oversight

The City of Atlanta Entered Incorrect Commitments into HUD's Integrated Disbursement and Information System for its HOME Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-09-28.

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

                                                               Issue Date
                                                                     September 28, 2009
                                                               Audit Report Number
                                                                    2009-AT-1013




TO:        Mary D. Presley, Director, HUD Atlanta Office of Community Planning and
            Development, 4AD

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

SUBJECT:   The City of Atlanta Entered Incorrect Commitments into HUD’s Integrated
            Disbursement and Information System for its HOME Program


                                 HIGHLIGHTS

 What We Audited and Why


           We conducted an audit of the City of Atlanta’s (City) HOME Investment
           Partnerships Program (HOME). We selected the City for review because it has
           received more than $17 million in HOME funding since 2005. Our objective was
           to determine whether the City accurately entered commitments into the U.S.
           Department of Housing and Urban Development’s (HUD) Integrated
           Disbursement and Information System (information system) for HOME-funded
           activities.


 What We Found


           The City did not comply with HUD requirements for committing HOME funds
           within the 24-month statutory deadline. The audit identified more than $6.8
           million in incorrect commitment entries that the City made to HUD’s information
           system. The incorrect entries masked a shortfall of more than $3.9 million that is
           subject to recapture by HUD. The recaptures, which resulted from a failure of
           City staff to implement adequate controls, will deprive City residents of services
           that the HOME program was intended to provide. The incorrect commitments
           also undermined the integrity of the information system and of reports HUD
           generated from the system to monitor the City’s compliance with the 24-month
           statutory commitment requirement.


What We Recommend

           We recommend that the Director of HUD’s Atlanta Office of Community
           Planning and Development recapture more than $3.9 million in funds not
           committed by the 24-month statutory deadline. We also recommend that the
           Director require the City to implement controls to ensure that future HOME funds
           are committed by the required deadline, monitor commitments entered into
           HUD’s information system and take appropriate action to promptly correct
           detected violations.

           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 finding with City and HUD officials during the audit. On
           August 17, 2009, we provided a copy of the draft report to City officials for their
           comment and discussed the report with them at the exit conference on August 24,
           2009. The City provided its written comments to the draft report on September 8,
           2009. The City agreed that it made incorrect entries to HUD’s information
           system. However, the City felt the issues involved extenuating circumstances that
           HUD should consider to reduce the recommended financial impact on the City
           and its HOME program.

           The complete text of the City’s response, along with our evaluation of that
           response, can be found in appendix B of this report.




                                          2
                           TABLE OF CONTENTS


Background and Objective                                                          4

Results of Audit                                                                  5
      Finding 1: The City Entered Incorrect Commitments into HUD’s Information
                 System

Scope and Methodology                                                            10


Internal Controls                                                                12

Appendixes
   A. Schedule of Funds to Be Put to Better Use                                  13
   B. Auditee Comments and OIG’s Evaluation                                      14
   C. Schedule of Incorrect Commitments Entered into HUD’s Information System    23
      Which Resulted in Shortfalls




                                         3
                       BACKGROUND AND OBJECTIVE

The U.S. Department of Housing and Urban Development (HUD) allocates HOME Investment
Partnerships Program (HOME) funding to eligible local and state governments to strengthen
public-private partnerships and to supply decent, safe, and sanitary affordable housing to very
low-income families. Participating jurisdictions may use HOME funds to carry out multiyear
housing strategies through acquisition, rehabilitation, new construction, and tenant-based rental
assistance. For program years 2005 through 2009, HUD awarded the City of Atlanta (City),
Georgia more than $17 million in HOME funding. The City’s policy-making and legislative
authority are vested in the city council, while the mayor is responsible for overseeing the day-to-
day operations of the City and appointing and directing the heads of the various departments.
The City’s HOME program is primarily administered by its Bureau of Housing.

HUD requires grantees to enter data into an Integrated Disbursement & Information System
(information system). The system allows grantees to request their grant funding from HUD and
report on what is accomplished with these funds. HUD uses the real-time mainframe-based
computer application, to accumulate and provide data to monitor compliance with HOME
requirements for committing and expending funds. HUD also uses the information system to
generate reports used within and outside HUD, including the public, participating jurisdictions,
and the Congress.

