Issue Date
August 18, 2009
Audit Report Number
2009-AT-1011
TO: Maria R. Ortiz, Director of Community Planning and Development, Miami Field
Office, 4DD
//signed//
FROM: James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA
SUBJECT: The City of Miami, Florida, Did Not Properly Administer Its Community
Development Block Grant Program
HIGHLIGHTS
What We Audited and Why
We audited the Community Development Block Grant (CDBG) program
administered by the City of Miami, Florida (City). The objectives of the audit
were to determine whether the City administered its CDBG program in
accordance with applicable U.S. Department of Housing and Urban Development
(HUD) requirements for: (1) meeting CDBG national objective(s), (2) allocation
of expenditures to the CDBG program, and (3) reporting program activities. We
selected the City for review because the Miami HUD Office of Community
Planning and Development ranked it as high risk in its 2006, 2007, and 2008 risk
assessments. In addition, previous HUD on-site monitoring reviews identified
concerns regarding the City’s administration of the CDBG program.
What We Found
The City did not administer its CDBG program in accordance with applicable
HUD requirements. It did not comply with HUD requirements in meeting national
objectives for its commercial façade program. This condition occurred because the
City lacked effective management controls and disregarded HUD requirements.
As a result, it had no assurance that more than $4.1 million in expended CDBG
funds achieved the intended national objective or met program requirements.
The City did not properly allocate salary expenditures to its CDBG program and
did not maintain adequate supporting documentation demonstrating that
employees worked in the program. These conditions occurred because the City
did not have effective management controls to properly allocate salary
expenditures to the CDBG program and disregarded HUD requirements. As a
result, the City improperly allocated $690,392 to the program.
The City did not accurately report CDBG financial information to HUD in
accordance with federal requirements. It inaccurately reported
administrative/planning costs for program year 2006 and failed to report $265,823
in reprogrammed CDBG funds to HUD. These conditions occurred because the
City was transferring financial information to another automated system and
disregarded HUD regulations. As a result, there was a lack of assurance that the
City reported accurate CDBG financial information to HUD in accordance with
HUD regulations.
What We Recommend
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to (1) provide documentation to support that
CDBG program requirements were followed and the intended national objective
was met for two commercial façade activities or reimburse its program more than
$4.1 million from nonfederal funds, (2) reimburse its program $690,392 from
nonfederal funds for unsupported salary expenditures, and (3) provide
documentation to support the reprogrammed funds or reimburse its program
$265,823 from nonfederal funds for canceled CDBG activities for which funds
were reprogrammed.
For each recommendation without a management decision, please respond and
provide status reports in accordance with HUD Handbook 2000.06, REV-3.
Please furnish us copies of any correspondence or directives issued because of the
audit.
Auditee’s Response
We discussed the findings with the City during the audit. We provided a copy of
the draft report to City officials on June 29, 2009, for their comments and
discussed the report with the officials at the exit conference on July 10, 2009.
The City provided its written comments to our draft report on July 22, 2009. In
its response, the City generally disagreed with the findings but agreed to
implement corrective actions.
2
The complete text of the City’s response, along with our evaluation of the
response, can be found in appendix B of this report. Attachments to the City’s
comments were not included in the report, but are available for review upon
request.
3
TABLE OF CONTENTS
Background and Objective 5
Results of Audit
Finding 1: The City Did Not Demonstrate Compliance in Meeting National 6
Objectives for Its Commercial Façade Program
Finding 2: The City Did Not Properly Allocate Salary Expenditures to the 9
CDBG Program
Finding 3: The City Did Not Accurately Report CDBG Financial Information to 12
HUD
Scope and Methodology 15
Internal Controls 17
Appendixes
A. Schedule of Questioned Costs 18
B. Auditee Comments and OIG’s Evaluation 19
C. Canceled CDBG Activities and Reprogrammed CDBG Funds 28
4
BACKGROUND AND OBJECTIVE
The City of Miami, Florida (City) receives annual Community Development Block Grant
(CDBG) program funds from the U.S. Department of Housing and Urban Development (HUD).
