oversight

The City of Durham, North Carolina, Did Not Adequately Administer Its Community Development Block Grant Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-03-31.

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

                                                                 Issue Date
                                                                       March 31, 2009
                                                                 Audit Case Number
                                                                       2009-AT-1004




TO:         Gary Dimmick, Director, Office of Community Planning and Development, 4FD


            //signed//
FROM:       James D. McKay, Regional Inspector General for Audit, 4AGA

SUBJECT: The City of Durham, North Carolina, Did Not Adequately Administer Its
           Community Development Block Grant Program

                                   HIGHLIGHTS

 What We Audited and Why

             We audited the Community Development Block Grant (CDBG) program
             administered by the City of Durham, North Carolina (City). The objective of the
             audit was to determine whether the City administered its program in accordance
             with U.S. Department of Housing and Urban Development (HUD) requirements.
             We selected the City for review based on HUD’s risk assessment and previous
             monitoring reviews.

 What We Found

             The City did not administer its CDBG program in accordance with all of HUD’s
             requirements. Specifically, the City was deficient in (1) documenting national
             objectives, (2) monitoring, (3) procuring services, (4) reporting program income,
             and (5) preparing accurate consolidated annual performance and evaluation
             reports. These deficiencies occurred because the City lacked effective
             management controls over its CDBG program activities to ensure compliance
             with all applicable HUD requirements. As a result, it had no assurance that more
             than $1.3 million in CDBG funds met HUD requirements.
What We Recommend


           We recommend that the Director of the Greensboro Office of Community
           Planning and Development require the City to establish and implement effective
           written procedures for documenting compliance with HUD’s requirements for (1)
           national objectives and monitoring, (2) procurement, (3) program income, and (4)
           preparing performance reports. We also recommend that HUD require the City to
           record unreported program income in HUD’s Integrated Disbursements and
           Information System (system), expend the funds on eligible CDBG activities, and
           repay the interest earned on unreported program income. In addition, we
           recommend that HUD require the City to provide adequate supporting
           documentation to show that CDBG funds disbursed were awarded to the lowest
           responsive and responsible bidder, met one of the three national objectives, and
           were properly monitored.

           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 the draft report to the City on February 11, 2009, and discussed the
           findings with City officials at an exit conference on February 25, 2009. The City
           provided its written comments on March 2, 2009. The City expressed agreement
           with the finding and recommendations in both its written comments and during
           the exit conference.

           The complete text of the City’s response can be found in appendix B of this
           report.




                                            2
                            TABLE OF CONTENTS

Background and Objectives                                                  4

Results of Audit
      Finding 1: The City Did Not Adequately Administer Its CDBG Program   5

Scope and Methodology                                                      13

Internal Controls                                                          15

Appendixes
   A. Schedule of Questioned Costs and Funds to be Put to Better Use       16
   B. Auditee Comments                                                     17
   C. Federal Requirements                                                 20




                                            3
                     BACKGROUND AND OBJECTIVES

The City of Durham, North Carolina (City) receives annual Community Development Block Grant
(CDBG) program funds from the U.S. Department of Housing and Urban Development (HUD).
HUD awarded the City’s CDBG program more than $3.9 million in funding for fiscal years 2006
and 2007. The City is governed by a mayor and a six-member city council. A city manager
appointed by the city council oversees the day-to-day functions of the City. The City administers
the CDBG program through its Department of Community Development. A director manages
the daily operations of the department, which maintains its records at 807 East Main Street, Suite
2-200, Durham, North Carolina.

The CDBG program is a flexible program that provides communities with resources to address a
wide range of unique community development needs. It is regulated by 24 CFR [Code of
Federal Regulations] Part 570. HUD determines the amount of each grant by using a formula
comprised of several measures of community need, including the extent of poverty, population,
housing overcrowding, age of housing, and population growth lag in relationship to other
metropolitan areas. All activities receiving CDBG funds must meet one of the following
national objectives:

       Benefit low- and moderate-income persons.
       Prevent or eliminate slum or blight.
       Meet a recent, urgent community need for which other funds are not available.