HUD’s Office of Community Planning and Development in Atlanta, Georgia, is responsible for
overseeing the City’s HOME program. HUD’s most recent monitoring report of the City’s
HOME program, dated September 30, 2005, did not include a review of the accuracy of
commitment entries the City made to HUD’s information system. However, in 2008 HUD
recaptured more than $1.9 million of the City’s HOME funding for program year 2005 because
the City did not commit the funds by its 24-month statutory deadline, March 31, 2007. Our audit
identified more than $3.9 million in additional HOME funds that are subject to recapture due to
incorrect entries the City made to the information system during its 24-month statutory deadlines
as of March 31, 2008, and May 31, 2009. We confirmed with HUD staff that the $3.9 million
subject to recapture by the audit is in addition to and is not a part of the $1.9 million that HUD
previously recaptured.

Our audit objective was to determine whether the City accurately entered commitments into
HUD’s information system.




                                               4
                                RESULTS OF AUDIT

Finding 1: The City Entered Incorrect Commitments into HUD’s
           Information System
The City incorrectly entered more than $6.8 million in commitments into HUD’s information
system. The incorrect entries masked a shortfall of more than $3.9 million that is subject to
recapture by HUD. This condition occurred because City staff did not follow and enforce HUD
program requirements and did not establish and implement procedures to monitor commitments.
The recaptures will deprive City residents of services the HOME program was intended to
provide. The incorrect commitment entries also undermined the integrity of the information
system and reports that HUD generated from the system, such as the deadline compliance status
report, to monitor City compliance with commitment requirements and to compile national
program statistics. The incorrect commitment entries included more than

       $5.1 million for non-community housing development organization activities in which
       the City was unable to produce written agreements, the agreements were executed after
       the 24-month deadline, or the commitments exceeded the contract amounts shown in the
       agreements.

       $600,000 for community housing development organization activities in which the City
       was unable to produce one written agreement and two agreements were executed after the
       24-month deadline.

       $1.1 million for regular and community housing development organization activities in
       which written agreements did not exist at the time of the entries but were executed before
       the 24-month deadline.

Title II of the Cranston-Gonzalez National Affordable Housing Act, section 218(g), and 42
U.S.C. [United States Code] 12748(g) provide that a participating jurisdiction’s right to draw
funds from its HOME Investment Trust Fund shall expire if the funds are not placed under
binding commitment to affordable housing within 24 months after the last day of the month in
which such funds are deposited into the participating jurisdiction’s HOME Investment Trust
Fund. Regulations at 24 CFR [Code of Federal Regulations] 92.2(1) define commitment as an
executed legally binding agreement to use a specific amount of HOME funds to produce
affordable housing or provide tenant-based rental assistance, an executed written agreement
reserving a specific amount of funds to a community housing development organization, or
having met the requirements to commit to a specific local activity. Regulations at 24 CFR
92.500(d) state that any funds in the U.S. Treasury account that are not committed within 24
months after the last day of the month in which HUD notifies the participating jurisdiction of
HUD’s execution of the HOME agreement are subject to reduction or recapture by HUD.




                                              5
The City Entered Incorrect
Commitments into the Information
System


            Notice CPD [community planning and development] 07-06, Commitment, CHDO
            [community housing development organization] Reservation, and Expenditure
            Deadline Requirements for the HOME Program, section VII, provides
            instructions on unacceptable and acceptable documentation for commitments.
            Section VII(A) provides that unacceptable commitment documentation includes
            approved budgets, signed letters of intent, award letters, and council minutes.
            Section VII(B) provides that acceptable commitment documentation includes a
            written agreement or contract between the participating jurisdiction and a state
            recipient, subrecipient, program recipient, or contractor signed by both parties,
            dated on or before the deadline date, committing a specific amount of HOME
            funds to a specific HOME project. It further provides that the signatures of all
            parties signing the agreement or contract must be dated to show the execution
            date.

