oversight

City of Dallas, Dallas, Texas, Incurred Ineligible and Unsupported Expenses for Its Housing Opportunity for Persons with AIDS Grant

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-03-20.

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

                                                              Issue Date
                                                                           March 20, 2008
                                                              Audit Report Number
                                                                           2008-FW-1007




TO:         Katie S. Worsham
            Director, Community, Planning, and Development, 6AD


FROM:       Gerald R. Kirkland
            Regional Inspector General for Audit, Fort Worth Region, 6AGA

SUBJECT: City of Dallas, Dallas, Texas, Incurred Ineligible and Unsupported Expenses for
         Its Housing Opportunity for Persons with AIDS Grant


                                    HIGHLIGHTS

 What We Audited and Why

              We conducted a review of the City of Dallas’ (City) Housing Opportunities for
              Persons with AIDS (HOPWA) grant. We initiated the review due to concerns of
              the U. S. Department of Housing and Urban Development (HUD) regarding the
              City’s management and oversight of its program sponsors because of the size of
              the grant and the addition of two new competitive grants. Our objectives were to
              determine whether the City and its program sponsors provided rent, mortgage,
              and utility assistance to persons who met program criteria and whether the 2005
              and 2006 competitive grants provided transitional and replacement housing.


 What We Found


              Generally, the City complied with program requirements to ensure that it and its
              program sponsors provided assistance to eligible persons. However, in violation
              of the HOPWA grant agreement, three program sponsors charged $24,521 in
              ineligible expenses, and one program sponsor did not support $138,979 in
              expenses. Further, the City provided $1,732 in excess short-term rental,
           mortgage, and utility assistance, and several client files lacked adequate
           supporting documentation.

What We Recommend


           We recommend that the Director of HUD’s Fort Worth Office of Community
           Planning and Development require the City to (1) repay $26,253 to its HOPWA
           formula grant; (2) provide supporting documentation or reimburse its formula
           grant $138,979; (3) discontinue cable television payments, which will result in
           $16,345 in formula grant funds put to better use; and (3) strengthen controls to
           better comply with requirements.

           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 provided a draft to the City of Dallas on February 25, 2008, and held an exit
           conference on March 10, 2008. The City of Dallas provided written comments on
           March 17, 2008. The City of Dallas agreed with all the recommendations except
           the ineligibility of cable television expenses. The City of Dallas’ response along
           with our evaluation is included in appendix B of this report.




                                             2
                            TABLE OF CONTENTS

Background and Objectives                                                                     4

Results of Audit
      Finding 1: The City Charged Ineligible and Unsupported Expenses to Its Formula Grants   5
      Finding 2: The City Paid Excessive Assistance and Did Not Maintain Complete Files       7

Scope and Methodology                                                                         9

Internal Controls                                                                             10

Appendixes
    A. Schedule of Questioned Costs and Funds to Be Put to Better Use                         11
    B. Auditee Comments and OIG’s Evaluation                                                  12




                                            3
                      BACKGROUND AND OBJECTIVES

The City of Dallas (City) received Housing Opportunities for People with AIDS (HOPWA)
formula grants of more than $3 million annually during our review period. The City’s
Environmental and Health Services Department administers the HOPWA grant and provides
management and oversight of the program. The HOPWA program year runs from October 1
through September 30.

The Dallas eligible metropolitan statistical area includes the City and eight surrounding counties.
A reported 13,472 persons with Human Immunodeficiency Syndrome/Acquired Immune
Deficiency Syndrome (HIV/AIDS) lived in the area as of December 31, 2005.
The City’s HOPWA formula grant provides the following services: (1) tenant-based rental
assistance; (2) short-term rent, mortgage, and utility assistance; (3) facility-based housing
assistance, including the lease of certain facilities; and (4) other supportive services, consisting
of homeless outreach, medically managed day care, and lost-to-care outreach and assistance.
The City has contracts or agreements with eight program sponsors to provide the services.

During the 2005 and 2006 program years, the City’s HOPWA program provided housing
assistance to 743 households, a total of 1,032 persons. This assistance consisted of long- and
short-term rental assistance, short-term utility assistance, and facility-based housing.
Additionally, the U.S. Department of Housing and Urban Development (HUD) awarded the City
two HOPWA Special Projects of National Significance demonstration grants. One of the grants,
totaling $773,839, which runs from October 1, 2005, to September 30, 2008, was to provide
housing placement and transitional housing to homeless persons living with HIV/AIDS. The
other grant, totaling $721,000, which runs from January 1, 2007, through December 31, 2009,
provides housing placement and transitional tenant-based rental assistance to ex-offenders with
HIV/AIDS residing in the City of Dallas.




