Issue Date
August 19, 2009
Audit Report Number
2009-BO-1011
TO: Robert C. Paquin, Director, Office of Community Planning and Development,
Boston Regional Office, 1AD
FROM:
John A. Dvorak, Regional Inspector General for Audit, Boston Region, AGA
SUBJECT: The City of Boston’s Department of Neighborhood Development in Boston,
Massachusetts, Did Not Administer Its HOME Program in Compliance with
HUD Requirements
HIGHLIGHTS
What We Audited and Why
We audited the HOME Investment Partnerships Program (HOME) administered
by the City of Boston’s (City) Department of Neighborhood Development
(Department) as part of our annual audit plan.
Our objective was to determine whether the Department administered its HOME
program in compliance with HUD requirements. Specifically, we wanted to
determine whether the Department used community housing development
organization (CHDO) qualification requirements in designating its CHDOs and
spent CHDO operating expenses on eligible activities. In addition, we wanted to
determine if the Department complied with U.S. Department of Housing and
Urban Development (HUD) procurement policies and procedures. We also
wanted to determine if the Department’s method of allocating salaries was
adequate and supported.
What We Found
The Department awarded CHDO set-aside funding totaling more than $4.7
million to 18 organizations that did not meet all legal and organizational
characteristics of CHDOs or did not have the required capacity to operate as
CHDOs. Additionally, the Department provided more than $2.1 million in
CHDO operating funds to the 18 ineligible organizations.
The Department also did not ensure that proper, fair, and equitable procurement
practices were followed for more than $5.1 million in HOME funding expended
on construction and development work. Contractors were selected without
solicitation of bids, bids were not formally (publicly) advertised, independent cost
analyses were not performed before the bidding process, and supporting
documentation related to the history of procurement actions was not maintained.
In addition, the Department could not ensure that payroll costs of more than $1.7
million charged to the HOME program for fiscal years 2007 and 2008 were
accurate because it did not have a reliable system/method to record the actual time
spent on its various programs. The Department did not maintain a cost allocation
plan and used an allocation method based, for the most part, on estimates or past
experience. As a result, some of its programs may have incurred a
disproportionate share of staffing costs, while some local City programs were not
charged.
What We Recommend
We recommend that the Director of the Office of Community Planning and
Development require the Department to cease spending set-aside and operating
expense funding until it can be determined whether the organizations can achieve
CHDO status in accordance with HUD regulations. The Department should be
required to assist the organizations in achieving CHDO status as deemed
necessary. We also recommend that the City: (1) deobligate unexpended set-aside
funding of more than $3.9 million and provide funding to organizations that are
eligible to receive the funding or reimburse funds to the HOME program, (2)
reimburse approximately $800,000 expended from set-aside funds from
nonfederal funds to the HOME program. (3) deobligate unexpended operating
funds of approximately $1 million and reimburse these funds to the HOME
program, and (4) reimburse expended operating funds of more than $1 million
from nonfederal funds to the HOME program.
2
In addition, we recommend that the Director of the Office of Community
Planning and Development require the Department to conduct an independent
cost analysis for each of the procurements to ensure that more than $5.1 million in
HOME program expenditures were reasonable and supported. For amounts not
supported, the Department should reimburse the HOME program from nonfederal
funds. Also, the Department must monitor and provide technical assistance to
ensure that developers follow HUD procurement regulations, including ensuring
that (1) independent cost analyses are performed before bids are received, (2) bids
are formally (publicly) advertised, (3) bids are solicited from an adequate number
of contractors and awards are made to the lowest responsive bidder, and (4)
supporting documentation is maintained for each procurement.
Finally, we recommend that the Director of the Office of Community Planning
and Development require the Department to implement a cost allocation plan
which adequately describes the process for personnel who work on multiple
programs. The Department must also revise its job descriptions so that they are
consistent with the allocation plan. We also recommend that the Department
provide supporting documentation for payroll costs of more than $1.7 million
charged to the HOME program in fiscal years 2007 and 2008 and submit
documentation to the HUD Office of Community Planning and Development for
approval. If proper supporting documentation is not provided, the Department
should reimburse the HOME program from nonfederal funds.
