
Comment 3
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Comment 4
Comment 5
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Comment 4
Comment 4
Comment 5
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Comment 5
Comment 5
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Comment 6
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Comment 6
Comment 6
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OIG Evaluation of Auditee Comments
The City generally agreed with our recommendations, except for recommendation 3A.
Comment 1 The City stated that files for City projects have been in the past maintained with
the Engineering or other City Departments. The City also stated that the
documentation attesting to the eligibility of the projects to meet the CDBG
program requirements was retained in the City’s Engineering office during the
time of the IG audit review.
We were unable to review these files because the City did not specify which
departments other than engineering maintained them. The City did not have a
listing of projects and associated departments readily available. During our
review, we were initially provided with a listing of projects. However, this listing
was incomplete and was revised by the City several times because it included
inaccurate information such as project and funding information. The City
ultimately provided us with a listing that we used to review project files but this
listing was also inaccurate. We repeatedly attempted to obtain project files, but
the City said it was in the process of gathering the necessary information. As the
CDBG administrator, the City needs to maintain accurate and updated
information on the number of projects and the location of supporting
documentation.
Comment 2 The City agreed to conduct monitoring and execute a memorandum of
understanding with City departments. The City indicated that it has updated its
monitoring policies and procedures to ensure effective performance and
compliance with federal regulations to meet CDBG national objectives. The City
will also provide HUD with an updated list of all public service activities awarded
to City Departments. However, the City did not address that supporting
documentation was lacking or inadequate for the 11 public service activities we
reviewed during our audit.
Comment 3 The City provided us with documentation on the status of the seven land
acquisitions and said that an action plan will be provided to HUD. However, we
maintain that the City has not completed projects within a reasonable period and
did not document whether the planned developments would meet a CDBG
program objective. The City provided us with a draft development agreement for
four land parcels. However, the City and developer have not yet come to a
mutual agreement to develop the four land parcels that were acquired in 1989.
This project also includes 31 other land parcels and the City should provide HUD
with an action plan detailing the plan for the entire project. The City provided us
with a request for proposal for another project, but the City still has not selected a
developer since the acquisition of the land in 2002. The City also provided us
with a draft Master Plan for two other land parcels. However, the plan does not
clearly indicate the specific plan for the two projects associated with the two land
parcels. In addition to these two projects, the subrecipient received CDBG funds
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for seven other projects. The City should provide HUD with a specific action
plan for all nine projects.
The City also stated that it is in the process of retrieving all land acquisition
project files from a subrecipient and securing documentation for land acquired by
the subrecipent. However, the City needs to insure that all land acquisition files
contain sufficient documentation to fully support the basis for the purchase of the
land.
Comment 4 The City recognized the need for more accurate tracking of grant funds by fiscal
year and has begun testing a new system that will result in simplifying the
reconciliation between FAMIS and IDIS going forward. The City expects to have
a number balanced with IDIS for the CAPER within the next 60 days and to
notify HUD when FAMIS and IDIS are reconciled. We recognize the City’s
efforts in adopting a new system that will properly account for HUD funds and to
reconcile FAMIS and IDIS. The City stated that staff has attended several
training sessions this year on the IDIS system and has requested more intense
training from HUD. The additional training and supervision on using FAMIS and
IDIS should enhance their knowledge and improve the administration of the
CDBG program.
Comment 5 The City stated that it has reported program income on the post office project
in both FAMIS and IDIS since HUD informed them that the rental income for this
project qualifies as program income. The City said it understood that it was not
required to report as program income the amounts of post office rental income
received prior to HUD’s decision. We disagree with this assessment. Regulations
at 24 CFR 570.504 require that [all] receipts and expenditures of program income
be recorded as part of the financial transactions of the grant program and be
subject to all applicable requirements governing the use of CDBG funds. In
addition, HUD’s decision clearly stated that the City needed to determine and
report the correct amount of program income received from the rental of the post
office project, and to inform HUD of the assessment and reporting when it is
completed. We found that the City did not determine and report to HUD the
correct amount of program income received from the rental of the post office
project. According to City staff, they knew they had to report program income for
prior years, but they did not know how to report it.
The City stated that they have not received substantiation from the IG for
reporting rental and interest income of $1,092,289 as CDBG program income.
During our review, the City provided us with post office project information and
we computed and provided information regarding $1,075,638 in rental income
that needed to be reported as program income. We also notified the City during
our review that the interest generated from the rental income should also be
reported as CDBG program income. After repeated attempts, the City was unable
to provide us with an accurate amount of interest income generated. Therefore,
based on the limited post office project information provided by the City, we
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computed estimated interest income to be $16,651 and provided the information
to the City. The City has agreed to meet and work with HUD to determine the
appropriate amount of rental and interest income to report as CDBG program
income generated from the post office project.
The City also stated that with the exception of the post office program income, all
program income has been properly reported. The City did not provide us with
documents to support that all program income has been properly reported. As the
CDBG administrator, the City is responsible to accurately compute and report the
amount of program income generated.
