oversight

City of Muncie, Indiana Lacked Adequate Controls over Its HOME Investment Partnerships Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-04-07.

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

                                                                   Issue Date
                                                                            April 7, 2008
                                                                   Audit Report Number
                                                                            2008-CH-1004




TO:        Robert F. Poffenberger, Director of Community Planning and Development,
             5HD


FROM:      Heath Wolfe, Regional Inspector General for Audit, 5AGA

SUBJECT: The City of Muncie, Indiana Lacked Adequate Controls over Its HOME
           Investment Partnerships Program

                                    HIGHLIGHTS

 What We Audited and Why

             We audited the City of Muncie’s (City) HOME Investment Partnerships Program
             (Program). The audit was part of the activities in our fiscal year 2007 annual
             audit plan. We selected the City based upon our analysis of risk factors relating to
             Program grantees in Region V’s jurisdiction. Our objectives were to determine
             whether the City effectively administered its Program and followed the U.S.
             Department of Housing and Urban Development’s (HUD) requirements.

 What We Found

             The City did not maintain an adequate system of controls to ensure that it
             commits Program funds within HUD’s 24-month commitment deadline and
             avoids losing the Program funds. As a result, the City must commit more than
             $1.2 million in Program funds for eligible activities by July 31, 2008, to avoid
             losing the funds.

             The City lacked documentation to support that it followed HUD’s regulations
             and/or its requirements when it used Program funds and/or Program income to
             provide rehabilitation assistance; downpayments, closing costs, and/or gap
             financing; and tenant-based rental assistance for Program activities. In addition, it
           improperly used Program funds after an operating agency agreement with a
           subrecipient expired. Therefore, it was unable to support its use of more than
           $215,000 in Program funds and Program income and improperly disbursed more
           than $6,000 in Program funds.

           We informed the director of the City’s Community Development Department
           (Department) and the Director of HUD’s Indianapolis Office of Community
           Planning and Development of minor deficiencies through a memorandum, dated
           April 1, 2008.

What We Recommend

           We recommend that the Director of HUD’s Indianapolis Office of Community
           Planning and Development require the City to reimburse its Program from
           nonfederal funds for the improper use of funds, provide support or reimburse its
           Program from nonfederal funds for the unsupported payments, and implement
           adequate procedures and controls to address the findings cited in this audit report.
           These procedures and controls should help ensure that Program funds and
           Program income are used in accordance with HUD’s regulations and the City’s
           requirements and the City does not lose more than $1.1 million in Program funds
           over the next five months.

           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 issued because of the audit.

Auditee’s Response

           We provided our discussion draft audit report to the director of the City’s
           Department, the City’s mayor, and HUD’s staff during the audit. We held an exit
           conference with the City’s director on March 14, 2008.

           We asked the City’s director to provide comments on our discussion draft audit
           report by March 31, 2008. The director provided written comments, dated March
           31, 2008. The director generally agreed with finding 1, but only partially agreed
           with finding 2. The complete text of the written comments, except for 19 pages of
           documentation that was not necessary to understand the director’s comments, along
           with our evaluation of that response, can be found in appendix B of this report. We
           provided the Director of HUD’s Indianapolis Office of Community Planning and
           Development with a complete copy of the City’s written comments plus the 19
           pages of documentation.




                                             2
                            TABLE OF CONTENTS

Background and Objectives                                                    4

Results of Audit
      Finding 1: Controls over the City’s Commitment of Program Funds Were   5
                 Inadequate

      Finding 2: Controls over the City’s Activities Were Inadequate         8

Scope and Methodology                                                        11

Internal Controls                                                            12

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use         14
   B. Auditee Comments and OIG’s Evaluation                                  15
   C. Federal Regulations and the City’s Requirements                        18




                                             3
                      BACKGROUND AND OBJECTIVES

The Program. Authorized under Title II of the Cranston-Gonzales National Affordable Housing
Act, as amended, the HOME Investment Partnerships Program (Program) is funded for the purpose
of increasing the supply of affordable standard rental housing; improving substandard housing for
existing homeowners; assisting new homebuyers through acquisition, construction, and
rehabilitation of housing; and providing tenant-based rental assistance.