For each recommendation in the body of the report 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 Department officials with a draft audit report on July 14, 2009, and
requested a response by July 28, 2009. We held an exit conference with
Department officials on July 24, 2009, to discuss the draft report, and we received
their written comments on July 28, 2009. The Department agreed with the facts,
conclusions, and recommendations in Findings 3 and 5. However, the
Department was not in total agreement with Findings 1, 2 and 4.
The complete text of the auditee’s response, along with our evaluation of that
response, can be found in appendix B of this report.
3
TABLE OF CONTENTS
Background and Objective 5
Results of Audit
Finding 1: The Department Did Not Ensure That Organizations Met CHDO 6
Requirements
Finding 2: The Department Did Not Always Ensure That Project Developers 11
Followed Proper Procurement Procedures
Finding 3: The Department’s Method for Allocation of Salaries Was Inadequate 16
Finding 4: The Department Provided HOME Funds to Developers for Costs That 19
Were Ineligible or Unsupported
Finding 5: The Department Did Not Submit Its Evaluation Reports in a Timely
Manner 23
Scope and Methodology 25
Internal Controls 27
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 29
B. Auditee Comments and OIG’s Evaluation 30
C. Required CHDO Documents and Certifications Not Received from Nonprofit 48
Organizations
D. Criteria 49
4
BACKGROUND AND OBJECTIVES
The HOME Investment Partnerships Program (HOME) was created by Title II of the Cranston-
Gonzalez National Affordable Housing Act of 1990. Under the HOME program, the U.S.
Department of Housing and Urban Development (HUD) allocates funds to eligible state and local
governments for the purpose of (1) expanding the supply of decent, safe, and affordable housing
for very low-income and low-income Americans and (2) strengthening public-private
partnerships in the production and operation of such housing. The HOME program gives
participating jurisdictions discretion over which housing activities to pursue. These activities
may include acquisition, rehabilitation, new construction, and resident-based rental assistance.
In addition, participating jurisdictions may provide assistance in a number of eligible forms,
including loans, advances, equity investments, and interest subsidies. Up to 10 percent of the
HOME funds received by a participating jurisdiction may be used to administer the program.
The City of Boston, Massachusetts (City), through its Department of Neighborhood
Development (Department), receives HOME funds each year directly from HUD as a
participating jurisdiction under the program. The Department received HOME funding of more
than $23.8 million for fiscal years 2007 to 2009 to administer five main activities, including (1)
existing homeowner rehabilitation, (2) homeownership development, (3) home-buyer financial
assistance, (4) housing preservation/production, and (5) community housing development
organization (CHDO) assistance.
Under HOME program rules, at least 15 percent of the Department’s annual HOME allocation
must be set aside for eligible CHDO housing activities. Only nonprofit organizations that have
been certified as CHDOs by participating jurisdictions can receive funds from the minimum 15
percent set-aside funds. To be certified as a CHDO, an organization must meet certain
requirements described in the HOME regulations.
The HOME program establishes requirements for the organizational structure of CHDOs to ensure
that the governing body of the organization is controlled by the community it serves. These
requirements are designed to ensure that the CHDO is capable of making decisions and performing
actions that address the community’s needs without undue influence from external agendas.
Our audit objective was to determine whether the Department administered its HOME program in
compliance with HUD requirements and whether HOME funds were efficiently and effectively
used to expand the supply of decent, safe, and affordable housing for low- and very low-income
households. Specifically we wanted to determine (1) whether the City used CHDO qualification
requirements to designate its CHDOs and spent CHDO operating expenses on eligible activities,
(2) whether the Department complied with HUD procurement policies and procedures, (3)
whether the Department’s method of allocating salaries was adequate and supported, and (4) the
cause(s) for the Department’s failure to submit its consolidated annual performance evaluation
reports (evaluation reports) to HUD in a timely manner in recent years.