Comment 6 The City stated that it budgets one vehicle for the CDBG program, one vehicle for
the SHIP program, and another vehicle for the HOME program. The City
processes expenditures from the CDBG fund, and the cost is then distributed and
transferred to the appropriate grant. We believe that distributing total
expenditures based on time spent on a particular program is inaccurate since each
program has its own vehicle. Further, if the methodology used is based on a
percentage of time spent on a program, then this method needed to be approved
by HUD.
The City also stated that logs and timesheets are utilized to track which projects
are visited on a daily basis. This information is used to charge each grant
accordingly based on the amount of time spent working on a particular project.
During our review, the City never provided us with any logs or timesheets to
document that vehicle expenses were CDBG program related. City officials never
informed us of this process. Instead, City officials repeatedly said that they
charged all vehicle expenditures to the CDBG program. During our review, City
officials repeatedly mentioned that the only document on file was an internal
document illustrating the standard fee paid to the City’s Administrative Service
Fleet department.
Along with their response, the City provided us with the log used to track time
spent working on those projects visited. This log is not sufficient to determine
time spent working on a project. The log does not indicate the program (CDBG,
HOME, SHIP) associated with the site visit or the reason for using the vehicle. In
some cases, the time associated with using the vehicle is missing or incomplete.
As a result, this information is insufficient to charge each program accordingly
based on the amount of time spent working on a particular project.
In addition, the City did not address how it determined the amount of vehicle
allowance charged to the CDBG program.
We recognize that the City is developing policies and procedures to ensure that
supporting documentation is maintained on vehicle use for the CDBG program.
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Appendix C
CRITERIA
Federal (HUD) Regulations at 24 CFR
• 85.20(b)(1) states: “The financial management systems of other grantees and
subgrantees must meet the following standards: Financial reporting- Accurate, current,
and complete disclosure of the financial results of financially assisted activities must be
made in accordance with the financial reporting requirements of the grant or subgrant.”
• 85.20(b)(6) requires that accounting records be supported by such source documentation as
cancelled checks, mileage logs, invoices, etc.
• 85.32(d)(1) states: “Property records must be maintained that include a description of the
property, a serial number or other identification number, the source of property, who
holds title, the acquisition date, and cost of the property, percentage of Federal
participation in the cost of the property, the location, use and condition of the property,
and any ultimate disposition data including the date of disposal and sale price of the
property.”
• 85.40(a) states that grantees are responsible for managing the day-to-day operations of
grant- and subgrant-supported activities. Grantees must monitor grant- and subgrant-
supported activities to assure compliance with applicable federal requirements and that
performance goals are being achieved.
• 570.205(a)(6) states: “Planning activities which consist of all costs of data gathering,
studies, individual project plan (but excluding engineering, architectural and design costs
related to a specific project), analysis, and preparation of plans and the identification of
actions that will implement such plans, including, but not limited to: Policy—planning—
management—capacity building activities which will enable the recipient to: Carry out
management, coordination and monitoring of activities necessary for effective planning
implementation, but excluding the costs necessary to implement such plans.”
• 570.206 states that program administrative costs do not include staff and overhead costs
directly related to carrying out activities eligible under sections 570.201 through 570.204,
since those costs are eligible as part of such activities.
• 570.208 states: “Additional criteria: (1) where the assisted activity is acquisition of real
property, a preliminary determination of whether the activity addresses a national
objective may be based on the planned use of the property after acquisition.”
• 570.501(b) states that the grantee is responsible for determining the adequacy of
performance under subrecipient agreements and for taking appropriate action when
performance problems arise.
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• 570.503(a) requires that before disbursing any CDBG funds to a subrecipient, the
recipient shall sign a written agreement with the subrecipient. The agreement shall
remain in effect during any period that the subrecipient has control over CDBG funds,
including program income.
• 570.504(a) states that the receipt and expenditure of program income as defined in
section 570.500(a) shall be recorded as part of the financial transactions of the grant
program. Section 570.500(a) defines program income as gross income received by the
recipient or a subrecipient directly generated from the use of CDBG funds, which
includes gross income from the use or rental of real or personal property acquired by the
recipient or by a subrecipient with CDBG funds, less costs incidental to generation of the
income and interest earned on program income pending its disposition.
• 570.506 states: “each recipient shall establish and maintain sufficient records to enable
the Secretary to determine whether the recipient has met the requirements of this part. At
a minimum, the following records are needed: (a) records providing a full description of
each activity assisted (or being assisted) with CDBG funds, including its location; the
amount of CDBG funds budgeted, obligated, and expended for the activity; and the
provision in subpart C under which it is eligible; and (b) records demonstrating that each
activity undertaken meets one of the criteria [national objective] set forth in 570.208.
• 570.506(b)(2) requires that for each activity determined to benefit low- and moderate-
income families (area benefit), the grantee must provide documentation showing (1) the
boundaries of the service area; (2) the income characteristics of families and unrelated
individuals in the service area; and (3) if the percentage of low- and moderate-income
persons in the service area is less than 51 percent, data showing that the area qualifies.