The City. Organized under the laws of the State of Indiana, the City of Muncie (City) is governed
by a mayor and nine-member city council (council), including a council president, elected to four-
year terms. The City’s Community Development Department (Department) is responsible for the
oversight and monitoring of the City’s Program. The City’s board of public works and safety and
its citizen’s advisory committee work collaboratively with the Department to administer the
Program. The overall mission of the Department is to work with housing developers, community
development corporations, social service providers, and the Delaware County Public Housing
Agency to build and maintain affordable housing and provide social services. The City’s Program
records are located at 300 North High Street, Muncie, Indiana.

The following table shows the amount of Program funds the U.S. Department of Housing and
Urban Development (HUD) awarded the City for Program years 2003 through 2007.

                                    Program          Program
                                      year             funds
                                      2003              $700,348
                                      2004               696,933
                                      2005               668,190
                                      2006               628,787
                                      2007               625,499
                                     Total            $3,319,757

The City awarded Program funds to three subrecipients to provide downpayments, closing costs,
and/or gap financing; tenant-based rental assistance, including the first month’s rent and/or
security deposits; and housing rehabilitation assistance during our audit period. Our audit
included activities completed by the three subrecipients, as well as the City’s Department, from
January 2006 through September 2007. The three subrecipients, which are nonprofit
organizations, consisted of the Muncie Homeownership and Development Center (Center),
Christian Ministries of Delaware County (Christian Ministries), and Bridges Community
Services, Incorporated (Bridges).

Our objectives were to determine whether the City effectively administered its Program and
followed HUD’s requirements.




                                                 4
                                RESULTS OF AUDIT

Finding 1: Controls over the City’s Commitment of Program Funds
                           Were Inadequate
The City did not maintain an adequate system of controls to ensure that it commits Program
funds within HUD’s 24-month commitment deadline and avoids losing the Program funds. In
addition, it failed to ensure that Program funds were always committed for eligible activities.
The weaknesses occurred because the City lacked adequate procedures and controls to ensure
that it commits Program funds within HUD’s 24-month commitment deadline, avoids losing the
Program funds, and commits Program funds to eligible activities. As a result, the City must
commit more than $1.2 million in Program funds for eligible activities by July 31, 2008, to avoid
losing the funds.



 The City Must Commit More
 Than $1.2 Million in Program
 Funds by July 31, 2008

              As of January 31, 2008, HUD’s Program deadline compliance status report
              (report) showed that the City had $1,166,662 in Program funds which it must
              commit by July 31, 2008, to comply with HUD’s 24-month commitment deadline
              and avoid losing the funds.

              However, the City committed $19,999 in Program funds on February 11, 2008,
              for activity number 2133. Further, as of February 27, 2008, HUD was updating
              its Program report to include $418,094 in Program funds from activity number
              1955, which HUD determined was not an eligible activity. The more than
              $418,000 includes $262,003, which the City reimbursed to its HOME trust fund
              treasury account (treasury account) in May 2007, and $156,091 in Program funds
              the City did not draw down from its treasury account for the activity.

              In addition, the City entered into a contract with the Center totaling $439,978 in
              Program funds on May 23, 2007, to provide downpayment assistance and gap
              financing. As of March 28, 2008, $308,799 of the nearly $440,000 contract
              remained to be committed for eligible activities in HUD’s Integrated
              Disbursement Information System (System).
              Therefore, the City must commit $1,255,958 in Program funds ($1,166,662, which it
              must commit, less the $19,999 it committed, plus the $418,094 HUD was updating
              to its Program report, less the $308,799 under contract with the Center) for eligible
              activities by July 31, 2008, to avoid losing the Program funds.