5
RESULTS OF AUDIT
Finding 1: The Department Did Not Ensure That Organizations Met
CHDO Requirements
The Department certified 18 nonprofit organizations as CHDOs that did not meet the terms or
requirements necessary for CHDO designation. This condition occurred because the Department
was not fully aware of the HUD requirements and regulations regarding the designation and
operation of CHDOs, including the use of CHDO operating funds and set-aside eligibility. As a
result, these unqualified organizations improperly received CHDO set-aside and operating funds
totaling $6.8 million, and the CHDO operating and set-aside funds were overstated in HUD’s
Integrated Disbursements Information System (IDIS).
Unqualified Nonprofit
Organizations Were Certified as
CHDOs
The Department certified 18 unqualified nonprofit organizations as CHDOs. These
certifications were improper because the organizations did not meet all requirements
for designation as CHDOs. Specifically, the Department did not ensure that
nonprofit organizations provided all of necessary documents and certifications that
would have ensured that the organizations met all legal and organizational
characteristics of CHDOs or that they had the required capacity to operate as
CHDOs. HOME requirements for CHDO certification must be satisfied for an
organization to become a certified CHDO. If the requirements (found in Subpart A
of 24 CFR Part 92.2, and the “CHDO checklist” in Notice: CPD-97-11) are not met,
the organization is not properly designated as a CHDO, and no funding can be
expended. The City should not have certified these organizations as CHDOs before
it received all the required information.
To be certified as a CHDO, an organization must meet certain requirements,
including (1) legal status; (2) organizational structure; and (3) experience,
capacity, and financial accountability. The 18 organizations failed to meet at least
one of these characteristics (see appendixes C and D). For example,
All 18 organizations did not have proper by-laws or articles of
incorporation documents. These documents were missing a tenant
participation plan or a formal process for low-income community input.
Each project undertaken by the CHDO should allow potential program
beneficiaries to be involved and provide input on the entire project from
project concept and site selection to the property management phase.
6
Fourteen organizations did not meet low-income accountability
requirements. Specifically, the by-laws were missing required terms with
regard to low-income board representation.
Ten organizations did not provide sufficient documentation to show a
history of serving the community within which housing to be assisted with
HOME funds was to be located.
Sixteen organizations did not provide documentation to show that they
conformed to the financial accountability standards of 24 CFR 84.21
“Standards for Financial Management Systems.”
HOME Set-Aside Funds Were
Provided to Unqualified
Organizations
For fiscal years 2006 to 2008, the Department reserved more than $4.7 million in
set-aside funding for 3 of the 18 organizations improperly designated as CHDOs.
None of the remaining 15 organizations received set-aside funding during fiscal
years 2006 to 2008. The set-aside funding was to be used for rehabilitation or
construction of five separate projects. As of March 27, 2009, more than $4.1
million of the reserved funds had been committed, of which $836,941 had been
expended.
CHDO Fiscal year Reserved Committed Expended Unexpended
bal.
Nuestra 2006 $1,213,749 $1,213,749 $ 0 $1,213,749
Communidad
Dorchester Bay 2007 564,323 154,112 42,714 521,609
Jamaica Plain 2007 1,189,189 1,189,189 435,336 753,853
Jamaica Plain 2008 771,716 535,122 0 771,716
Nuestra 2008 1,012,114 1,012,083 358,891 653,223
Communidad
Total $4,751,091 $4,104,255 $836,941 $3,914,150
7
CHDO Operating Funds Were
Provided to Unqualified
Organizations
From fiscal years 2004 to 2009, the City also provided more than $2.1 million1 in
CHDO operating funds to the 18 nonprofit organizations that were not entitled to
receive the funds because they were not qualified CHDOs. HUD regulations
(HUD Notice 97-11) state that, if an organization is acting only as a subrecipient
or as a contractor, the organization is not eligible to receive CHDO operating
funding. In effect, the organizations were operating in the capacity of
subrecipients or contractors because they did not meet the requirements for
CHDO designation.