We selected the City for review because previous HUD field office reviews had identified
material deficiencies. In addition, our two audits of the City’s HOME Investment Partnerships
program identified material deficiencies in the City’s administration of that program.

Our audit objective was to determine whether the City administered its CDBG program in
accordance with applicable HUD requirements. Specifically, we wanted to determine whether
the City complied with HUD’s requirements related to (1) national objectives, (2) monitoring
subrecipients and contractors, (3) procurement, and (4) recording and using program income.




                                                4
                                        RESULTS OF AUDIT

Finding 1: The City Did Not Adequately Administer Its CDBG Program
The City did not administer its CDBG program in accordance with all of HUD’s requirements.
Specifically, it was deficient in (1) documenting national objectives, (2) monitoring, (3)
procuring services, (4) reporting program income, and (5) preparing an accurate consolidated
annual performance and evaluation report (CAPER). These deficiencies occurred because the
City lacked effective management controls over its program to ensure compliance with all of the
applicable HUD requirements. As a result, it had no assurance that more than $1.3 million in
CDBG funds met the requirements.



    National Objectives Were Not
    Documented

                   The City contracted with subrecipients to establish and administer some of its
                   CDBG activities. In addition to the Department of Community Development, two
                   other departments within the City were allocated CDBG funds for at least three
                   activities. The City did not maintain adequate supporting documentation to
                   demonstrate that four of the twelve activities reviewed met national objectives.
                   This deficiency occurred because the City’s policies and procedures were
                   insufficient to ensure compliance with HUD’s national objective requirements.
                   As a result, the City could provide no assurance that $380,2901 in CDBG funds
                   achieved the intended national objective. The regulations (24 CFR 570.506(b))
                   hold the City responsible for demonstrating that each activity meets a national
                   objective.

                   The following examples illustrate the deficiencies noted during our review.

                            Small business incubator. Since 2003, the City had contracted with a
                            subrecipient to provide low- and moderate-income individuals a facility in
                            which to start their businesses. The national objective was to benefit low-
                            and moderate-income families. According to the contract, the City was to
                            receive documentation, such as family size and income, affirming that
                            low- and moderate-income individuals were being served. However, the
                            City’s files lacked evidence to support this requirement. When we
                            brought this matter to the attention of City staff, they informed us that they
                            had attempted to obtain this information from the subrecipient since 2007.

1
    The City expended $418,305 for activities that did not clearly meet the intended national objective. We adjusted
    this amount by $38,015 for activities which had both national objective and procurement issues in order to avoid
    double counting total questioned costs.

                                                           5
                          As of January 7, 2009, however, the subrecipient had not provided the
                          City the requested information.

                          Emergency relocation. The City, through another of its departments,
                          provides relocation assistance to low-income residents whose homes have
                          been deemed unsafe or condemned by the City. The national objective
                          identified in the files stated that low- and moderate-income individuals
                          outside the designated census tracts would benefit from this service.
                          However, the documentation in the files did not support that designation.
                          In addition, the support had been placed in the file after the activity was
                          completed.

                          Opportunity loans. The City, through another of its departments, provides
                          loan funds to assist businesses located in low- and moderate-income
                          census tracts. According to the established procedures, the national
                          objective was to benefit low- and moderate-income individuals. However,
                          the files did not contain documentation in support of the national
                          objective.

                          Homeowner rehabilitation. The City provides forgivable loans to elderly
                          or disabled homeowners to perform substantial rehabilitation or urgent
                          repairs to homes that are in severe condition. National objective
                          information was not contained in the files upon initial review. However,
                          once we informed the City, documentation was placed in three of the five
                          files. As of January 7, 2009, documentation had not been placed in the
                          other two files.


    Monitoring Was Insufficient or
    Not Performed


                 The City failed to perform the required monitoring for at least eight activities. It
                 did not perform the required monitoring for three subrecipients performing four
                 activities, one activity performed by the Department of Community Development,
                 and three activities performed by other City departments. As a result, the City
                 had no assurance that $493,0962 in CDBG funds was properly monitored.