                                                5
The City Committed More
Than $1.5 Million in Program
Funds for Inappropriate
Activities

           The City has committed $3,197,262 in Program funds since January 1, 2003.
           However, it committed $1,515,413 of the nearly $3.2 million in Program funds for
           improper activities. The following table shows the seven improper activities for
           which the City has committed Program funds since January 2003.

                    Activity                                    Initial commit   Improper
                    number          Type of assistance                date        amount
                     1955      New construction                 Dec. 18, 2003     $1,372,437
                     2006      Tenant-based rental assistance   Nov. 10, 2004          6,077
                     2007      New construction                 Jan. 18, 2006         44,800
                     2091      Rehabilitation                   Feb. 12, 2007         12,099
                     2093      Acquisition/new construction      Apr. 5, 2007         10,000
                     2094      Acquisition/new construction      Apr. 5, 2007         10,000
                     2095      Acquisition/new construction      Apr. 5, 2007         60,000
                                               Total                              $1,515,413

           Therefore, the City has only committed $1,681,849 in Program funds for eligible
           activities and contracts since January 1, 2003, for an average of $325,519
           ($1,681,849 divided by 62 months times 12 months) per year or $135,633 ($325,519
           divided by 12 months times five months remaining to commit Program funds) over a
           five-month period.

           As of March 31, 2008, the City has held preliminary discussions and/or received
           draft proposals regarding the funding of four potential activities, which may involve
           more than $1.8 million in Program funds. The City plans to commit Program funds
           for the potential activities by July 31, 2008. However, as of March 31, 2008, the
           City has yet to commit Program funds for any future activities.

The City Lacked Adequate
Procedures and Controls


           The City lacked adequate procedures and controls to ensure that it commits funds
           within HUD’s 24-month commitment deadline and avoids losing the Program
           funds. A former director of the City’s Department said that the Department
           lacked policies or procedures to ensure that Program funds were committed to
           eligible activities within HUD’s 24-month commitment deadline. The current
           director of the City’s Department stated that aside from public notices for its
           consolidated plan, which solicits the public’s input regarding the City’s use of
           Program funds, the City did not have a formal request for proposal process for
           Program activities. The current director also said that the Department’s staff did



                                                 6
             not consider committing Program funds for potential activities from July 31,
             2007, through January 25, 2008, since HUD froze the City’s Program funds due
             to monitoring concerns.

Conclusion

             The City must commit $1,120,325 ($1,255,958 that it must commit less the
             $135,633 average over a five-month period) in Program funds between February and
             July 2008 above the five-month average of Program funds the City has committed
             for eligible activities since January 1, 2003, to avoid losing the funds.

Recommendation


             We recommend that the Director of HUD’s Indianapolis Office of Community
             Planning and Development require the City to

             1A.    Implement adequate procedures and controls to commit Program funds for
                    eligible activities by July 31, 2008, to help ensure that the City does not
                    lose $1,120,325 in Program funds in July 2008.




                                             7
Finding 2: Controls over the City’s Activities Were Inadequate
The City lacked documentation to support that it followed HUD’s regulations and/or its
requirements when it used Program funds and/or program income to provide rehabilitation
assistance; downpayments, closing costs, and/or gap financing; and tenant-based rental
assistance for Program activities. In addition, the City improperly used Program funds after an
operating agency agreement with a subrecipient expired. The weaknesses occurred because the
City lacked adequate procedures and controls to ensure that it maintained adequate
documentation and properly disbursed Program funds. As a result, it was unable to support its
use of more than $215,000 in Program funds and Program income and improperly disbursed
more than $6,000 in Program funds after the operating agency agreement with the subrecipient
expired.



 The City Lacked
 Documentation to Support Its
 Use of More Than $215,000 in
 Program Funds and Program
 Income

              We reviewed all eight of the Program activities the City completed from January
              1, 2006, through September 30, 2007. The City lacked documentation for six of
              the eight activities to support that it used $215,575 in Program funds and Program
              income for eligible activities.