In addition, 12 of the 18 organizations would not have been eligible to receive the
operating funding even if they met the requirements for CHDO designation. In
accordance with regulations at 24 CFR 92.300(a)(e), a CHDO can be provided
with operating funds if it is expected that it will be receiving CHDO project set-
aside funds within 24 months of receiving the operating funding. The
participating jurisdiction must enter into a written agreement with the CHDO
specifying the terms and conditions upon which this expectation is based. The 12
organizations that received CHDO operating funds did not receive CHDO set-
aside funding within 24 months of receiving the operating funding. Further, none
of the 12 organizations had received CHDO set-aside funding since fiscal year
2000. In addition, the grant agreements between the City and the organizations
did not stipulate that the organizations receiving operating expense funding were
expected to receive set-aside funding within 24 months of receiving the operating
expense funds. As of March 27, 2009, more than $1.3 million of the
authorized/reserved funds had been committed, of which more than $1.1 million
had been expended.
Fiscal year Authorized Reserved Committed Expended Unexpended
bal.
2004 $375,750 $375,750 $375,750 $0
2005 375,000 375,000 375,000 0
2006 375,000 375,000 375,000 0
2007 375,000 176,606 19,973 355,027
2008 $322,875 322,875
2009 $344,900 344,900
Totals $344,900 $1,823,625 $1,302,356 $1,145,723 $1,022,802
1
Total funds of $1,823,625 reserved from 2004 to 2008 plus $344,900 authorized for 2009 equals $2,168,525.
8
The Department’s Compliance
Manager Was Unfamiliar with
HUD Regulations
The Department’s compliance manager is responsible for determining whether
nonprofit organizations can be designated as CHDOs. The compliance manager
had a general knowledge of the requirements regarding CHDOs; however, the
manager was not familiar with specific program requirements, especially the 15%
set-aside requirements for CHDO funding. The compliance manager stated that
during the course of working two years for the Department, the manager had
relied on the instruction and guidance from on-the-job training received from the
manager’s predecessor.
The Department also did not always ensure that funding was applied properly.
For example in 2006, the Department had reserved CHDO set-aside funding of
more than $1.2 million for an organization improperly designated as a CHDO, but
the funding was not committed and disbursed. In lieu of using the set-aside
funding as planned, the Department inadvertently used Community Development
Block Grant funding for rehabilitation and construction of a CHDO project. The
compliance manager was unsure how this error occurred but readily admitted that
the Department was responsible.
Conclusion
The Department inappropriately reserved more than $4.7 million in CHDO set-
aside funding and $2.1 million for operating funds when the organizations did not
qualify for these funds. As a result, HOME set-aside spending did not meet the
statutory 15 percent set-aside spending requirements. This condition occurred
because the Department’s staff was not fully aware of the HUD requirements and
regulations pertaining to CHDOs.
Recommendations
We recommend that the Director of the Office of Community Planning and
Development in Boston direct the Department to
1A. Improve its controls over the CHDO certification process to ensure that
organizations designated as CHDOs meet HUD requirements.
9
1B. Ensure that its staff become more familiar with HUD regulations
regarding the CHDO process.
1C. Cease spending set-aside and operating funding until it can
be determined whether the 18 organizations can achieve CHDO status in
accordance with HUD regulations.
1D. Assist the 18 organizations in achieving CHDO status as deemed
necessary.
1E. Deobligate unexpended set-aside funding of $3,914,150 and provide funding
to organizations that are eligible to receive the funding or reimburse funds to
the HOME program.
1F. Reimburse $836,941 expended from set-aside funds from nonfederal funds to
the HOME program.
1G. Deobligate unexpended operating funds of $1022,802 and reimburse funds to
the HOME program.
1H. Reimburse $1,145,723 expended in operating funds from
nonfederal funds to the HOME program.
10
RESULTS OF AUDIT
Finding 2: The Department Did Not Always Ensure That Project
Developers Followed Proper Procurement Procedures
The Department did not ensure that the project developers that were provided with HOME
funding followed proper procurement practices and procedures. Project developers (1) did not
perform independent cost analyses before soliciting bids, (2) selected contractors without
properly soliciting bids, (3) did not formally advertise bids as required, and (4) did not maintain a
detailed history of actions undertaken for each procurement. These deficiencies occurred
because the Department did not adequately monitor the developers’ procurement and contracting
procedures. As a result, it could not provide HUD with adequate assurance that the procurement
process used by developers was fair and equitable and that more than $5.1 million in HOME
funds provided to developers for construction/development work represented the most favorable
contract prices that could have been obtained.