HUD awards annual grants to entitlement community recipients to carry out a wide range of
community development activities directed toward revitalizing neighborhoods, economic
development, and providing improved community facilities and services, principally for low-
and moderate-income persons. An activity that receives CDBG funds must meet one of three
national objectives:
Benefit low- and moderate-income families,
Aid in the prevention or elimination of slums or blight, or
Meet community development needs having a particular urgency because existing
conditions pose a serious and immediate threat to the health or welfare of the community
and when other financial resources are not available.
The City’s Department of Community Development administers the CDBG program. It
administers programs intended to assist in creating a viable urban community for the neediest
persons within the City while reducing poverty, embracing diversity, assisting with economic
development, and improving the overall quality of life.
The HUD Integrated Disbursement and Information System (IDIS) reported that the City
expended more than $17.9 million in CDBG funds for 2006 and 2007.
We selected the City for review because the Miami HUD Office of Community Planning and
Development ranked it as high risk in its fiscal years 2006, 2007, and 2008 risk assessments. In
addition, the 2006 Miami HUD monitoring review of the commercial façade program identified
concerns regarding the meeting of national objectives and eligibility of projects.
Our audit objectives were to determine whether the City administered its CDBG program in
accordance with applicable HUD requirements for: (1) meeting CDBG national objective(s), (2)
allocation of expenditures to the CDBG program, and (3) reporting program activities.
5
RESULTS OF AUDIT
Finding 1: The City Did Not Demonstrate Compliance in Meeting
National Objectives for Its Commercial Façade Program
The City did not demonstrate compliance with HUD requirements in meeting national objectives for
its commercial façade program. It did not maintain adequate supporting documentation to
demonstrate that the program achieved the intended national objectives. This condition occurred
because the City lacked effective management controls and disregarded HUD requirements. As a
result, it had no assurance that more than $4.1 million in expended CDBG funds achieved the
intended national objective or met program requirements.
We selected eight activities to determine whether the City maintained sufficient documentation to
demonstrate that it met a national objective. The City did not maintain adequate supporting
documentation to demonstrate that two activities met a national objective.
Supporting Documentation
Inadequate to Meet National
Objectives
The City did not maintain adequate supporting documentation for two commercial
façade activities to demonstrate that national objectives would be met. Regulations
at 24 CFR [Code of Federal Regulations] 570.506(b) state that records must be
maintained to demonstrate that each activity undertaken meets one of the national
objective criteria.
The commercial façade program activities were to provide assistance to for-profit
businesses to rehabilitate the exterior of the business. The national objective was
to benefit low- and moderate-income persons based on the area served by the
activities. We reviewed seven completed CDBG projects from activity #1954 and
16 completed CDBG projects from activity #2125.
The City provided inadequate documentation to support that the 23 projects
served areas that were primarily residential in nature. Regulations at 24 CFR
570.208(a)(1)(i) require that an activity that serves an area that is not primarily
residential in character shall not qualify as a low- and moderate-income area. We
informed City officials about this issue, and they provided us with maps for
several projects to illustrate that the area served was primarily residential in
nature. The maps did not include adequate information to show whether the area
served was primarily residential; they did not identify the area served and focused
instead on the location of the business. The maps did not contain a legend to
identify the symbols. Some maps indicated a commercial zone, whereas others
6
did not identify a zone type. While we recognize the City’s attempt to provide
documentation supporting that the national objective was met, the City did not
demonstrate that the area served was primarily residential in nature.
This condition occurred because the City lacked effective management controls
over its commercial façade program activities and disregarded HUD
requirements. Specifically, the City did not follow its own policies and
procedures to ensure effective performance and compliance with federal
regulations for meeting national objectives. City officials did not know that they
were required to maintain documentation supporting that the areas serviced were
primarily residential in nature, but they informed us that City inspectors made on-
site visits and observed the area to determine whether it was primarily residential.