              The City lacked documentation to support that it followed HUD’s regulations
              when it used $117,375 in Program funds to provide rehabilitation assistance for
              activity number 2015. The City did not conduct an inspection to determine
              whether the house met HUD’s property standards requirements. In addition, it
              could not provide a written agreement with the homeowner, a prerehabilitation
              appraisal for the after-rehabilitation value of the house to show that the activity
              qualified as affordable housing, and sufficient income documentation to
              demonstrate that the household was income eligible.

              The City also could not provide documentation for activity numbers 2086, 2088,
              2089, and 2096 to support that it followed HUD’s regulations and its
              requirements when it used $76,530 in Program funds to provide downpayments,
              closing costs, and/or gap financing. The City did not conduct its own inspections
              to determine whether the houses met all applicable state and local housing quality
              standards and code requirements and HUD’s housing quality standards. The
              Center’s activity files contained homebuyers’ consumer housing inspection
              reports (reports) for the four activities. However, the reports did not focus on
              whether the houses met all applicable state and local housing quality standards
              and code requirements and HUD’s housing quality standards.



                                                8
           The City lacked documentation to support that it followed HUD’s regulations and
           its requirements when it used $20,000 in Program funds and $1,670 in Program
           income for activity number 2006. Christian Ministries provided tenant-based
           rental assistance, including the first month’s rent and/or security deposits, for 96
           households. Christian Ministries’ activity files for 37 households contained
           incomplete HUD housing quality standards inspection reports conducted by the
           City. The activity files for the remaining 59 households did not contain
           inspection reports supporting that the units met HUD’s housing quality standards.

           We provided a schedule for activity number 2006, in which housing quality
           standards inspection reports were incomplete or not conducted, to the Director of
           HUD’s Indianapolis Office of Community Planning and Development and the
           director of the City’s Department on January 29, 2008.

The City Improperly Disbursed
More Than $6,000 in Program
Funds for One Activity

           The City disbursed $6,077 in Program funds to Christian Ministries after its 2004
           operating agency agreement (agreement) with Christian Ministries had expired.
           According to the City’s agreement with Christian Ministries, if all funds were not
           disbursed by May 31, 2005, the agreement would terminate and all remaining
           funds would be recaptured by the Department. The following table shows the
           four draw requests approved by the City for activity number 2006 after its
           agreement with Christian Ministries had expired, including the purchase order
           number, the type and amount of Program assistance, the Program income
           deducted, and the date each request was approved by the Department.

          Purchase
            order           Date            Deposits       Program        Draw
           number        approved      Security   Rental    income       request
            51709      July 15, 2005                $2,573                $2,573
            51710      July 15, 2005     $2,361                $772         1,589
            55969      Dec. 21, 2005        725                               725
            55970      Dec. 21, 2005                 1,190                  1,190
                     Totals              $3,086     $3,763     $772       $6,077

The City Lacked Adequate
Procedures and Controls

           The weaknesses regarding the City’s improperly disbursing Program funds and
           lacking documentation to support that activities were appropriate occurred
           because the City lacked adequate procedures and controls to ensure that it
           appropriately followed HUD’s regulations and/or its own requirements. The City


                                            9
             did not ensure that it fully implemented HUD’s regulations and/or its own
             requirements.

             The planner for the City’s Department said that a former director of the
             Department was more concerned with completing activities in a timely manner
             than ensuring that the City followed HUD’s regulations and/or its own
             requirements when using Program funds. The planner said that although she
             knew the City was not in compliance with HUD’s regulations and/or its own
             requirements, she did what the former director told her to do.

             The City did not adequately monitor its subrecipients to ensure compliance with
             HUD’s regulations and its own requirements. The planner said that the
             Department’s lack of monitoring of its subrecipients was due in part to a lack of
             direction by a former director and overall staff experience regarding the Program.

Conclusion


             HUD and the City lack assurance that the City used $215,575 in Program funds
             and/or Program income to provide rehabilitation assistance; downpayments,
             closing costs, and/or gap financing; and tenant-based rental assistance for eligible
             Program activities. In addition, the City improperly disbursed $6,077 in Program
             funds after its agreement with Christian Ministries had expired.