                 Regulations (24 CFR 85.40) assign grantees responsibility for managing the day-
                 to-day operations of grant- and subgrant-supported activities. Grantees must
                 monitor grant- and subgrant-supported activities to assure compliance with
                 applicable federal requirements and that performance goals are achieved. Grantee

2
  The City expended $1,044,011 for activities that it did not properly monitor. We adjusted this amount by
$380,290 for activities which had both monitoring and national objective issues and by $170,625 for activities which
had both monitoring and procurement issues in order to avoid double counting total questioned costs.


                                                         6
monitoring must cover each program, function, or activity. The use of
subrecipients does not relieve the City of this responsibility.

Below are examples of monitoring deficiencies associated with the different types
of CDBG activities performed.

       Lead abatement training. Under this program, the subrecipient was to
       provide training to local contractors to repair 10 homes using lead-safe
       interim control methods. The only monitoring located in the file consisted
       of copies of pay requests. These were to be signed by the occupant, the
       contractor, and the project manager. However, the forms were not
       properly completed and did not contain sufficient information to be
       considered adequate monitoring.

       Infrastructure. This program was to perform all necessary actions to
       install the appropriate infrastructure to support the development of 33 lots.
       The only evidence of monitoring contained in the files consisted of forms
       that had been completed by a HUD Office of Community Planning and
       Development representative. The regulation states that the grantee is to
       perform the monitoring.

       Other City departments. The Department of Community Development
       allocated two other City departments CDBG funds for at least three
       activities. The City had assigned project managers to oversee the other
       departments’ distribution of these funds. However, it had conducted no
       monitoring of these departments. One department’s files contained a one-
       page monitoring checklist that provided little information.

The City did not have written monitoring procedures in place for subrecipients or
activities administered by other City departments. For activities carried out by
other City departments, the annual action plan required a memorandum of
understanding among the departments. The plan stated that the assigned project
manager should visit each project on a regular basis, with at least one visit
dedicated to a file review, to ensure that the project was completed as required. A
memorandum of understanding existed between the Department of Community
Development and one other City department. However, it was not followed.

The City must develop written procedures to ensure that all required monitoring is
completed. Since the City’s Department of Community Development administers
the majority of CDBG funds and has the most knowledge of HUD programs, it
should provide monitoring and technical assistance to other City departments
receiving CDBG funds.




                                 7
Procurement Requirements
Were Not Followed


          The City administered a homeowner rehabilitation program and an urgent repair
          program for homeowners with incomes at or below 50 percent of the area median
          income. During our review period, the City procured contractors to rehabilitate 6
          homes and repair 20 homes without following applicable procurement
          requirements. It paid the contractors $366,479 in CDBG funds for this work. In
          addition, the City did not always ensure that subrecipients followed procurement
          requirements. These deficiencies occurred because the City did not have adequate
          written procedures to ensure compliance with procurement requirements. As a
          result, the City could not support that it carried out procurements using full and
          open competition, or properly solicited participation of minority and women-
          owned businesses or labor surplus area firms.

          Under the homeowner rehabilitation program, the City granted deferred,
          forgivable loans of up to $35,000 for elderly and disabled owner-occupants with
          incomes at or below 50 percent of the area median income. Under the urgent
          repair program, the City granted forgivable loans of up to $10,000 to elderly or
          disabled homeowners to address conditions causing an imminent threat to the
          health and safety of the occupants or limiting their accessibility. The City
          procured contractors for the rehabilitation and urgent repair program in the same
          manner.

          The City used the sealed bid method of procurement for its homeowner
          rehabilitation and urgent repair activities. Procurement regulations (24 CFR
          85.36(d)(2)(ii)(A)) require that invitations for bids be publicly advertised when
          using the sealed bid method. The City was also required (24 CFR 85.36(e)) to
          take all necessary affirmative steps to ensure that minority firms, women’s
          business enterprises, and labor surplus area firms were used when possible.
          Affirmative steps include (1) placing qualified small and minority businesses and
          women’s business enterprises on solicitation lists and (2) ensuring that small and
          minority businesses and women’s business enterprises are solicited whenever they
          are potential sources. We reviewed the six homeowner rehabilitation activities
          and found that none were advertised as required to support full and open
          competition. In addition, the City had not maintained documentation to support
          that it had solicited participation of minority and women-owned businesses or
          labor surplus area firms.