                                                 4
                                    RESULTS OF AUDIT

Finding 1: The City Charged Ineligible and Unsupported Expenses to Its
           Formula Grants
Three City program sponsors 1 charged $24,521 in ineligible expenses to the City’s HOPWA
formula grant for cable television, aquarium supplies, and Christmas decorations. Further,
contrary to HUD requirements, one program sponsor 2 did not provide support for $138,979 in
expenses charged to the HOPWA formula grant. The City should reimburse its HOPWA grant
$24,521 and any of the $138,979 that it cannot adequately support. Further, it should strengthen
controls to ensure that the program sponsors only charge eligible expenses in the future, saving
an additional $16,345 over the next year.



    Program Sponsors Charged
    Ineligible and Unsupported
    Costs


                 From October 2005 through September 2007, two program sponsors charged the
                 City’s HOPWA formula grant $24,022 in unallowable television charges. Also,
                 one program sponsor charged the HOPWA grant for $278 in aquarium supplies
                 and $119 for Christmas decorations and another program sponsor charged the
                 HOPWA grant $122 for sporting equipment. The purpose of the formula grant is
                 to provide housing and supportive services to individuals with HIV/AIDS and
                 their families. Eligible uses of the funds include mortgage, utility, and rental
                 assistance; support services; and acquisition, rehabilitation, operation, and lease of
                 facilities to provide housing. Cable television, 3 aquarium supplies, and Christmas
                 decorations are not housing costs and, therefore, unallowable.

                 This occurred because the program sponsors and the City incorrectly considered
                 these eligible expenses. The City should reimburse its HOPWA grant $24,521
                 and strengthen its controls to ensure that program sponsors charge only eligible
                 expenses to its HOPWA grants. By doing this, it could avoid an estimated
                 $16,345 4 in ineligible costs from being charged to its HOPWA grants over the
                 next year.



1
     AIDS Services of Dallas charged $23,596, Legacy Counseling Center charged $803, and Welcome House
     charged $122.
2
     Welcome House, Inc.
3
     Office of Management and Budget Circular A-87, attachment B 14.
4
     Based upon the average cable costs charged to the HOPWA grants over the previous two years.


                                                     5
                Contrary to HUD requirements, one program sponsor 5 did not provide support for
                $138,979 in expenses charged to the HOPWA formula grant. The expenses
                included payroll allocations, security, and utilities. The program sponsor did not
                reconcile its expenses with reimbursements. The City should provide supporting
                documentation for the $138,979 or repay any ineligible amounts.

    Recommendations



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

                1A. Reimburse its HOPWA formula grant $24,521 6 for the ineligible expenses.

                1B. Strengthen controls to ensure that it charges only eligible expenses to its
                    grants, which could save an estimated $16,345 over the next year.

                1C. Support the $138,979 in claimed expenses by a program sponsor or repay
                    the grant the unsupported amounts.




5
     Welcome House, Inc.
6
     ($23,199+$803+$278+$119+$122).


                                                 6
Finding 2: The City Paid Excessive Assistance and Did Not Maintain
           Complete Files

The City paid $1,732 in excess short-term rent, mortgage, and utility assistance for four clients.
Three cases occurred due to an employee’s disregard for policy. The fourth case occurred
because of errors. Additionally, some client files lacked required documentation, such as
documentation to show that the units met housing quality standards. As a result, $1,732 was not
available for eligible assistance, and the City could not ensure that assistance was eligible in all
cases because of missing documentation.




     Ineligible Assistance Was Paid


                    Of the 112 client files reviewed, four clients received short-term rent, mortgage,
                    and utility assistance in excess of the allowed 21 weeks. 7 In total, the City paid
                    $1,732 in ineligible assistance for the four clients. For the West Dallas
                    Multipurpose Center, the City paid $1,280 in ineligible assistance for three
                    clients. This occurred due to an employee's disregard for policy. For the Martin
                    Luther King Community Center, one client received $452 in excessive assistance
                    because of errors.

                    The City terminated one case manager who disregarded policy by approving
                    inappropriate assistance for three clients. The City should repay $1,732 and
                    strengthen controls to ensure that it does not provide excessive assistance.


     Client Files Were Missing
     Documentation


                    Of the 112 client files reviewed, 19 files lacked some documentation. One
                    program sponsor 8 lacked housing quality standards documentation in 15 of 27 (56
                    percent) files reviewed. Contrary to program requirements, the client files lacked
                    documentation supporting that units met housing quality standards 9 and were free
                    of lead-based paint. 10 Files also did not always include documentation supporting


7
       24 CFR [Code of Federal Regulations] Part 574 limits assistance to 21 weeks during a 52-week period.
8
       AIDS Services of Dallas (ASD).
9
       24 CFR 574.310.2.
10
       24 CFR 574.635.


