Issue Date
January 23, 2008
Audit Report Number
2008-NY-1003
TO: Vincent Hom, Director, Office of Community Planning and Development, 2AD
For
FROM: Edgar Moore, Regional Inspector General for Audit, 2AGA
SUBJECT: The City of New York’s Department of Housing Preservation and Development,
New York, New York, Had Administrative Weaknesses in Its HOME Program
HIGHLIGHTS
What We Audited and Why
We performed an audit of the HOME Investment Partnerships Program (HOME)
administered by the City of New York’s Department of Housing Preservation and
Development (the City), New York, New York, as part of the Office of Inspector
General’s (OIG) work plan goals to address Community Development Block
Grant program issues and improve the U.S. Department of Housing and Urban
Development’s (HUD) execution and accountability regarding fiscal
responsibilities. We selected the City based upon our risk assessment of HOME
grantees monitored by the HUD New York City Office of Community Planning
and Development. The audit objectives were to determine whether the City (1)
properly committed and disbursed HOME funds; (2) adequately monitored its
community housing development organizations, projects, and contractors; and (3)
correctly reported its match contributions.
What We Found
The City generally committed and disbursed HOME funds in accordance with
HOME regulations; however, there were weaknesses in its monitoring
procedures, which caused noncompliance with HOME regulations. Specifically,
the City did not (1) recertify or evaluate performance of its community housing
development organizations as required, (2) close out seven projects in HUD’s
Integrated Disbursement and Information System within the prescribed
timeframe, and (3) use correct affordability periods for monitoring its completed
projects. As a result, the City lacked assurance that its community housing
development organizations were properly organized and operated effectively, data
in HUD’s Integrated Disbursement and Information System accurately reflected
the status of its HOME funds, and HOME-funded projects being monitored met
the statutory HOME eligibility requirements throughout the affordability periods.
Additionally, the City overstated its match contribution by incorrectly calculating
and reporting its match contributions. While the City met its HOME match
requirements and reported a substantial balance of match contributions made in
excess of the required amounts, the erroneous calculation resulted in $34.1
million of ineligible match carried forward as a balance for use in future years.
What We Recommend
We recommend that the Director of HUD’s New York Office of Community
Planning and Development require the City to (1) implement procedures to
recertify its community housing development organizations and evaluate their
performance, (2) enter information into HUD’s Integrated Disbursement and
Information System to reflect the current status of seven old projects that have not
been closed out, (3) implement procedures to ensure that all completed projects
are monitored for the specified affordability period, (4) remove $34.1 million in
ineligible match from its 2007 HOME Match Report, and (5) establish procedures
to accurately report the value of match contributions for each of its programs.
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 results of our review during the audit and provided a draft report
to the City on December 12, 2007. We held an exit conference on January 9,
2008. We requested that any written comments be provided by January 14, 2008,
and we received a written response on January 16, 2008. The City generally
agreed with the findings and has begun implementing corrective action to address
our recommendations. The complete text of the City’s response, along with our
evaluation of that response, can be found in appendix B of this report.
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TABLE OF CONTENTS
Background and Objectives 4
Results of Audit
Finding 1: Weaknesses Existed in the City’s Procedures for Monitoring 6
HOME Funds
Finding 2: The City Incorrectly Calculated and Reported Its Match 11
Contributions
Scope and Methodology 14
Internal Controls 16
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 18
B. Auditee Comments and OIG’s Evaluation 19
3
BACKGROUND AND OBJECTIVES
The HOME Investment Partnerships Program (HOME), authorized under Title II of the
Cranston-Gonzalez National Affordable Housing Act, as amended, is designed to create
affordable housing for low-income households. The program provides formula grants to States
and local governments to fund a wide range of activities that build, buy, and/or rehabilitate
affordable housing for rent or homeownership or provide direct rental assistance to low-income
people. Program regulations are found in the HOME Investment Partnerships Program Final
Rule at 24 CFR (Code of Federal Regulations) Part 92, and U.S. Department of Housing and
Urban Development (HUD) program guidance is contained in its guidebook entitled Building
HOME, dated February 2006.