However, the City’s policies and procedures described the inspectors’ sole
responsibility as reviewing the work performed and conducting the environmental
inspection. We did not find documentation indicating that the inspectors
evaluated the service area.
Based on conversations with City officials and review of the City’s policies and
procedures and CDBG program files, we consider all CDBG projects funded for
activities #1954 and #2125 to be missing adequate supporting documentation to
meet the low- and moderate-area national objective. As a result of the condition
noted above, we were unable to confirm whether a national objective was met for
two commercial façade program activities that were provided more than $4.1
million1 in CDBG funds.
Conclusion
The City did not demonstrate commercial façade program compliance with HUD
requirements for meeting a national objective for two CDBG activities. Our
review of eight activities indicated that the City did not maintain adequate
documentation to support that a national objective was met for two commercial
façade program activities. This condition occurred because the City lacked
effective management controls and disregarded HUD requirements. As a result, it
had no assurance that two CDBG commercial façade program activities totaling
more than $4.1 million achieved the intended national objective or met program
requirements.
1
The City expended $1,872,817 in CDBG funds for activity #2125 and $2,322,262 for activity #1954. We reduced
$2,322,262 by $38,879 because HUD had previously requested reimbursement for two projects from activity #1954.
Total expended CDBG funds for both activities are $4,156,200.
7
Recommendations
We recommend that the Director of the Miami Office of Community Planning and
Development require the City to
1A. Provide documentation supporting that CDBG program requirements were
followed and the intended national objective was met for two CDBG
activities according to 24 CFR 570.506 and 570.208 or reimburse its
program $4,156,200 from nonfederal funds.
1B. Revise its policies and procedures to ensure that commercial façade program
activities comply with federal regulations for meeting CDBG national
objectives.
8
Finding 2: The City Did Not Properly Allocate Salary Expenditures to
the CDBG Program
The City did not properly allocate salary expenditures to its CDBG program and did not maintain
adequate supporting documentation demonstrating that employees worked in the program.
These conditions occurred because the City did not have effective management controls to
properly allocate salary expenditures to the CDBG program and disregarded HUD requirements.
Without supporting documentation to substantiate the allocations of actual services performed by
personnel or some type of quantifiable measure of employee effort, the City had no assurance
that salary expenditures were accurate and CDBG program related. As a result, the City
improperly allocated $690,392 to the CDBG program.
Salary Expenditures Not
Properly Allocated to the
CDBG Program
The City did not properly allocate salary expenditures to the CDBG program.
Regulations at 2 CFR Part 225, appendix B, paragraph 8h(4), require that a
distribution of salaries or wages be supported by personnel activity reports or
equivalent documentation for employees that work on multiple activities or cost
objectives.
We selected salary expenditures from three pay periods in program years 2006
and 2008 for a total of six pay periods. The City did not follow federal
requirements that adequate supporting documentation be maintained on the
distribution of salaries of those employees that worked on multiple programs. For
program year 2006, the City indicated that the salary allocation percentage for
each employee for federal and nonfederal programs was prepared by the budget
department and other directors and supervisors. The City did not maintain
adequate documentation supporting the actual time worked by employees
between federal and nonfederal programs. Regulations at 2 CFR Part 225,
appendix B, paragraph 8h(5)(e), state that budget estimates or other distribution
percentages determined before the services are performed do not qualify as
support for charges to federal awards but may be used for interim accounting
purposes. As a result, we consider $244,900 allocated to the CDBG program to
be an unsupported cost.
9
Unsupported
Total salary salary
No. Pay period expenditure expenditure
1 Apr. 14, 2007 $83,179 $76,615
2 Sept. 15, 2007 $94,465 $90,954
3 Sept. 29, 2007 $80,842 $77,331
Subtotal in program year 2006 $244,9002
For program year 2008, City officials indicated that the salary allocation process
had not changed except for the preparation of timesheets. The City did not
prepare biweekly timesheets until program year 2008. The biweekly timesheets
were prepared by the City for each pay period according to the approved salary
allocation for each employee. The employees were required to certify by means
of their biweekly timesheets that they worked the hours allocated to the different
programs. If the hours shown on the biweekly timesheets were incorrect, the
employees were to submit a form with the revised hours to the director for
approval.