                                                          7
                  that annual income recertifications were performed, 11 client eligibility, 12 or
                  persons being assisted. 13

                  Regarding housing quality standards documentation, the program sponsor’s
                  management stated that maintaining the documentation was not a requirement
                  until recently. Previously, a contractor was responsible for ensuring that
                  standards were met but did not maintain documentation. As a result, the program
                  sponsor did not have any records of unit deficiencies or whether they were
                  properly corrected. HOPWA regulations required that documentation be
                  maintained. When the program sponsor did start maintaining documentation, it
                  only collected the apartment number. This was not adequate documentation to
                  show the types of deficiencies and whether or not they were corrected. Recently,
                  the sponsor began maintaining additional information to sufficiently meet
                  requirements.

     Recommendations



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

                  2A. Reimburse the HOPWA formula grant $1,732 in ineligible short-term rent,
                      mortgage, and utility assistance.

                  2B. Strengthen policies and procedures to ensure that client files contain
                      required documentation.




11
      24 CFR 574.330(a).
12
      24 CFR 574.332 (a)(2).
13
      24 CFR 574.3.


                                                     8
                         SCOPE AND METHODOLOGY

Our objectives were to determine whether the City and its program sponsors provided rent,
mortgage, and utility assistance to persons that met program criteria and whether the 2005 and
2006 competitive grants provided transitional and replacement housing. To accomplish our
objectives, we

       •     reviewed applicable program requirements,
       •     reviewed the City's internal controls regarding the HOPWA grant,
       •     reviewed draws from the following grants that were statistically selected based on a
             confidence level of 95 percent with a $100 materially level,

                       GRANT                 POPULATION          SAMPLE SIZE
               2005-06 Formula Grant            1,234                37
               2006-07 Formula Grant            1,554                47
               2005 Competitive grant           1,560                47
               2006 Competitive grant            527                 16

       •     reviewed 112 of 667 (17 percent) formula client files, 8 of 46 (17 percent) 2005
             HOPWA competitive grant client files, and 6 of 27 (22 percent) 2006 HOPWA
             competitive grant client files. The client files were judgmentally selected to include
             men and women, persons living in all facilities, and current clients as well as
             terminated clients,
       •     conducted housing quality standards inspections of 29 of 281 (10 percent) assisted
             units that were judgmentally selected to include all facilities and include units
             occupied by both women and men, and
       •     interviewed City's Department of Environmental Health Services and program
             sponsor personnel.

We conducted our review from October through December 2007 at the City Environmental and
Health Services Office, Dallas, TX, the City's program sponsor's offices located in Dallas, TX,
Denton, TX, and Weatherford, TX; two of the City's community centers, and our offices. Our
review period was from January 1, 2005, through September 30, 2007. We performed our
review in accordance with generally accepted government auditing standards.




                                                9
                              INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:

   •   Effectiveness and efficiency of operations,
   •   Reliability of financial reporting, and
   •   Compliance with applicable laws and regulations.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.



 Relevant Internal Controls


              We determined the following internal controls were relevant to our audit objectives:

              •       Compliance with laws and regulations – Policies and procedures that
                      management has implemented to reasonably ensure that resource use is
                      consistent with laws and regulations, including policies and procedures
                      regarding eligible costs, eligible clients, and housing quality standards.

              We assessed the relevant control 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 Weakness


              Based on our review, we do not believe there are any significant weaknesses.




                                                10
                                    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                     $24,521
                1B                                                             $16,345
                1C                                          $138,979
                2A                        1,732

              Totals                   $26,253              $138,979           $16,345




1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or federal, state, or local
     policies or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of audit. Unsupported costs
     require a decision by HUD program officials. This decision, in addition to obtaining
     supporting documentation, might involve a legal interpretation or clarification of
     departmental policies and procedures.

3/   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. In this instance, by avoiding ineligible costs, the funds
     can be used for eligible expenses.




                                                 11
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         12
Comment 1




Comment 2




            13
Comment 1




            14
Comment 1




            15
Comment 1




            16
                         OIG Evaluation of Auditee Comments

Comment 1   With the exception of the ineligibility of cable television, the City of Dallas
            agreed with the report and recommendations.

Comment 2   The City of Dallas believed that the cable television expense should be an eligible
            expense because it benefited “the health, welfare, and safety of HOPWA clients
            residing in facilities.” However, the Deputy Director of the Office of HIV/AIDS
            made the determination that cable television was an entertainment expense and
            not an eligible operating expense.




                                             17