A Majority of Procurements
Reviewed Had Deficiencies
We reviewed 10 of the Department’s procurements/contracts relating to
construction. For 9 of the 10, we identified at least one violation of HUD
regulations and/or the Department’s procurement policy as follows:
Project IDIS Costs Deficiencies
number
Humphrey Street2 – homeownership component 13569 $518,615 1,3,4
Humphrey Street – rental component 13575 391,875 1,3,4
Imani House 13537 483,464 2
Leila Doe House 13568 789,749 2
1460 House 14224 384,750 1,4
Brookford, Dalin, Dean Homes 13597 855,000 1,2
Hope House 14381 900,000 2
270 Centre Street 13891 95,000 1,3
636 Dudley Street 14475 760,000 4
Totals $5,178,4533
2
The construction work on Humphrey St. included two components or projects: one rental and the other
homeownership. The developer planned that the same contractor would work on both components. Homeownership
units are located at 12-14 Humphrey St., Dorchester, and rental units are located at 38 Elder/69 Beldon Sts., Roxbury.
3
Amounts represent funds drawn down in IDIS as of December 12, 2008.
11
Deficiency Explanations:
1. Failure to perform independent cost analysis before soliciting bids
2. Contractors selected without solicitation of bids
3. Bids not formally advertised
4. Failure to maintain a detailed history of procurement action
Independent Cost Analysis Was
Not Performed
For five procurement actions reviewed, there was lack of evidence that the
Department conducted independent cost analyses for the procurements. An
independent cost analysis prepared before receipt of bids or proposals ensures that
the construction costs are reasonable. HUD regulations [24 CFR 82.36(f)(1)]
require that a cost or price analysis be performed in connection with every
procurement action before bids or proposals are received.
Contractors Were Selected
without Adequate Competition
The developers contracted with four construction companies without using full and
open competition. The construction work was performed at the following projects:
(1) Brookford, Dalin, and Dean Homes (Brookford); (2) Hope House; (3) Imani
House; and (4) Leila Doe House.
Brookford
The Department did not require the developer of the Brookford project to follow the
standard three-bid process for the procurement because the developer (1) had
already provided construction cost estimates and a budget and (2) had a contractor in
place as part of its development team.
Hope House
According to a memorandum, dated October 3, 2007, prepared by a developer’s
consultant, the development team for the Hope House project chose not to solicit
bids because of the increasing construction prices and complexity of the
construction work. The owner and the development team for the project justified
their selection of a construction company to perform the work based on that
company’s knowledge of construction and because the company’s management
team was comprised of professional structural engineers. The Department’s
Housing Policy (Section 3 on Bidding) dictates that a project must be competitively
bid to achieve the lowest reasonable construction cost and to provide increased fair
access to the economic opportunities created through the project.
12
Imani House
The developer for the Imani House project solicited bids, selected a contractor, and
executed a written agreement with the contractor in 2003. Later, the contractor
could not manage its costs and discontinued its work on the project in 2006. The
developer then selected another contractor (not among the previous bidders) to
perform the work without solicitation of bids. In lieu of rebidding the construction
work, the developer awarded the contract based on recommendations from the
lenders.
Leila Doe House
The developer for the Leila Doe House received bids submitted by three
construction companies in December 2005. Two of these companies eventually
dropped out of the bidding process. Another (fourth) construction contractor
submitted a bid in June 2006 and was awarded the contract without competition.
Since the construction company that was awarded the contract was not among the
previous bidders, this procurement should have been rebid. HUD regulations [24
CFR 85.36(d)(4)(i)] dictate that: Procurement by noncompetitive proposals may be
used only when the award of a contract is infeasible under small purchase
procedures, sealed bids or competitive proposals and one of the following
circumstances applies: (A) The item is available only from a single source; (B) The
public exigency or emergency for the requirement will not permit a delay resulting
from competitive solicitation; (C) The awarding agency authorizes noncompetitive
proposals; or (D) After solicitation of a number of sources, competition is
determined inadequate.