The City of New York’s Department of Housing Preservation and Development (the City)
administers the funds provided under HOME. The City is the largest municipal developer of
affordable housing in the nation and uses funds provided under HOME to make loans through
programs that serve low-income renters and owners, as well as homeless families and
individuals. The Department of Housing Preservation and Development is administered by
Commissioner Shaun Donovan and several deputy commissioners. Responsibility for HOME
funds is decentralized among the deputy commissioner for intergovernmental affairs; deputy
commissioner for development; deputy commissioner for budget, fiscal, and engineering audit;
and deputy commissioner for housing operations.
New York City was awarded $241 million and drew down $225.7 million in HOME funds
during the audit period, October 1, 2004, through September 30, 2006. As shown below, the
City administered various programs with its HOME funds.
Program name Amount drawn
Article 8A Loan Program $ 2,316,340
City/State Permanent Housing for the Homeless (85/85) 5,380,612
Converted HOME Activities 1 36,113,820
Cornerstone Program 189,185
Neighborhood Entrepreneurs Program 72,602,781
Neighborhood Redevelopment Program 33,907,573
Participation Loan Program 15,702,835
Small Buildings Loan Program (formerly Small Homes
Private Loan Program) 6,812,816
The Supportive Housing Program 38,886,338
Third Party Transfer 13,795,569
Total $225,707,869
1 Converted HOME Activities consists of prior HOME projects originally recorded in HUD’s Line of Credit Control System, which were converted to HUD’s Integrated Disbursement and
Information System as well as funds for administration. These prior HOME projects were from the Neighborhood Entrepreneurs Program, Neighborhood Redevelopment Program,
Phase Piggy Back, Southside United, and New York City.
4
We reviewed completed projects from the Neighborhood Entrepreneurs, Neighborhood
Redevelopment, and Supportive Housing Programs. The Neighborhood Entrepreneurs Program
identifies neighborhood-based property managers and developers to manage rehabilitation of and
later own occupied and vacant City-owned buildings. The City drew $54.5 million in HOME
funds to complete 38 projects under the Neighborhood Entrepreneurs Program. The
Neighborhood Redevelopment Program provides financing to enable experienced, locally based
not-for-profit organizations to acquire and rehabilitate occupied City-owned buildings. The City
drew $124.7 million in HOME funds to complete 40 projects under the Neighborhood
Redevelopment Program. Supportive Housing Program funds were used for acquisition and new
construction or rehabilitation of properties by not-for-profit organizations to develop new
permanent housing for homeless and low-income single adults. The City drew $41.5 million in
HOME funds to complete 10 projects under the Supportive Housing Program.
Our audit objectives were to determine whether the City (1) properly committed and disbursed
HOME funds; (2) adequately monitored its community housing development organizations,
projects, and contractors; and (3) correctly reported its match contributions.
5
RESULTS OF AUDIT
Finding 1: Weaknesses Existed in the City’s Procedures for Monitoring
HOME Funds
While the City generally committed and disbursed HOME funds in accordance with HOME
regulations, there were weaknesses in its monitoring procedures, which caused noncompliance with
HOME regulations. Specifically, the City did not (1) recertify or evaluate the performance of its
community housing development organizations as required, (2) close out seven projects in HUD’s
Integrated Disbursement and Information System within the prescribed timeframe, and (3) use
correct affordability periods for monitoring 47 completed HOME funded projects. This
noncompliance occurred because the City (a) lacked procedures to recertify and evaluate the
performance of its community housing development organizations, (b) lacked procedures to collect
data to document that the seven projects met HOME affordability requirements, and (c) began
projects’ affordability periods either at an earlier or later date than the date on which projects’
completion data were entered into HUD’s Integrated Disbursement and Information System.