City employees appeared to be routinely certifying through their biweekly
timesheets that they worked a percentage of time on a particular program although
they may not have actually worked on that program. As indicated above, the City
did not maintain adequate documentation supporting the actual time worked by
employees between federal and nonfederal programs. Several City employees
also certified hours on their biweekly timesheets for the CDBG program that did
not agree with the hours reported in the City’s financial system and exceeded the
approved salary allocation percentage. In addition, three employees revised
timesheets that were not approved by the director, and the revisions appeared in
the City’s financial system.
We consider all CDBG salary expenditures for program year 2008 to be missing
adequate documentation supporting the actual hours worked on the program. As
a result, we consider $445,492 allocated to the CDBG program to be an
unsupported cost.
Unsupported
Total salary salary
No. Pay period expenditure expenditure
4 Oct. 25, 2008 $57,985 $57,985
5 Nov. 8, 2008 $61,299 $61,299
6 Jan. 17, 2009 $57,388 $57,388
Subtotal $176,672
Total unsupported salary expenditures in
program year 2008 $445,492
2
We deducted $13,586, which represents those employees who worked 100 percent in the CDBG program.
10
This condition occurred because the City did not maintain effective management
controls to properly allocate salary expenditures to the CDBG program and
disregarded HUD requirements. The City did not have written procedures for
salary allocation among CDBG and other federal and nonfederal programs and
did not require its employees to maintain documentation supporting the time
worked for each federal or nonfederal program. City officials also believed that
the methodology it used to allocate salary expenditures was adequate.
Without supporting documentation to substantiate the allocations of actual
services performed by personnel or some type of quantifiable measure of
employee effort, we had no assurance that salary expenditures were accurate and
CDBG program related. As a result, we consider $690,392 allocated to the
CDBG program to be an unsupported cost.
Conclusion
The City improperly allocated salary expenditures to the CDBG program without
adequate supporting documentation demonstrating that employees worked in the
program. This condition occurred because the City did not have effective
management controls to properly allocate salary expenditures to the CDBG
program and disregarded HUD requirements. As a result, the City had no
assurance that $690,392 in salary expenditures was accurate and CDBG program
related.
Recommendations
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to
2A. Reimburse its program $690,392 for unsupported salary expenditures from
nonfederal funds.
2B. Develop a salary allocation method that complies with 2 CFR Part 225.
2C. Develop, implement, and enforce written procedures for salary allocation
among federal and nonfederal programs to include documentation
requirements for its employees.
11
Finding 3: The City Did Not Accurately Report CDBG Financial
Information to HUD
The City did not accurately report CDBG financial information to HUD in accordance with
federal requirements. It reported more than $1.7 million in administrative/planning costs to
HUD but reported more than $1.9 million in its financial system. In addition, it failed to report
$265,823 in reprogrammed CDBG funds to HUD. These conditions occurred because the City
was transferring financial information to another automated system and disregarded HUD
regulations. As a result, there was a lack of assurance that the City reported accurate CDBG
financial information to HUD in accordance with HUD regulations.
Administrative/Planning Costs
Not Accurately Reported to
HUD
The City did not accurately report CDBG financial information to HUD. It
reported more than $1.7 million in administrative/planning costs to HUD in
program year 2006, but the City’s financial system showed more than $1.9
million. Regulations at 24 CFR 85.20 require that accurate, current, and complete
disclosure of the financial results of financially assisted activities be in
accordance with the financial reporting requirements of the grant.
The City attempted to reconcile the discrepancies between IDIS and the City’s
financial system. The City reported transactions totaling $53,258 in IDIS that did
not belong to program year 2006, and it reported $1,019 in IDIS that it could not
explain. The City also reported $265,823 in its financial system representing
reprogrammed CDBG funds that was not reported to HUD (see below). The net
amount of these transactions totaled $211,546 that was inaccurately reported to
HUD.