          Subrecipient Procurement
          The City did not ensure that a subrecipient receiving $3,456 in CDBG funds to
          demolish four substandard structures followed the proper procurement
          requirements. Section 15 of the subrecipient agreement required the subrecipient
          to conduct all procurement transactions in a manner so as to provide maximum,
          open, and free competition in accordance with the applicable regulations (24 CFR

                                           8
           570.502). The City’s files contained no documentation showing how the
           procurement was conducted. At our request, the City obtained an explanation
           from the subrecipient. The subrecipient provided a letter stating that the
           contractor was chosen solely on the recommendation of another nonprofit
           organization.

Program Income Was Not
Properly Recorded or Used


           The City did not always record and use program income as required. In addition,
           it sometimes miscalculated program income. As a result, the City’s reporting to
           HUD was incorrect, and it unnecessarily drew down $125,278 in CDBG funds.

           Program income should be recognized accurately and in a timely manner because
           the regulations (24 CFR 570.504(b)(2)(ii)) require that program income be
           disbursed for eligible activities before additional funds are drawn from the U.S.
           Treasury account. In addition, regulations (24 CFR 85.21(h)(2)(i)) require that
           interest earned on federal advances be returned to the agency.

           The City generated program income through payments received from home-buyer
           mortgage assistance and small business loans. The loan servicing company
           provided a monthly report of loan activity to support the electronic transfer of
           payments to the City. The City’s accounting department analyzed the data and
           recorded the payments in the appropriate program’s account. The information
           was communicated to a Department of Community Development employee, who
           then entered the program income into HUD’s system.

           Unreported Income
           The City did not record $95,593 in CDBG program income for May and June
           2006 into HUD’s system. It continued to draw down grant funds when there were
           available program income funds and earned interest on the program income in its
           account. As of August 27, 2008, $10,968 in interest had accrued on these funds.

           During fiscal year 2007, the City, through its Neighborhood Improvement
           Services Department, used CDBG funds to demolish homes that were not
           maintained to city code. The City placed liens on the properties to recoup the
           funds used to demolish them. While the Neighborhood Improvement Services
           Department was aware that any funds recovered were program income, it was not
           aware, until our request for documentation, that some funds had been repaid. As
           a result, $26,019 was not properly recorded in HUD’s system, and the City
           continued to draw down grant funds when program income was available. As of
           January 13, 2009, $715 in interest had accrued on these funds.




                                           9
             Program Income Miscalculations
             Miscalculations, omissions, and double counting of some amounts resulted in the
             City’s reporting incorrect amounts of program income for fiscal years 2006 and
             2007. The City understated fiscal year 2006 program income by $26,275. It then
             overstated fiscal year 2007 program income by $22,609 in an attempt to correct
             the 2006 understatement. The net effect was a $3,666 reporting understatement
             for the period.


The CAPER Contained Errors


             Each jurisdiction that has an approved consolidated plan shall annually review
             and report, in a form prescribed by HUD, on the progress it has made in carrying
             out its strategic plan and its action plan (24 CFR 91.520(a)). Throughout the
             course of our review, we used the City’s CAPER as a source of information on
             the City’s program. However, the CAPERs contained many deficiencies. There
             were

                    Instances in which the itemized listing of amounts spent did not match the
                    total listed for that activity;
                    Instances in which the national objective listed in the CAPER did not
                    match the national objective documented in the files;
                    Incomplete descriptions documenting the individuals served and the
                    purpose and results of various CDBG activities; and
                    Two activities, which expended about $200,000, that were not shown in
                    the CAPER.

             As a consequence of such deficiencies, the City could not assure HUD or the
             public that the information in the CAPER provided a complete, supported, and
             accurate portrayal of the use of HUD funds for the program year.


Conclusion


             More than $1.3 million for CDBG activities is subject to possible repayment
             because the City did not always follow the applicable HUD requirements. This
             condition occurred because the City lacked effective management controls over
             its CDBG program and activities to ensure compliance with all HUD
             requirements.