Consequently, the City lacked assurance that its community housing development organizations
were properly organized and operated effectively, data in HUD’s Integrated Disbursement and
Information System accurately reflected the status of its HOME funds related to seven projects, and
47 completed HOME funded projects being monitored met the statutory HOME eligibility
requirements throughout the applicable affordability periods.
Weakness in Community
Housing Development
Organization Monitoring
The City did not recertify and monitor the performance of its community housing
development organizations as required by HOME regulations. Our review of the
files of four community housing development organizations disclosed that
certifications were reviewed neither annually nor at the time of additional
funding, and ongoing performance was not evaluated.
Regulations at 24 CFR (Code of Federal Regulations) 92.504(a) require the City
to monitor its community housing development organizations and conduct a
performance review at least annually. Community Planning and Development
Notice 97-11 states that only nonprofit organizations that have been certified by
HOME participating jurisdictions can receive funds from the minimum 15 percent
set-aside, and to be eligible for set-aside funds, community housing development
organizations must be organized and structured according to the standards
provided in HOME regulations at 24 CFR 92.2.
Although the City had adequate procedures for monitoring individual project
compliance with HOME regulations, which can include projects that are owned,
6
developed, and sponsored by its community housing development organizations,
it lacked procedures to recertify the eligibility of its community housing
development organizations annually or at the time of application for additional
funding. The City also did not have adequate procedures for ongoing monitoring
and evaluation of community housing development organization performance as
suggested in chapter 3 of the Building HOME guidebook. Chapter 3 notes that
evaluation of these organizations is designed to help identify their operational
strengths and weaknesses and that an evaluation of performance may include a
review of the following factors: completion of funded projects, timeliness and
ability to complete projects within established budget parameters, human
resources, adequate financial resources, ability to leverage other resources,
adequate financial systems, board operations, strategic plans, organizational work
plans, record keeping, compliance with HOME targeting requirements, and board
composition and operations.
A City official agreed that the City is required to recertify its community housing
development organizations but contended that HUD does not require ongoing
evaluation of community housing development organizations’ performance. A
HUD Office of Community Planning and Development official stated that
recertification annually or at the time of additional funding is required, as is
evaluation of community housing development organization performance on an
ongoing basis. The official noted that these requirements would be in addition to
any other monitoring of individual projects that the City conducted.
Despite the position of the City official, in May 2007 during our audit, the City
reviewed the certification for the four organizations, which we had reviewed, and
a City official stated that the City was working with a HUD contractor to develop
procedures to review community housing development organizations’
certifications annually.
Projects Not Closed in a Timely
Manner
Regulations at 24 CFR 92.502(d)(1) require that complete project completion
information be entered into HUD’s Integrated Disbursement and Information
System within 120 days of the final project drawdown, and if satisfactory project
completion information is not provided, HUD may suspend further project setups
or take other corrective actions. Regulations at 24 CFR 92.503(b) provide that
any HOME funds invested in housing that does not meet the affordability
requirements must be repaid by the participating jurisdiction. The City had not
entered information into HUD’s Integrated Disbursement and Information System
to accurately reflect the status of seven projects.
As part of a 2006 nationwide initiative to ensure that completed HOME-funded
projects were properly closed out in HUD’s Integrated Disbursement and
Information System, HUD identified seven City projects totaling $6.7 million
7
that, despite a final drawdown in May 1998, had not been closed out. The City
was unable to close these projects because it lacked documentation for
compliance with HOME affordability requirements. Accordingly, in February
2007, the City requested a waiver of the HOME regulations at 24 CFR 92.503(b).
While the waiver was initially denied by the HUD field office, discussion
between the field office and HUD’s Office of Affordable Housing Programs
resulted in the approval of a process whereby the City could “voucher out” the
$6.7 million in ineligible costs.