            During the review period, April 1, 2006, through May 31, 2009, the City
            committed more than $14.3 million in HOME funds, of which we examined more
            than $10.7 million. We identified more than $6.8 million in commitments that did
            not comply with the above requirements. The City entered the incorrect
            commitments during the 24-month commitment deadlines ending March 31,
            2008, and May 31, 2009. The incorrect commitments consist of more than

                   $5.1 million (appendix C) that the City showed as committed before its
                   24-month commitment deadline, although the funds were not valid
                   commitments. The incorrect entries consisted of commitments for (1) 10
                   activities totaling more than $2.72 million in which the City never
                   executed written agreements and thus the reported commitments were not
                   valid, (2) one activity for more than $1.32 million that did not involve
                   HOME funds, (3) one activity for $1 million in which the written
                   agreement was executed after the deadline date, and (4) two activities in
                   which the committed amounts exceeded contract amounts by more than
                   $46,000.

                   City officials stated that HUD staff instructed them to enter more than
                   $1.32 million for a non-HOME-funded activity as a commitment into the
                   information system to offset ineligible costs HUD identified in a prior
                   monitoring review. HUD’s field officials stated that they provided
                   guidance for the city to enter the activity as a substitute project for the
                   disallowed activity. However, the regulations only permit commitments
                   for HOME-funded activities.




                                           6
We reassessed the City’s commitment compliance by adjusting the March
31, 2008, and May 31, 2009, balances in the deadline compliance status
reports to exclude the incorrect entries discussed above. The incorrect
entries masked a shortfall that totaled more than $3.9 million that is
subject to recapture by HUD because the City did not commit sufficient
funds by the 24-month statutory commitment deadline dates. The City did
not provide any allowable substitute commitments to offset the shortfall
identified by the audit.

                              March 31, 2008 May 31, 2009
 Description                      deadline        deadline          Total
 Excess commitments *             $1,099,648         $68,224      $1,167,872
 Less: incorrect commitments
 identified by audit             (3,309,006)     (1,795,231)     (5,104,237)
 Adjusted balance (shortfall)  $(2,209,358)     $(1,727,007)    $(3,936,365)
*These were the excess commitments shown in HUD’s deadline compliance status
  reports.

   $600,000 in community housing development organization
   reservations that the City showed as committed before the deadline
   date, although the amounts were not committed.

                                                  Days past 24-
   Activity     24-month           Actual        month deadline
   number     deadline date   commitment date    at June 30, 2009   Amount
    2152      Mar. 31, 2008                n/a             456      $201,182
    2624      Mar. 31, 2008     July 14, 2008              105       200,300
    2505      Mar. 31, 2008     May 10, 2008                40       200,000
     Total                                                          $601,482

The incorrect entries consisted of one activity (2152) in which the City did
not execute a written agreement and two activities (2624 and 2505) in
which the written agreements were executed after the deadline date. The
incorrect commitments compromised the integrity of HUD’s information
system and the degree of reliability HUD could place on the data for
monitoring commitments and compiling national statistics on the HOME
program. However, the incorrect commitments were not subject to
recapture because the amounts were less than the excess commitments
shown in HUD’s deadline compliance status report for community
housing development organizations.

   $1.1 million for activities in which the written agreements were
   executed 24 to 216 days after the commitment entries but in each case,
   the commitments were made before the 24-month deadline date.




                          7
                                                                    Days
                  Date funded                                      between
                        in         Date written    24-month       entry and
      Activity    information       agreement       deadline       written
      number         system          executed         date        agreement    Amount
       2447      July 27, 2007    Feb. 28, 2008   Mar. 31, 2008        216    $ 138,053
       2858      Nov. 7, 2007     Mar. 26, 2008   Mar. 31, 2008        140       372,000
       2441      Sept. 25, 2007   Dec. 31, 2007   Mar. 31, 2008          97       92,500
       2708      June 7, 2007     Aug. 28, 2007   Mar. 31, 2008          82      293,400
       2831      Sept. 25, 2007   Oct. 22, 2007   Mar. 31, 2008          27       90,173
       2829      Sept. 25, 2007   Oct. 22, 2007   Mar. 31, 2008          27       76,173
       2516      July 27, 2007    Aug. 30, 2007   Mar. 31, 2008          24      112,008
       Total                                                                  $1,174,307

      The above amounts are not subject to recapture because the funds were
      committed before the 24-month statutory deadline date. However, the
      incorrect commitments compromised the integrity of HUD’s information
      system and the degree of reliability HUD could place on the data for
      monitoring commitments and compiling national statistics on the HOME
      program.