Bids Were Not Formally
Advertised
There was no evidence that the bids for the 270 Centre Street project, the Humphrey
Street project (homeownership component), and the Humphrey Street project (rental
component) were formally advertised. Therefore, the awarding of these contracts
was not conducted in accordance with free and open competition. Based on
documentation provided by the Department, the bidding was by invitation only,
meaning that only certain contractors were given an opportunity to bid. HUD
regulations [24 CFR 85.36(d)(2)] dictates that procurement by sealed bids (formal
advertising) is the preferred method for procuring construction and invitations for
bids will be publicly advertised.
13
Monitoring of the Developer’s
Procurement Activities Was
Inadequate
Department staff did not demonstrate that they were fully aware of their
responsibilities regarding the oversight and monitoring of developers’
procurement activities. One staff member stated that the Department did not
customarily make developers aware of procurement requirements. The
developers would sometimes rely on contractors that they knew and trusted, based
on past experience. A housing development officer representing the Department
stated that the Department was unable to properly monitor procurement activities
due to lack of sufficient staff.
The Department Lacked
Adequate Procurement History
The Department maintained only minimal procurement documentation. For at least
four of the procurement actions reviewed, we had to request documentation from the
developer. The Department’s Housing Policy (Section 3 on Bidding) require that
copies of each contractor bid be submitted to the Department for review and
maintained in the project files. We found four procurement actions in which
procurement documentation, specifically invitations to bid, and bid proposals were
missing from the Department’s records. The projects included (1) Humphrey Street
project (homeownership component), (2) Humphrey Street project (rental
component), (3) 636 Dudley Street, and (4) 1460 House.
Procurement Policies Were Not
Consistent with Federal
Regulations
The Department’s procurement policies and procedures are not always consistent
with federal requirements. For example, the Department’s written procurement
procedures did not adequately explain the methods of procurement, specifically
(1) procurement by sealed bid, (2) procurement by competitive proposal, and (3)
procurement by noncompetitive proposal as covered in HUD regulations.
Participating jurisdictions are required to follow procurement regulations at 24
CFR 85.36c(3). This condition occurred because the Department failed to update
its own procurement regulations to ensure compliance with federal regulations.
14
Conclusion
The Department was required to promote full and open competition for all
procurement actions to include preparation of cost or price analysis for each
procurement before receiving bids or proposals. These deficiencies occurred because
the Department did not adequately monitor the developer’s procurement and
contracting process. As a result, there was a lack of assurance that the procurement
process was fair and equitable and that the most favorable contract prices were
obtained for more than $5.1 million in HOME funding spent for the
construction/development work.
Recommendations
We recommend that the Director of the Office of Community Planning and
Development in Boston direct the Department to
2A. Conduct an independent cost analysis for each of the procurements to ensure
that $5,178,453 is reasonable and supported. For any amounts not reasonable
and supported, the Department should reimburse the HOME program from
nonfederal funds.
2B. Monitor the developer’s procurement process to ensure construction bids are
formally (publicly) advertised, bids are solicited from an adequate number of
contractors, and awards are made to the lowest responsive bidder.
2C. Provide technical assistance to the developers, as needed.
2D. Review and maintain supporting documentation for each procurement
including a history of the procurement.
2E. Revise its written procurement regulations to ensure compliance with federal
regulations.
15
RESULTS OF AUDIT
Finding 3: The Department’s Method for Allocation of Salaries Was
Inadequate
The Department did not use a reliable method to record the actual time employees spent on its
various programs. It used a cost (salary) allocation plan method based on estimates, instead of
requiring all employees to either record their actual hours worked by funding source/program or
to use the results of an acceptable time study. However, Department management believed that
its salary allocation method was appropriate and reasonable and was unaware that an
improvement was needed. As a result, it could not ensure that the hours charged by its staff to
HUD-funded programs were accurate and reasonable and that some of its various federal and
local programs did not incur a disproportionate share of the payroll costs. We question more
than $1.7 million as unsupported, which represents the Department’s payroll costs charged to the
HOME program for fiscal years 2007 and 2008.