By vouchering out, the City was to identify new projects to replace the $6.7
million. This process was documented in an e-mail to the City from the field
office in response to the City’s request for written verification that this process
was acceptable and that the City would not be found in violation of HOME rules
in the months it would take to identify new projects. While the City had
identified projects against which the $6.7 million would be applied, formal
corrective action had not been implemented because City officials were still
determining which project(s) best met the schedule established by the local field
office. Consequently, HUD’s Integrated Disbursement and Information System
reported that $6.7 million was disbursed for seven projects that had not been
closed out although final disbursements had been made. Further, the Integrated
Disbursement and Information System did not reflect that these projects were
ineligible under HOME regulations and that specific replacement projects had not
been identified. Without information in HUD’s Integrated Disbursement and
Information System identifying these seven projects as ineligible and in the
process of being vouchered out, HUD’s Integrated Disbursement and Information
System would not accurately reflect the status of the City’s HOME funds.
Incorrect Affordability Periods
Used for Monitoring Projects
Regulations at 24 CFR 92.252(e) require HOME-assisted units to meet the
affordability requirements for not less than the specified period, beginning after
project completion.2 Section 92.2 states that project completion means that all
necessary title transfer requirements and construction work have been performed,
the project complies with the requirements of this part, the final drawdown has been
disbursed for the project, and project completion information has been entered into
HUD’s Integrated Disbursement and Information System. The City did not use the
correct affordability periods for monitoring its completed projects. Our review of
234 projects monitored by the City in 2005, representing 415 HUD Integrated
Disbursement and Information System activities, found that the City monitored 47
2 The statutory minimum period of HOME affordability is five years for rehabilitation or acquisition of existing housing with a per unit amount of HOME funds under $15,000, 10 years
for funds of $15,000 to $40,000, 15 years for those units over $40,000 or for rehabilitation involving financing, and 20 years for new construction or acquisition of newly constructed
housing.
8
projects (92 Integrated Disbursement and Information System activities ) using an
incorrect affordability period. Therefore, some projects might not be monitored for
eligibility throughout the entire period of affordability. This condition occurred
because the City began the affordability period either at an earlier or later date than
the date projects’ completion data were entered in HUD’s Integrated Disbursement
and Information System. City officials contend that this occurred because data
were corrupted during conversion from HUD’s old system to the Integrated
Disbursement and Information System for some projects and post completion
updates changed the completion dates for other projects in HUD’s Integrated
Disbursement and Information System. Consequently, the City lacked assurance
that 47 completed HOME funded projects (92 Integrated Disbursement and
Information System activities) would meet the statutory HOME eligibility
requirements throughout the period of affordability.
Conclusion
While the City generally committed and disbursed HOME funds in accordance
with HOME regulations, it had weaknesses in its monitoring procedures that
resulted in noncompliance with HOME regulations. Consequently, the City
lacked assurance that (a) its community housing development organizations were
properly organized and operated effectively, (b) data in HUD’s Integrated
Disbursement and Information System accurately reflected the status of its
HOME funds related to seven projects, and (c) 47 HOME-funded projects (92
Integrated Disbursement and Information System activities) were meeting the
statutory HOME eligibility requirements throughout the applicable affordability
periods.
Recommendations
We recommend that the Director of HUD’s New York Office of Community
Planning and Development instruct the City to
1A. Implement procedures to annually or at the time of additional funding
review its community housing development organizations for certification
(designation).
1B. Develop, in consultation with HUD’s contractor, procedures to evaluate the
performance of its community housing development organizations on an
ongoing basis.
1C. Enter information into HUD’s Integrated Disbursement and Information
System to reflect that seven open projects are ineligible and include the
status of the vouchering-out process.
9
1D. Implement monitoring procedures to ensure that the 47 HOME-funded
projects (92 Integrated Disbursement and Information System activities) with
incorrect affordability periods meet the statutory HOME eligibility
requirements throughout the period of affordability.