Reprogrammed CDBG Funds
Not Reported to HUD
The City reprogrammed $265,823 in CDBG funds to administrative/planning
activity for four canceled activities without notifying HUD and conducted public
hearings for only one activity. Regulations at 24 CFR 91.505(a) require that the
jurisdiction amend its approved plan whenever it makes one of the following
decisions: (1) to make a change in its allocation priorities or a change in the
method of distribution of funds; (2) to carry out an activity, using funds from any
program covered by the consolidated plan (including program income), not
previously described in the action plan; or (3) to change the purpose, scope,
location, or beneficiaries of an activity. (b) The jurisdiction shall identify in its
citizen participation plan the criteria it will use for determining what constitutes a
substantial amendment. It is these substantial amendments that are subject to a
12
citizen participation process in accordance with the jurisdiction’s citizen
participation plan. (c) Upon completion, the jurisdiction must make the
amendment public and must notify HUD that an amendment has been made. The
jurisdiction may submit a copy of each amendment to HUD as it occurs or at the
end of the program year. Letters transmitting copies of amendments must be
signed by the official representative of the jurisdiction authorized to take such
action.
City officials claimed that the conditions described above occurred because the
City was transferring financial information to another automated system. The
transfer of financial information between systems created a number of problems
for users of the financial records. City officials claimed that canceling the CDBG
activities in IDIS was sufficient to notify HUD about the cancelation and
reprogramming of CDBG funds from one activity to another.
As a result of the conditions noted above, there was a lack of assurance that the
City reported accurate CDBG financial information to HUD in accordance with
HUD regulations. In addition, we consider $265,823 in reprogrammed CDBG
funds not reported to HUD to be an unsupported cost.
Conclusion
The City did not accurately report CDBG financial information to HUD. It also
improperly reprogrammed CDBG funds from four canceled activities without
notifying HUD. These conditions occurred because the City was transitioning to
another financial system and disregarded HUD regulations. As a result, there was
a lack of assurance that the City reported accurate CDBG financial information to
HUD in accordance with HUD regulations. The City should provide
documentation supporting the reprogrammed funds or reimburse its program
$265,823 for improperly reprogramming CDBG funds for four canceled activities
without notifying HUD. See appendix C for a list of the canceled activities.
Recommendations
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to
3A. Provide documentation supporting that CDBG program requirements were
followed or reimburse its program $265,823 from nonfederal funds.
3B. Reconcile CDBG administrative/planning costs between IDIS and the City’s
financial system.
13
3C. Ensure that all CDBG activities are properly reported in IDIS and the City’s
financial system on a timely basis.
3D. Notify HUD of all substantial changes to CDBG activities in accordance
with HUD regulations.
14
SCOPE AND METHODOLOGY
Our audit objectives were to determine whether the City administered its CDBG program in
accordance with applicable HUD requirements for: (1) meeting CDBG national objective(s), (2)
allocation of expenditures to the CDBG program, and (3) reporting program activities.
To accomplish our objectives, we
Reviewed relevant HUD regulations and guidebooks;
Reviewed relevant City policies and procedures and independent public accountant
reports;
Interviewed HUD and City officials;
Reviewed HUD files to include IDIS reports and monitoring reports;
Reviewed City financial records; and
Reviewed City files and records to include the subrecipient contract, resolutions, and
monitoring reports.
We obtained a list of CDBG-funded activities administered by the City from October 1, 2006, to
September 30, 2008. The City reported 165 completed activities, and we selected eight activities
(representing 37 percent of total expenditures) to determine whether the City met a national
objective. We selected activities from each of the four subcategories to benefit low- and moderate-
income individuals (area benefit, limited clientele, housing, and job creation or retention) and
activities with large CDBG expenditures.