Recommendations

             We recommend that the Director of HUD’s Indianapolis Office of Community
             Planning and Development require the City to

             2A.    Reimburse its Program $6,077 from nonfederal funds for the Program
                    funds the City disbursed to Christian Ministries after its agreement with
                    Christian Ministries had expired.

             2B.    Provide supporting documentation or reimburse its Program from
                    nonfederal funds, as appropriate, for the $215,575 in Program funds
                    and/or Program income used for the six activities cited in this finding for
                    which the City lacked documentation to support compliance with HUD’s
                    regulations and/or the City’s requirements.

             2C.    Implement adequate procedures and controls to ensure that Program funds
                    and Program income are used in accordance with HUD’s regulations and
                    the City’s requirements.




                                              10
                          SCOPE AND METHODOLOGY

To accomplish our objectives, we reviewed

            •   Applicable laws; HUD’s regulations at 24 CFR [Code of Federal Regulations] Parts
                85, 92, and 982; HUD’s Office of Community Planning and Development Notice
                07-06; HUD’s HOMEfires volume 6, number 2; and HUD’s “Building HOME: A
                Program Primer.”

            •   The City’s accounting records, annual audited financial report for 2005 and 2006,
                annual audited financial statements for 2005 and 2006, data from HUD’s System,
                Program activity files, policies and procedures, organizational chart, and
                consolidated strategy and annual action plan.

            •   Christian Ministries’, the Center’s, and Bridges’ Program activity files, policies,
                and procedures.

            •   HUD’s files for the City.

We also interviewed the City’s employees, subrecipients’ employees, and HUD’s staff.

Finding 2

We selected all eight of the City’s Program activities completed from January 1, 2006, through
September 30, 2007. The eight activities were selected to determine whether the City effectively
administered its Program and provided assistance for eligible activities.

We performed our on-site audit work from October 2007 through February 2008 at the City’s
Department office located at 300 North High Street, Muncie, Indiana. The audit covered the period
January 2006 through September 2007 and was expanded as determined necessary.

We performed our audit in accordance with generally accepted government auditing standards.




                                                 11
                             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,
   •   Compliance with applicable laws and regulations, and
   •   Safeguarding resources.

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:

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

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

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

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

              We assessed 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.




                                               12
Significant Weakness

           Based on our review, we believe the following item is a significant weakness:

           •   The City lacked adequate procedures and controls to ensure that it complied
               with HUD’s regulations and/or its requirements regarding HUD’s 24-month
               commitment deadline and maintaining adequate documentation to support the
               use of Program funds (see findings 1 and 2).




                                           13
                                    APPENDIXES

Appendix A

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

         Recommendation                                            Funds to be put
             number            Ineligible 1/     Unsupported 2/    to better use 3/
                1A                                                      $1,120,325
                2A                   $6,077
                2B                                     $215,575
               Totals                $6,077            $215,575         $1,120,325


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 the 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/   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 reduction 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
     that are specifically identified. In this instance, if the City implements our
     recommendation it will not lose the Program funds required to be committed by July
     2008. Once the City successfully improves its procedures and controls, this will be a
     recurring benefit. Our estimate reflects only the initial five months of this benefit.