                                             10
Recommendations

          We recommend that the Director of HUD’s Greensboro, North Carolina, Office of
          Community Planning and Development require the City to

          1A.     Provide and maintain documentation to support that CDBG program
                  requirements were followed and national objectives were met for the four
                  activities according to 24 CFR 570.506 or reimburse its program $380,290
                  from nonfederal funds. The City disbursed $418,305 for activities not
                  clearly meeting a national objective. The remaining $38,015 is included
                  in recommendation 1E which addresses procurement issues.

          1B.     Develop, implement, and enforce written policies and procedures to
                  ensure effective performance and compliance with federal regulations for
                  meeting CDBG national objectives.

          1C.     Provide HUD with adequate documentation related to the $493,096 in
                  CDBG funds disbursed without proper monitoring. Any amounts
                  determined to be ineligible should be reimbursed to the CDBG program
                  from nonfederal funds. The City disbursed $1,044,011 for activities that it
                  did not properly monitor. The remaining funds are included in
                  recommendation 1A ($380,290) for activities not clearly meeting a
                  national objective, and recommendation 1E ($170,625) which addresses
                  procurement issues.

          1D.     Implement written procedures, in accordance with HUD requirements, to
                  ensure that the City performs and documents monitoring reviews of its
                  CDBG activities as required.

          1E.     Provide adequate documentation to support that the $366,479 in CDBG
                  funds for homeowner rehabilitation activities for fiscal years 2006 and
                  2007 was awarded to the lowest responsive and responsible bidders. Any
                  amounts determined to be ineligible should be reimbursed to the CDBG
                  program from nonfederal funds.

          1F.     Develop and implement procedures to ensure that future services for
                  homeowner rehabilitation are procured in accordance with requirements as
                  they relate to (1) advertising to provide full and open competition, and (2)
                  adequately documenting all necessary affirmative steps to ensure that
                  minority firms, women’s business enterprises, and labor surplus area firms
                  are used when possible.

          1G.     Provide adequate documentation to support that the subrecipient awarded
                  the CDBG-funded demolition contract in fiscal year 2006 to the most
                  reasonable and responsible bidder. The $3,456 expended for this activity

                                           11
      is included in the $493,096 of questioned costs in recommendation 1C
      since the City had also not properly monitored the subrecipient.

1H.   Develop and implement procedures to ensure that all procurement
      transactions that subrecipients enter into as a result of CDBG funding will
      be conducted in a manner that provides full and open competition in
      accordance with federal requirements.

1I.   Submit for review and approval a plan for improving controls among the
      City’s departments so that program income will be consistently recorded
      and reported in accordance with HUD’s requirements.

1J.   Repay HUD $11,683 or the current balance for interest the City earned on
      program income which was either not recorded in HUD’s system or not
      recorded in a timely manner.

1K.   Record $125,278 in program income in HUD’s system and expend the
      funds for eligible CDBG activities before drawing down additional funds.

1L.   Develop and implement written procedures to ensure that the information
      placed in the CAPER is a complete, supported, and accurate portrayal of
      the use of HUD funds for the program year.




                               12
                         SCOPE AND METHODOLOGY

Our audit objective was to determine whether the City administered its CDBG program in
accordance with applicable HUD requirements. Specifically, we wanted to determine whether
the City complied with HUD’s requirements related to (1) national objectives, (2) monitoring
subrecipients and contractors, (3) procurement, and (4) recording and using program income. To
accomplish our objective, we

       Obtained and reviewed relevant HUD regulations and City guidelines,
       Interviewed HUD and City officials,
       Reviewed monitoring reports,
       Reviewed applicable City files and records including general ledgers, and
       Reviewed the City’s internal controls related to the administration of its CDBG program.

Monitoring and National Objective
Based on a list provided by the City, interviews with staff, and reviewing the CAPERs, we
developed a list of 42 CDBG activities for the audit period. A sample of 14 activities was
selected to ensure that each project manager had at least one project in the sample and each
different type of national objective was reviewed. The results apply to the items reviewed only;
we did not project them to the universe.