The regulations at 24 CFR 92.504 provide that the participating jurisdiction is
responsible for managing the day-to-day operations of its HOME program,
ensuring that HOME funds are used in accordance with all program requirements,
and taking appropriate action when performance problems arise. The City did not
adequately implement this requirement. Specifically, the City did not monitor nor
had it established procedures to require and document monitoring of the accuracy
of commitments its staff entered into the information system. As a result, the City
missed the opportunity to detect and correct the problems before they elevated to
the point of subjecting program funds to recapture by HUD.

Because of the above conditions, the audit identified more than $3.9 million in
funds that are subject to recapture in addition to $1.9 million that HUD recaptured
from the City in 2008 (see background section). These conditions underscore the
need for City officials to maintain proper management and oversight of program
commitments. The recapture will deprive City residents of assistance the program
was intended to provide. For instance, the $3.9 million that is subject to recapture
is enough to fund more than 85 home rehabilitations based on the City’s $45,000
standard limit per home for such work.




                                  8
Conclusion


             The City had not established and implemented the controls and procedures needed
             to detect and correct more than $6.8 million in incorrect commitment entries its
             staff had made to the information system since April 2006. The incorrect entries
             masked a commitment shortfall of more than $3.9 million that is subject to
             recapture by HUD. The recapture could have been avoided if the City had
             properly met its responsibility to ensure compliance with requirements. The
             recapture will deprive City residents of program assistance, and the incorrect
             entries compromised the integrity of commitments in the information system
             which HUD uses to monitor compliance with commitment requirements and to
             compile national program statistics.


Recommendations

             We recommend that the Director of HUD’s Atlanta Office of Community
             Planning and Development

             1A.    Require the City to reduce the commitments in the information system to
                    the amounts supported by written agreements.

             1B.    Recapture $3,936,365 in HOME funds, which the City did not commit by
                    the 24-month statutory deadline.

             1C.    Require the City to train its staff regarding HUD’s documentation and
                    entry requirements for commitments entered into HUD’s information
                    system.

             1D.    Require the City to develop and implement monitoring procedures to
                    ensure that future HOME funds are committed by the required deadline,
                    ensure the accuracy of commitments entered into HUD’s information
                    system, and take appropriate action to promptly correct detected
                    violations.




                                           9
                        SCOPE AND METHODOLOGY


We performed the audit from April through July 2009 at the offices of the City’s Bureau of
Housing and the HUD Office of Community Planning and Development in Atlanta, Georgia.

We did not review and assess general and application controls for computer-processed data that
the City entered into HUD’s information system for commitments. We conducted other tests and
procedures to ensure the integrity of computer-processed commitments that were relevant to the
audit objective. Specifically, we examined written agreements to determine the accuracy of
commitments the City entered into the information system. The review disclosed that the City
entered incorrect commitments into the information system. We obtained correct information
from written agreements for the activities reviewed and determined that incorrect entries
compromised the reliability and integrity of HUD’s information system (finding 1).

The review generally covered the period April 1, 2006, through May 31, 2009. We adjusted the
review period when necessary. To accomplish our objective, we

        Researched HUD handbooks, the Code of Federal Regulations, and other requirements
        and directives that govern the commitment of HOME program funds;

        Obtained and reviewed reports from HUD’s information system;

        Reviewed HUD’s monitoring reports and files for the City’s HOME program;

        Reviewed the City’s consolidated annual performance and evaluation reports for its
        HOME program;

        Reviewed the City’s procedures and controls used to administer its HOME program
        activities relative to commitments;

        Interviewed officials of the Atlanta HUD Office of Community Planning and
        Development and the City;

        Obtained and reviewed the City’s audited annual financial statements, project files,
        policies, and procedures; and




                                             10
        Conducted tests to determine the City’s compliance with HOME fund commitment
        requirements. During the review period, April 1, 2006, through May 31, 2009, the City
        committed more than $14.3 million in HOME funds, of which we examined more than
        $10.7 million, or 75 percent. We examined all commitments that equaled or exceeded
        $50,000 in order to cover the most significant commitment amounts. The results of the
        audit apply only to the tested activities and cannot be projected to the universe or total
        population.