                                               14
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation   Auditee Comments




Comment 1




                         15
Ref to OIG Evaluation   Auditee Comments




Comment 2




Comment 3




Comment 3



Comment 3




                         16
                        OIG’s Evaluation of Auditee Comments

Comment 1   We revised the audit report by adding in addition, the City entered into a contract
            with the Center totaling $439,978 in Program funds on May 23, 2007, to provide
            downpayment assistance and gap financing. As of March 28, 2008, $308,799 of
            the nearly $440,000 contract remained to be committed for eligible activities in
            HUD’s System.
            We revised the audit report to state the City must commit $1,255,958 in Program
            funds ($1,166,662, which it must commit, less the $19,999 it committed, plus the
            $418,094 HUD was updating to its Program report, less the $308,799 under
            contract with the Center) for eligible activities by July 31, 2008, to avoid losing
            the Program funds.
            We revised the audit report to state the City has committed $3,197,262 in
            Program funds since January 1, 2003. However, it committed $1,515,413 of the
            nearly $3.2 million in Program funds for improper activities.
            We revised the audit report to state the City has only committed $1,681,849 in
            Program funds for eligible activities and contracts since January 1, 2003, for an
            average of $325,519 ($1,681,849 divided by 62 months times 12 months) per year
            or $135,633 ($325,519 divided by 12 months times five months remaining to
            commit Program funds) over a five-month period.
            We revised the audit report to state the City must commit $1,120,325 ($1,255,958
            that it must commit less the $135,633 average over a five-month period) in
            Program funds between February and July 2008 above the five-month average of
            Program funds the City has committed for eligible activities since January 1,
            2003, to avoid losing the funds.
            Recommendation 1A in the audit report was revised to reflect these revisions.
Comment 2   We revised the audit report to state that as of March 31, 2008, the City has held
            preliminary discussions and/or received draft proposals regarding the funding of
            four potential activities, which may involve more than $1.8 million in Program
            funds. However, as of March 31, 2008, the City has yet to commit Program funds
            for any future activities.
Comment 3   HUD’s regulations at 24 CFR [Code of Federal Regulations] 92.251(a)(2) state
            that housing acquired with Program funds must meet all applicable state and local
            housing quality standards and code requirements. Page 3 of the City’s contract
            with the Center, dated May 23, 2007, states that the Center will ensure that all
            housing is in compliance with HUD’s housing quality standards at the time of
            occupancy. The City did not conduct its own inspections to determine whether
            the houses met all applicable state and local housing quality standards and code
            requirements and HUD’s housing quality standards.




                                            17
Appendix C

              FEDERAL REGULATIONS AND THE CITY’S
                        REQUIREMENTS

Finding 1
Title II of the Cranston-Gonzalez National Affordable Housing Act, as amended, Section 218(g),
states that if any funds becoming available to a participating jurisdiction under this title are not
placed under binding commitment to affordable housing within 24 months after the last day of
the month in which such funds are deposited in a participating jurisdiction’s treasury account, the
participating jurisdiction’s right to draw such funds from its treasury account shall expire.
HUD’s Secretary shall reduce the line of credit in the participating jurisdiction’s treasury account
by the expiring amount and shall reallocate the funds by formula.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 92.500(d)(1) state that HUD will
reduce or recapture Program funds in a participating jurisdiction’s treasury account by the
amount of Program funds in the treasury account that are not committed within 24 months after
the last day of the month in which HUD notifies the participating jurisdiction of HUD’s
execution of a Program agreement.

Chapter II, paragraph B.1, of HUD’s Office of Community Planning and Development Notice
07-06, states that the 24-month commitment requirement for Program funds is statutory and
cannot be waived. Paragraph A.2 of chapter VI states that to determine compliance with the
commitment requirement, HUD must compare a participating jurisdiction’s cumulative
allocations from Program inception through the deadline year, minus any deobligations, to its
cumulative commitments to Program activities from Program inception through its commitment
deadline. Paragraph A.3.a states that a participating jurisdiction meets the commitment
requirement if its cumulative commitments through its commitment deadline are equal to or
greater than its cumulative allocations, minus any deobligations, through the deadline year.
Paragraph A.3.c states that the amount of any ineligible activities will be subtracted from the
participating jurisdiction’s cumulative commitments since ineligible activities do not count as
Program commitments.

Finding 2
HUD’s regulations at 24 CFR [Code of Federal Regulations] 92.203(a)(2) state that a
participating jurisdiction must determine households’ annual income by examining source
documentation evidencing households’ annual income.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 92.209(i) state housing occupied by
a household receiving tenant-based rental assistance must meet HUD’s housing quality
standards. The participating jurisdiction must inspect the housing initially and reinspect it
annually.