1E. Implement procedures to ensure that all completed projects are monitored
for the specified affordability period beginning after project completion data
have been entered into HUD’s Integrated Disbursement and Information
System.
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Finding 2: The City Incorrectly Calculated and Reported Its Match
Contributions
The City used an incorrect methodology to calculate the value of its HOME match contributions
and reported match contributions related to six projects twice. These errors occurred because the
City lacked consistent procedures for calculating its match contribution and did not have
adequate procedures for identifying duplicate match contributions reported. As a result, while
the City met its HOME match requirements and reported to HUD a substantial balance of match
contributions made in excess of the required amount, the City reported $34.1 million that was
ineligible match contributions. If not corrected, the City could use the $34.1 million to secure
$136.4 million in HOME funds in future years.
Incorrect Match Calculation
The City incorrectly calculated the value of its match contributions in four of six
programs tested. Community Planning and Development Notice 97-03 defines
eligible match contribution as a permanent contribution from nonfederal sources
to a HOME project. The HOME Final Rule requires that each participating
jurisdiction make contributions of not less than 25 percent 3 of the funds drawn
from the jurisdiction’s HOME Investment Trust Fund Treasury account in a fiscal
year related to housing that qualifies as affordable housing under the HOME
program. The rule also provides that contributions made in a fiscal year that
exceed a participating jurisdiction’s match liability for that fiscal year may be
carried over and applied to future fiscal years’ match liability.
Notice 97-03 further requires that the City maintain a log that identifies match
liability as it is incurred and the type and amount of each match contribution. In
identifying eligible types of match, the notice provides that when match consists
of below-market interest rate loans made from nonfederal funds with loan
proceeds repaid to an account other than the HOME account, the match should be
valued at the present discounted value of the yield foregone. The notice also
requires that when fewer than 50 percent of a project’s units are HOME assisted,
match contributions are allowable only to HOME-assisted units and units that
meet the HOME affordability requirements.
Review and testing of three match contributions reported in the 2005 HOME
Match Report related to the Supportive Housing Program disclosed that the City
incorrectly reported the value of each match contribution because it did not (1)
calculate the present discounted value of the yield foregone of the loans and (2)
prorate its match contribution to only the HOME units for projects with fewer
than 50 percent HOME units. City officials agreed that the match contributions
for all Supportive Housing Program projects were calculated incorrectly. Later
3 The City received a 50 percent match reduction resulting in a 12.5 percent match requirement for 2005 and 2006.
11
review disclosed that the City reported match contributions related to 18
Supportive Housing Program projects for the period October 1, 2004, through
December 31, 2006. City officials provided documentation for the recalculation
of the match contributions for each of these 18 projects. Review and analysis of
the documentation determined that the match reported for these 18 projects was
overvalued by $28 million. As a result, the City incorrectly reported $28 million
as available match contributions, which could entitle the City to draw down $112
million in HOME funds in future years.
An additional review of 10 sampled match contributions in five other City
programs 4 reported for the period October 1, 2004, through December 31, 2006,
disclosed that the City correctly valued four match contributions in two programs
and incorrectly calculated six match contributions in three programs, resulting in
overvaluation of match by $2.6 million. Specifically, four match contributions for
the City’s Neighborhood Entrepreneurs and Neighborhood Redevelopment
Programs did not include a calculation of the present discounted value of the yield
foregone of the loans and incorrectly prorated one match contribution. These
improper calculations caused match to be overvalued by $1.8 million. Two match
contributions for the City/State Permanent Housing for the Homeless Program did
not include a calculation of the present discounted value of the yield foregone of
the loans and incorrectly calculated the present discounted cash value of foregone
taxes. These errors resulted in a match overvaluation of $838,193. As a result,
the City incorrectly reported $2.6 million as available match contributions, which
could entitle the City to draw down $10.4 million in HOME funds in future years.
We requested that the City recalculate the remaining match contributions reported
for the three programs during the period October 1, 2004, to December 31, 2006,
and City officials have begun the recalculations.