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.




                                              11
                              INTERNAL CONTROLS

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

              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:

                   Policies and procedures that management has implemented to reasonably
                   ensure that resource uses are consistent with laws and regulations.

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

              We assessed the above controls.

              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 is a significant weakness:

                   The City did not enforce HOME requirements to ensure the accuracy of
                   commitments its staff entered into the information system (finding 1).



                                             12
                                   APPENDIXES

Appendix A

     SCHEDULE OF FUNDS TO BE PUT TO BETTER USE

                          Recommendation          Funds to be put
                              number              to better use 1/
                                1B                $     3,936,365

1/   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 our recommendation is implemented,
     HUD will recapture $3,936,365 in funds not committed by the 24-month statutory
     commitment deadline.




                                           13
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         14
Comment 1




            15
Comment 2




Comment 1



Comment 3




            16
Comment 4




Comment 5




            17
Comment 4




Comment 6




Comment 7




            18
Comment 8




            19
20
                         OIG Evaluation of Auditee Comments

Comment 1   The City commented that the first-in first-out method for processing transactions
            in HUD’s information system has resulted in major systematic obstacles by cities
            across the country as they attempt to reconcile the data in HUD’s information
            system with their general ledger accounting records. The City stated that its staff
            developed a procedure to identify activities in HUD’s information system and to
            aid in the information system reconciliation process by “reserving funds” in the
            system. However, by “reserving” the funds in HUD’s information system without
            an executed written agreement, the City incorrectly committed the funds in
            violation of 24 CFR 92.2(1), which requires all commitments to be supported by
            executed written agreements. The City requested that we reconsider their position
            and accept the process it followed. The process followed by the City violated the
            requirements and is not permitted as a basis for committing funds in HUD’s
            information system.

Comment 2   The City commented that the assumption that the recapture will “deprive” the
            citizen” of 85 home rehabilitations is subjective. The report simply states a
            factual calculation of the number of rehabilitations that could have been funded
            by the potential recapture amount.

Comment 3   The City states it executed conditional written agreements, as allowed by HUD
            regulations. We reviewed the conditional written agreements and determined
            they did not qualify under the regulations as the basis for the commitment of
            HOME funds and that the agreements themselves stated “this agreement does not
            constitute a commitment of funds.”

Comment 4   The City explained that it was acting under guidance from HUD when it entered a
            $1.32 million commitment to the information system for an activity that was not
            funded by HOME funds. The City disagreed with the OIG inclusion of the $1.32
            million to calculate the more than $3.9 million subject to recapture. The
            regulations at 24 CFR 92.2(1) define commitment as an executed legally binding
            agreement to use a specific amount of HOME funds (emphasis added). This
            activity used non-federal funds and cannot constitute a commitment in HUD’s
            information system despite guidance received to the contrary.

Comment 5   The City commented that the questioned commitments included $1,000,000 that
            was for a 2007 contract that was executed within the 24-month commitment
            requirement. We disagree. The City entered the commitment into the
            information system on July 30, 2007, although it did not execute the contract until
            July 17, 2008. The contract was executed 108 days after the City’s March 31,
            2008, commitment deadline.




                                          21
Comment 6   The City requested HUD to reconsider the OIG conclusion and seek a waiver that
            would allow activity no. 3335 to count towards its 2008 commitment requirement.
            The City also commented that since the HUD information system uses a first-in
            first-out basis, if the waiver is not granted, HUD explore the option of allowing an
            uncommitted HOME multifamily allocation as if it were a multi-family project.
            The 24-month commitment requirement is statutory and is not subject to waiver.
            During the review, we asked City officials if they had any activities committed
            before their deadline dates, which they had not entered into HUD’s information
            system and they said no. The request to allow the multifamily allocation as a
            multifamily project is ambiguous. The City provided no evidence that it had
            executed a written agreement for the multifamily allocation for the period covered
            by the audit.

Comment 7   The City commented that between 2005 and 2009 its staff has attended various
            training courses and that it will continue to seek training regarding commitments
            entered into HUD’s information system. The issues identified by the audit
            indicates a further need for training focused on the commitment of HOME funds
            coupled with increased City monitoring of staff performance in this area.