                                                18
HUD’s regulations at 24 CFR [Code of Federal Regulations] 92.251(a)(1) state that housing
constructed or rehabilitated with Program funds must meet all applicable local codes,
rehabilitation standards, and ordinances at the time of project completion. Section 92.251(a)(2)
states that housing acquired with Program funds must meet all applicable state and local housing
quality standards and code requirements. If there are no such standards or code requirements,
the housing must meet HUD’s housing quality standards.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 92.254(a)(2)(iii) state that if a
participating jurisdiction intends to use Program funds for projects, the participating jurisdiction
may use the single-family mortgage limits under Section 203(b) of the National Housing Act or
it may determine 95 percent of the median area purchase price for single-family housing in the
jurisdiction. Section 92.254(b) states that housing that is currently owned by a household
qualifies as affordable housing only if the estimated value of the property, after rehabilitation,
does not exceed 95 percent of the median purchase price for the area and the housing is the
principal residence of an owner whose household qualifies as a low-income household at the
time Program funds are committed to the housing.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 92.504(a) state that a participating
jurisdiction is responsible for managing the day-to-day operations of its Program, ensuring that
Program funds are used in accordance with all Program requirements and written agreements,
and taking appropriate action when performance problems arise. The use of subrecipients or
contractors does not relieve the participating jurisdiction of this responsibility. Section 92.504(b)
states that a participating jurisdiction must enter into a written agreement with an entity before
disbursing any Program funds to that entity. Section 92.504(c)(5)(ii) states that a participating
jurisdiction’s written agreement with a homeowner must, at a minimum, conform to the
requirements in 24 CFR [Code of Federal Regulations] 92.254(b) and specify the amount and
form of Program assistance, rehabilitation work to be undertaken, date for completion, and
property standards to be met.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 92.508(a) state that a participating
jurisdiction must establish and maintain sufficient records to enable HUD to determine whether
the participating jurisdiction has met the requirements of 24 CFR [Code of Federal Regulations]
Part 92. The participating jurisdiction must maintain records demonstrating the following:

   ™ Each household is income eligible in accordance with 24 CFR [Code of Federal
     Regulations] 92.203.
   ™ Each tenant-based rental assistance project meets the housing quality standards
     requirements of 24 CFR [Code of Federal Regulations] 92.209.
   ™ Each project meets the property standards of 24 CFR [Code of Federal Regulations]
     92.251.
   ™ Each project’s estimated value after rehabilitation does not exceed 95 percent of the
     median purchase price for the area in accordance with 24 CFR [Code of Federal
     Regulations] 92.254(a)(2).
   ™ Each homeownership project meets the affordability requirements of 24 CFR [Code of
     Federal Regulations] 92.254.




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HUD’s HOMEfires, volume 6, number 2, states that participating jurisdictions must perform
inspections of units purchased with Program funds. Participating jurisdictions may not rely on
independent inspections performed by any party not under contract to the participating
jurisdiction.

Page 3 of the City’s contract with the Center, dated May 23, 2007, states that the Center will
ensure that all housing is in compliance with HUD’s housing quality standards at the time of
occupancy. As verification, the Center agrees to maintain a completed Section 8 Housing
Choice Voucher program existing housing program inspection checklist signed by a qualified
housing inspector.

Page 2 of the City’s operating agency agreement with Christian Ministries, effective June 1,
2004, states that Christian Ministries shall maintain verification that each unit is in compliance
with HUD’s housing quality standards at the time of occupancy, with the exception of units in
local housing authority apartments or units receiving Section 8 Housing Choice Voucher
program rental assistance. Page 7 states that the agreement shall be effective until final
disbursement of funds or until May 31, 2005, whichever occurs first. Further, the agreement
states that if all Program funds are not disbursed by May 31, 2005, the agreement shall be
terminated and the remaining Program funds shall be recaptured by the City.




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