Procurement
We reviewed the files for all six homeowner rehabilitation contracts. Through interviews with
the rehabilitation project manager, we determined that requests for bids included multiple jobs
that included both the substantial rehabilitation and urgent repair programs. Therefore, no
additional urgent repair program files were separately reviewed, but all costs, as applicable, were
considered questioned costs.

Program Income
Based on our review of the program income records, we determined that the City had not
reported program income for the months of May and June of 2006. To determine how much, if
any, program income was received during that time, we obtained the general ledger for those
months from the City’s finance department. Based on the information provided, we determined
that the City had not reported $95,593 for these months in HUD’s system. In addition, through
interviews with City staff, we found that $26,019 in program income from another City
department had not been properly recorded in HUD’s system. Miscalculations, omissions, and
double counting of some amounts resulted in the City’s understating an additional $3,666 for the
audit period. In total, $125,278 in program income will be put to better use if it is recorded in
the system and disbursed for CDBG-eligible activities as HUD requires.




                                                13
The audit generally covered the period July 1, 2005, through June 30, 2007, but we extended the
audit period when necessary to accomplish our objectives. We conducted our fieldwork from
June 2008 through January 2009 at the City’s offices in Durham, North Carolina.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable bases for our findings
and conclusions based on our audit objectives.




                                               14
                              INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are 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. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.



 Relevant Internal Controls
              We determined that 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.

                  Safeguarding of 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.


 Significant Weaknesses


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

                  The City lacked adequate controls over its CDBG program (see finding 1).




                                               15
                                   APPENDIXES

Appendix A

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

     Recommendation                                                  Funds to be put to
            number          Ineligible 1/         Unsupported 2/          better use 3/

            1A                                         $380,290
            1C                                           493,096
            1E                                         $366,479
            1J                   $11,683                _______
            1K                                                                $125,278
           Total                 $11,683             $1,239,865               $125,278


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 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. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, 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
     recommendations, it will commit and use program income in its local account before
     drawing down program funds from its U.S. Treasury account. Once the City successfully
     improves its procedures and controls, this will be a recurring benefit.




                                             16
Appendix B

             AUDITEE COMMENTS




                    17
Auditee Comments




  18
Auditee Comments




  19
Appendix C
                          FEDERAL REQUIREMENTS

Regulations at 24 CFR 570.506(b) state that each recipient shall establish and maintain sufficient
records demonstrating that each activity undertaken meets one of the criteria set forth in section
570.208 (national objective).

Regulations at 24 CFR 85.40 state that grantees are responsible for managing the day-to-day
operations of grant- and subgrant-supported activities. Grantees must monitor grant- and
subgrant-supported activities to assure compliance with applicable federal requirements and that
performance goals are achieved. Grantee monitoring must cover each program, function, or
activity.

Regulations at 24 CFR 85.36(d)(2)(ii)(A) state that the invitation for bids will be publicly
advertised and bids shall be solicited from an adequate number of known suppliers, providing
them sufficient time before the date set for opening the bids.

Regulations at 24 CFR 85.36(e) state that the grantee and subgrantee will take all necessary
affirmative steps to ensure that minority firms, women’s business enterprises, and labor surplus
area firms are used when possible. Affirmative steps include (1) placing qualified small and
minority businesses and women’s business enterprises on solicitation lists and (2) assuring that
small and minority businesses and women’s business enterprises are solicited whenever they are
potential sources.

Regulations at 24 CFR 570.504(b)(2)(ii) state that substantially all other program income shall
be disbursed for eligible activities before additional cash withdrawals are made from the U.S.
Treasury.

Regulations at 24 CFR 85.21(h)(2)(i) state that except for interest earned on advances of funds
exempt under the Intergovernmental Cooperation Act (31 U.S.C. [United States Code] 6501 et
seq) and the Indian Self-Determination Act (23 U.S.C. 450), grantees and subgrantees shall
promptly, but at least quarterly, remit interest earned on advances to the federal agency. The
grantee or subgrantee may keep interest amounts up to $100 per year for administrative
expenses.

Regulations at 24 CFR 91.520(a) state that each jurisdiction that has an approved consolidated
plan shall annually review and report, in a form prescribed by HUD, on the progress it has made
in carrying out its strategic plan and its action plan.




                                               20