We performed a cursory review of CDBG administrative/planning costs for program year 2006
(October 1, 2006, to September 30, 2007) and noted that salary expenditures represented
approximately 81 percent or $1,606,103 of the administrative/planning costs. Since City
officials informed us that they did not maintain adequate supporting documentation for salary
expenditures, we selected three pay periods with the largest amount of salary expenditures,
totaling $258,486, to determine whether they were properly allocated to the CDBG program.
City officials also informed us that biweekly timesheets were required to support the City’s
salary allocation beginning in October 2008. The City provided us with a listing of salary
expenditures for program year 2008 (October 2008 to January 17, 2009).3 We selected three pay
periods with the largest amounts of salary expenditures, totaling $176,672, to determine whether
they were properly allocated to the CDBG program. Our overall selection represents
approximately 21 percent of total salary expenditures for program years 2006 and 2008 (as of
January 17, 2009).
3
We requested salary expenditures incurred in program year 2008 early in 2009. The City provided us with salary information as of January 17,
2009. The City’s program year 2008 is ongoing (October 1, 2008 – September 30, 2009).
15
We verified whether CDBG administrative/planning costs were reported accurately between the
City’s financial system and IDIS for fiscal year 2006 (October 1, 2006, to September 30, 2007).
IDIS generates reports from the submission of the City’s consolidated annual performance and
evaluation report to HUD. We compared the financial summary report (PR-26) to the City’s
financial system.
We assessed the reliability of computer-processed data reported in IDIS and in the City’s
financial system for salary expenditures and national objectives. We traced salary expenditures
to and from the source documents to assess the reliability of salary expenditures reported in IDIS
and the City’s financial system. During program year 2006, the City did not require
documentation supporting its employees’ time distribution. The City indicated that hours
charged to the CDBG program were based on an estimated yearly budget determined by City
officials. The City did not maintain adequate documentation supporting the actual time worked
by employees between federal and nonfederal programs. In program year 2008, City officials
indicated that beginning in October 2008, it required biweekly timesheets to support its salary
allocation. We identified inconsistencies between what was reported in 13 biweekly timesheets
and the City’s financial system. The City lacked adequate controls to ensure that valid and
reliable data were obtained, maintained, and accurately reported in IDIS and the City’s financial
system. Therefore, we consider salary expenditures reported in IDIS and the City’s financial
system to be unreliable. For purposes of determining questioned costs, we used the CDBG
expenditures reported in the City’s financial system.
For national objectives, we tested the accuracy of the City drawdowns of CDBG funds reported
in IDIS and the expenditures reported in the City’s financial system. Based on our tests, we
found that the drawdowns were generally supported by the expenditures reported in the City’s
financial system for those activities funded from October 2007 to September 2008. We also
found that the expenditures reported in the City’s financial system were supported and accurate
and thus could be relied upon for our audit purposes. Therefore, we used the CDBG
expenditures reported in the City’s financial system for questioned costs.
Due to the volume of CDBG activities and administrative/planning costs, we did not perform a 100
percent review. The results of the audit apply only to the items selected and were not projected to
the universe or population.
The audit generally covered the period October 1, 2006, through September 30, 2007, and we
extended the period as needed to accomplish our objective. We conducted our fieldwork from
November 2008 through May 2009 at the City’s offices located at 444 Southwest 2nd Avenue,
Miami, Florida.
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
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.
16
INTERNAL CONTROLS
Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following controls are achieved:
Effectiveness and efficiency of program operations,
Relevance and reliability of information,
Compliance with applicable laws and regulations, and
Safeguarding of assets and resources.
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:
Controls over program operations;
Controls over the reliability of data;
Controls over compliance with laws and regulations; and
Controls over the safeguarding of resources 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 items are significant weaknesses:
The City did not demonstrate compliance in meeting national objectives for its
commercial façade program (see finding 1).
The City did not properly allocate salary expenditures to the CDBG program
(see finding 2).
The City did not accurately report CDBG financial information to HUD (see
finding 3).