• 570.506(b)(3) requires that for each activity determined to benefit low- and moderate-
income families (limited clientele), the grantee must provide documentation showing (1)
that the activity is designed for and used by a segment of the population presumed by
HUD to be principally low and moderate income, (2) the nature of the services and how
they were used predominantly by low- and moderate-income persons, or (3) the size and
annual income of the family of each person receiving the benefit.
• 570.506(b)(8) requires that for each activity determined to prevent or eliminate slums or
blight, the grantee must address one or more of the conditions which qualified an area as
a slum or blighted area, the boundaries of the area, and a description of the conditions
which qualified the area at the time of its designation in sufficient detail to demonstrate
how the area met the qualifying criteria.
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HUD Handbook 1378, CHG-7, Chapter 6, Recordkeeping Requirements for Real Property
Acquisitions
• (c) Acquisition case file. For each property acquired and each property for which
acquisition was initiated but not completed, a separate case file should be created to
include the documentation to substantiate the agency’s actions and compliance with the
Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970.
Case files should include documents such as appraisals, eminent domain filings, court
decisions, closing statements (HUD-1), title documentation, copy of recorded deed, claim
forms, etc.
Office of Management and Budget Circular A-87, Cost Principles for State, Local, and Indian
Tribal Governments
• Attachment A, section C(1)(a) requires that the cost be necessary and reasonable for
proper and efficient performance and administration of federal awards. As such, the
monthly car allowance provided to its employees must be documented to determine whether
the cost was necessary and program related, and costs must be adequately documented.
Contract between the City and a Subrecipient for Land Acquisitions
• The subrecipient will develop a “description of proposed redevelopment” and a “time
schedule for development and disposition” for all real property purchased in accordance
with this agreement within 60 days from the date of execution of this agreement. The
“description of proposed redevelopment” and the “time schedule for development and
disposition” will be provided to the grantee.
• The subrecipient will provide written reports to the City on a quarterly basis,
summarizing the status of proposed redevelopment activities, including any changes in
the time schedule. The term of this agreement is 60 months from the date of execution of
the agreement. The agreement was executed on May 9, 2001.
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Appendix D
SCHEDULE OF QUESTIONED COSTS AND FUNDS TO BE
PUT TO BETTER USE FOR PUBLIC FACILITY ACTIVITIES
No. Fiscal year Activity ID (a) Unsupported Funds to be put
costs to better use
1 2000-2001 804 $55,671 0
2 864 50,000 0
3 795 4,411 0
4 798 17,145 0
5 2001-2002 932 1,214 $35,303
6 939 42,084 0
7 940 12,686 0
8 941 24,500 0
9 938 28,286 0
10 910 58,294 0
11 928 222,916 0
12 2002-2003 1032 123,934 49,034
13 1031 195,803 104,197
14 1039 23,560 0
15 1040 35,000 0
16 2004-2005 1208 150,000 4
17 2005-2006 1304 83,2824
18 1307 100,0004
19 2006-2007 1438 1,658 98,342
20 1435 162,760 ________
$1,059,922 $620,158
Notes:
(a) The activity ID number is from IDIS.
4
Although funds were not disbursed, we recommend that the City also maintain documentation according to 24 CFR
570.506 (b)(2) and (b)(3) that indicates the activities met the intended national objectives.
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Appendix E
SCHEDULE OF QUESTIONED COSTS AND FUNDS TO BE
PUT TO BETTER USE FOR PUBLIC SERVICE ACTIVITIES
No. Subrecipient Activity ID Unsupported Funds to be put
(a) costs to better use
1 City department 805, 903, $519,827 $5,173
1036,
1098, 1202
(b)
2 City department 1294 9,425 80
3 City department 1029, 1101, 310,241 17,088
1206, 1423
(b) (c)
4 City department 1387 7,855 8,345
5 City department 1385 (c) 709 43,051
6 City department 1386 87,883 2,117
7 City department 810, 909 (b) 197,851 0
8 City department 1052 50,000 0
9 City department 1099 36,238 100
10 Non-City 1059 50,500 0
subrecipient
11 Non-City 1301 31,336 3,538
subrecipient
1,301,865 79,492
(c) ($22,727) (c) $22,727
$ 1,279,138 $ 102,219
Notes:
(a) The activity ID number is from IDIS.
(b) A separate activity ID number indicates a different fiscal year funding source. For purposes
of our review, we considered the activity to be one activity.
(c) Upon learning that $22,727 ($22,550 from activity ID No. 1423 and $177 from activity ID
No. 1385) had not been drawn down according to IDIS, we considered this amount to be funds to
be put to better use rather than as an unsupported cost.
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The City of Fort Lauderdale, Florida, Did Not Properly Administer Its Community Development Block Grant Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-01-11.
Below is a raw (and likely hideous) rendition of the original report. (PDF)