Comment 8   The City responded that it provided its procedures for entering commitments into
            HUD’s information system and has since expanded the procedures to include
            monitoring. The City provided and we assessed their procedures for entering
            commitments into HUD’s information system. However, we requested but the
            City never provided procedures for monitoring commitments that its staff enters
            into HUD’s information system.




                                           22
Appendix C
  SCHEDULE OF INCORRECT COMMITMENTS ENTERED
INTO HUD’s INFORMATION SYSTEM WHICH RESULTED IN
                  SHORTFALLS

                                                     Days past 24-
                     Required         Actual        month deadline
    Activity        commitment      commitment           as of
    number             date            date          June 30, 2009   Amount            Notes
                                    Amounts still not committed
     2866           Mar. 31, 2008        n/a                456      $1,792,167         A
     2669           Mar. 31, 2008        n/a                456        266,839          A
     2668           Mar. 31, 2008        n/a                456        250,000          A
     3335           May 31, 2009         n/a                 30       1,328,750         B
     2939           May 31, 2009         n/a                 30           60,000       A, C
     3122           May 31, 2009         n/a                 30           60,000       A, C
     3123           May 31, 2009         n/a                 30           60,000       A, C
     3287           May 31, 2009         n/a                 30           60,000       A, C
     3299           May 31, 2009         n/a                 30           60,000       A, C
     3300           May 31, 2009         n/a                 30           60,000       A, C
     3304           May 31, 2009         n/a                 30           60,000       A, C
                                                    Subtotal         $4,057,756
                           Commitments made after the 24-month deadline
     2748           Mar. 31, 2008   July 17, 2008           108      $1,000,000         D
                                                    Subtotal         $1,000,000

               Commitments that exceeded the amounts shown in the written agreements
     2934           May 31, 2009    Feb. 5, 2009               0       $22,061          E
     2938           May 31, 2009    Feb. 5, 2009               0       $24,420          E
                                                    Subtotal           $46,481
                                                    Total            $5,104,237




                                               23
Notes
A The City did not produce legal written agreements to support the commitments of these funds.
    The regulations at 24 CFR 92.2(1) define commitment as an executed legally binding
    agreement to use a specific amount of HOME funds to produce affordable housing or provide
    tenant-based rental assistance, an executed written agreement reserving a specific amount of
    funds to a community housing development organization, or having met the requirements to
    commit to a specific local activity. These commitments were not valid because they were not
    supported by written agreements executed before the commitment deadline dates.

    The documentation provided by the City shows that this activity was funded by local bonds
B
    and not by the HOME program. Thus, the more than $1.32 million commitment the City
    entered into the information system for the activity was incorrect, and it caused an
    overstatement of City commitments in the information system. The regulations at 24 CFR
    92.2(1) define commitment as an executed legally binding agreement to use a specific amount
    of HOME funds.

    City officials stated that community planning and development officials from the local HUD
    field office instructed them to enter this non-HOME-funded activity into the information
    system to offset ineligible costs that HUD identified in a prior monitoring review. We
    discussed this matter with HUD officials, and they stated that they provided guidance for the
    City to enter the activity as a substitute project for the disallowed activity. However, the
    regulations only permit commitments for HOME-funded activities to the information system,
    and the requirement is not subject to override by the local HUD office.


C   The contracts provided by the City were not executed agreements that qualify for the
    commitment of HOME funds. Instead, the documents provided were the agreements that the
    homeowner executed to comply with the affordable housing requirements associated with the
    rehabilitation activity for which they applied. The agreements were signed by the recipients
    but not by City officials. The documents state that “this agreement does not constitute a
    commitment of funds.” To support the commitments entered into the information system, the
    City needed but had not executed contracts to complete the rehabilitation work.

D   The commitment was supported by a written agreement, but the agreement was dated after the
    City’s 24-month statutory commitment deadline.

E   The commitments exceeded the written agreements by more than $46,000. The City
    committed $65,000 for activity 2934, but the contract was for $42,939, which was $22,061
    less than the City committed. The City also committed $65,000 for activity 2938, but the
    contract was for $40,580, which was $24,420 less than the City committed. The total
    commitments for the two activities exceeded the contract amounts by $46,481
    ($22,061+$24,420).




                                             24