17
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
Recommendation
number Unsupported 1/
1A $4,156,200
2A 690,392
3A 265,823
$ 5,112,415
1/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
or activity when we cannot determine eligibility at the time of 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.
18
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
19
20
Comment 1
21
Comment 2
22
23
Comment 3
24
25
OIG Evaluation of Auditee Comments
Comment 1 The City stated that it did not agree with our determination that the national
objective was not met, and contended that City staff inspects the business and
surrounding area and reports any condition that does not meet program
parameters.
The City provided us with documentation that it inspected the businesses to
ensure the work was completed, and performed the environmental and flood
inspections. However, the City failed to provide us with supporting
documentation that the service area was primarily residential in nature to
achieve the intended national objective.
The City said it would work with the local HUD office to ensure that
appropriate, adequate and clear information is included in each façade file to
fully document compliance with the requirements established at 24 CFR
570.506 and 24 CFR 570.208(1)(a). The City will submit to HUD thorough
documentation for each individual façade to demonstrate that the intended
national objective – Area Benefit - was met. The City will also revise its
policies and procedure for the façade program (detailed in the City of Miami
Commercial Façade Program Policies and Procedures Manual) to ensure that in
the future, façade files contain all the necessary information to clearly
demonstrate that the activity complies with federal regulation and that the
intended national objective was met.
Comment 2 The City agreed that it allocated salary expenditures to the CDBG program
especially for the 2006 program year without proper documentation, but
believed that all salary expenditures during the period under audit were
eligible, and properly chargeable to CDBG in accordance with 24 CFR
570.206.
The City did not provide us with supporting documentation that the salary
expenditures we reviewed during our audit were eligible and properly
chargeable to CDBG in accordance with 24 CFR 570.206. We maintain that
the City improperly allocated salary expenditures to the CDBG program
without adequate supporting documentation demonstrating that employees
worked in the program.
The City agreed documentation needs to be improved and will amend its
current policy to require staff to prepare an activity report on a biweekly period
and has already consulted CPA firms to provide proposals on the preparation
of salary allocations.
Comment 3 The City contended the reprogrammed funds were used for eligible activities,
and indicated that the revised IDIS vouchers for $5,026, $2,240 and $4,770
were reported to HUD through the City’s substantial amendment to HUD for
the 2006-2007 program year. The City provided us with this amendment.
26
We reviewed the amendment and agree that the City reported these
reprogrammed CDBG funds to HUD. We corrected appendix C to reflect this.
The amendment indicates that the funds were reallocated to Section 108 debt
service. However, the City reported in the HUD IDIS system that these funds
were reallocated to administrative/planning costs. In addition, the City failed
to provide supporting documentation that the reallocation of these funds
involved conducting public hearings. Therefore, we maintain that the City
failed to report accurate financial information to HUD in accordance with
federal requirements.
27
Appendix C
CANCELED CDBG ACTIVITIES AND
REPROGRAMMED CDBG FUNDS
# City
CDBG funds conducted City
reprogrammed to public notified
Canceled administrative/planning hearings4 HUD
activity # activity yes/no yes/no
1 1567 $ 253,787(1) yes no
2 1406 5,026 no yes
3 1511 2,240 no yes
4 1601 4,770 no yes
Total $ 265,823
Note:
(1) The City informed citizens during the public hearing about the cancelation of the activity
but did not inform them regarding the use of the reprogrammed CDBG funds. According
to the City, no other hearings were held to discuss the use of the funds. The City did not
inform HUD about the reprogramming of these funds to the administrative/planning
activity.
4
Based on the City’s citizen participation plan, revised in November 2005, any changes made in the use of funds are considered substantial and
require that a substantial amendment be made to its consolidated plan. In addition, it needed to conduct a public hearing informing its citizens
of the cancelation and reprogramming of funds it planned to make. The cancelation of these activities and reprogramming of funds occurred in
program year 2006.
28
The City of Miami, Florida, Did Not Properly Administer Its Community Development Block Grant Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-08-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)