Match Contributions Reported
Twice
The City reported match contributions twice for six projects (activity numbers 221,
1108, 1192, 1309, 1316, and 1448). As a result, match contributions for the period
October 1, 2004, through December 31, 2006, were overvalued by $3.5 million,
which could result in the City’s securing $14 million in HOME funds in future
years. These errors occurred because the City did not have controls to check the
Excel spreadsheet it used to track match for duplicate match contributions. City
officials agreed that these match contributions were erroneously reported twice and
agreed to post a correction in the City’s 2007 HOME Match Report. City officials
also stated that a database would be used to track matching funds to prevent
reporting duplicate match.
4 The five programs are City/State Permanent Housing for the Homeless, Neighborhood Entrepreneurs Program, Neighborhood Redevelopment Program, Participation Loan Program, and
Small Homes Private Loan Program.
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Conclusion
The City met its HOME match requirements for 2005 and 2006 and reported a
substantial balance of match contributions made in excess of the required
amounts. Since match contributions in excess of a participating jurisdiction’s
match obligation are carried forward to apply as a credit toward the next year’s
match obligation, the value of match contributions must be properly calculated
and reported to HUD to ensure that the City would comply with any required
match contribution in future years. The City incorrectly calculated the value of
match contributions for its Supportive Housing Program and for six sampled
projects in three other programs and reported its match contributions related to six
projects twice. These errors resulted in a balance carried forward to future years
that was overvalued by $34.1 million.
Recommendations
We recommend that the Director of HUD’s Office of Community Planning and
Development require the City to
2A. Remove $28 million from its 2007 HOME Match Report for match
contributions incorrectly reported for the period October 1, 2004, through
December 31, 2006, related to 18 Supportive Housing Program projects.
2B. Remove $2.6 million from its 2007 HOME Match Report for incorrectly
reported match contributions related to six projects from the City/State
Permanent Housing for the Homeless, Neighborhood Entrepreneurs, and
Neighborhood Redevelopment Programs.
2C. Recalculate the value of all other match contributions reported during the
period October 1, 2004, through December 31, 2006, for the
Neighborhood Entrepreneurs, Neighborhood Redevelopment, and
City/State Permanent Housing for the Homeless Programs. If any of these
contributions were incorrectly valued, the City should correct them in its
2007 HOME Match Report.
2D. Establish procedures and controls to ensure that loan values are properly
discounted to account for the yield foregone, match contributions are
prorated for projects with fewer than 50 percent HOME units, and match
contributions reported to HUD are accurate.
2E. Remove $3.5 million from its 2007 HOME Match Report for match
erroneously reported twice related to six projects.
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SCOPE AND METHODOLOGY
To accomplish our audit objectives, we
• Reviewed the HOME Investment Partnerships Final Rule, 24 CFR Part 92; HUD
Handbook 6509.2, REV-5, CHG-1, Community Planning and Development Monitoring
Handbook; Office of Community Planning and Development notices, Office of
Management and Budget Circulars A-87 and A-133; and the HUD guidebook entitled
Building HOME.
• Conducted interviews with staff from HUD’s Office of Community Planning and
Development responsible for the oversight and monitoring of the City’s administration of
HOME funds and HUD’s Regional Counsel.
• Reviewed reports from HUD’s Integrated Disbursement and Information System, the
City’s HUD-approved action plans and consolidated plan, HUD’s plan review/assessment
reports, the City’s consolidated annual performance evaluation reports, and independent
audit reports.
• Conducted interviews with the City’s staff to obtain an understanding of the internal
controls related to the administration of the City’s HOME program.
• Ensured compliance with HOME regulations regarding administrative and planning costs
by analyzing data from HUD’s Integrated Disbursement and Information System. We
determined that $27.5 million was drawn for administrative and planning costs during the
audit period; thus, we reviewed the funds drawn and the HOME program funding
agreements to determine compliance with the 10 percent statutory requirement. We
selected and reviewed a representative, nonstatistical sample of one voucher, representing
$14.7 million of the $27.5 million, to ensure eligibility of the costs.
• Reviewed a nonrepresentative sample of six completed projects from the Neighborhood
Redevelopment, Neighborhood Entrepreneurs, and Supportive Housing Programs to
determine compliance with HOME regulations and eligibility of costs and identify
weaknesses in internal controls. The sample of six projects represented $48.3 million of
the $290.4 million disbursed for projects completed during the audit period.
• Selected and reviewed a sample of eight Neighborhood Entrepreneurs Program projects
out of 18 projects that City officials stated began after June 30, 2004, to determine
whether the City complied with Davis-Bacon requirements for projects begun after City
fiscal year 2004.
• Reviewed HUD’s Integrated Disbursement and Information System data to ensure that
the requirement that 15 percent of funds be reserved for community housing development
organizations was met.
14
• Selected a sample of four community housing development organizations and reviewed
the City’s files to determine compliance with HOME regulations.
• Reviewed the City’s monitoring policies and procedures for projects, contractors, and
community housing development organizations to determine compliance with HOME
regulations.
• Reviewed HUD’s Integrated Disbursement and Information System and the 2005 and
2006 HOME Match Reports to ensure compliance with the statutory match requirement.
• Selected and reviewed a nonrepresentative sample of three match contributions totaling
$16.1 million, related to the City’s Supportive Housing Program, reported in the 2005
HOME Match Report, to ensure that the match contributions were correctly calculated
and reported. We later expanded our testing to verify the accuracy of the match
contribution for all 18 completed Supportive Housing Programs and 10 match
contributions totaling $34.2 million, related to five other City programs, reported in the
HOME Match Reports for the period October 1, 2004, through December 31, 2006.
We performed our audit fieldwork between May and October 2007 at the City’s office located at
100 Gold Street, New York, New York. The audit generally covered the period October 1, 2004,
through September 30, 2006, and was expanded as necessary.
We performed our audit in accordance with generally accepted government auditing standards.
15
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:
• Program operations - Polices 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 program implementation 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.
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Significant Weaknesses
Based on our review, we believe the following items are significant weaknesses:
• The City did not ensure compliance with laws and regulations because it did
not recertify its community housing development organizations or evaluate
their performance, close out seven projects in HUD’s Integrated
Disbursement and Information System, and use correct affordability periods
for monitoring its completed projects (see finding 1).
• The City did not ensure the validity and reliability of data because it
incorrectly calculated and reported the value of its match contributions to
HUD (see finding 2).
17
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Ineligible1/
number (millions)
2A $ 28.0
2B $ 2.6
2E $ 3.5
Total $ 34.1
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. In this case, the City reported $34.1 million
in ineligible match contributions to HUD as a result of erroneous calculations and
duplicative claims that should not be made available to match future HOME
funds.
18
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
19
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
Comment 2
Comment 1
Comment 1
20
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
21
OIG Evaluation of Auditee Comments
Comment 1 The City's actions are responsive to our recommendation.
Comment 2 While the City identified a replacement project and agreed to comply with the
recommendation, City officials contend that doing so conflicts with instructions
received from the HUD field office and that there is no clear mechanism to do so.
Our recommendation does not negate the instructions from the field office, but
rather seeks to ensure that HUD's Integrated Disbursement and Information
System reflects the actual status of the City’s activities until it is able to
implement the instructions of the field office. In addition, an official of the HUD
field office advised that there is a mechanism to implement the action
recommended; therefore, the City should request technical guidance from the
HUD field office to assist in implementing the narrative information
recommended.
22
The City of New York's Department Housing Preservation and Development, New York, New York, Had Administrative Weaknesses in Its HOME Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-12-23.
Below is a raw (and likely hideous) rendition of the original report. (PDF)