The Department Did Not
Maintain an Adequate Cost
Allocation Plan
The payroll costs for all employees of the City were paid from the City’s general
fund, and the individual City departments, including the Department, reimbursed
the general fund on a monthly basis.
However, the Department did not maintain an adequate cost allocation plan to
ensure that Department programs were charged for their fair share of payroll
costs. Department employees who worked on only one or two programs
recorded their time for each activity/program. However, the Department
employees who worked on more than two activities/programs did not keep track
of the time spent working on each activity/program. Unless employees spent an
unusual amount of time on a funding source during a specific week, they did not
make the necessary adjustment on the time sheet. The time sheets used by the
Department showed preprinted percentage allocations, which were based entirely
on estimates from past allocation experience and which were not revised and
updated on a regular basis to reflect actual experience. In addition, none of the
job descriptions for Department employees included the applicable funding
sources for each position or identified the program(s) applicable to each position.
As a result, the job descriptions were not consistent with the cost allocation plan
and need to be revised accordingly. The Department management believed that
its cost (salary) allocation method was reasonable and appropriate and that no
improvement was needed.
16
Federal Funding Absorbed the
Majority of Payroll Costs
The federal programs absorbed the majority of payroll costs. In addition to the HUD
funding, the Department receives funding directly from the City through five
sources: (1) Leading the Way program, (2) Neighborhood Development Fund
program, (3) Home Preservation Fund program, 4) Inclusionary Development Fund
program, 5) and the City operating budget. With the exception of funding received
through the City’s operating budget, the Department did not use any of the estimated
$9 million received annually to pay salaries of Department employees although they
may have worked on the City programs. However, the share of payroll costs
charged to the City’s operating budget was not supported, and a determination of
whether these charges were accurate could not be made, just as the payroll costs
charged to the HOME program could not be determined to be accurate.
The Cost Allocation Plan
Should Be Revised on a Regular
Basis
OMB regulations [2 CFR Appendix B to Part 225(h)(4)] dictate that, when
employees work on multiple activities or cost objectives, a distribution of their
salaries or wages will be supported by personnel activity reports or equivalent
documentation. The Department’s cost allocation plan did not comply with
these regulations. In similar situations, agencies or grantees perform a time study
for a three- or four-month period, keeping daily records of the time spent on each
program, and then use the data to compare to the existing allocation plan as a
basis for revising and updating payroll allocations.
We interviewed 11 Department employees whose salaries were charged to more
than two programs to determine the basis for the time charged. Of these
employees, seven stated that they did not know the basis for the allocation
percentages reflected on their time sheets, and they also indicated that they never
made changes or adjustments to their time sheets. These staff members signed
their time sheets with preprinted allocation percentages already in place.
17
Conclusion
The Department did not use a reliable method to record the actual time employees
spent on its various programs. It did not have an adequate cost (salary) allocation
plan that clearly identified the actual hours worked by funding source/program for
each employee. As a result, it could not ensure that the hours charged by its staff
to HUD-funded programs were accurate and reasonable and that some of its
various federal and local programs did not incur a disproportionate share of the
payroll costs. The Department management believed that its salary allocation
method was appropriate and reasonable and was unaware that an improvement
was needed. We question more than $1.7 million as unsupported, which
represents the Department’s payroll costs charged to the HOME program for
fiscal years 2007 and 2008.
Recommendations
We recommend that the Director of the Office of Community Planning and
Development in Boston direct the Department to
3A. Develop and implement a cost allocation plan for payroll costs, which
adequately describes the process for personnel who work on multiple
programs, and revise the related job descriptions for consistency with the
allocation plan.
3B. Provide supporting documentation for $1,786,395 in payroll costs and submit
documentation to the HUD Office of Community Planning and Development
for approval to ensure that federal programs were charged their fair share of
the costs. If proper supporting documentation is not provided, the Department
should reimburse the HOME program from nonfederal funds.
18
RESULTS OF AUDIT
Finding 4: The Department Provided HOME Funds to Developers for
Costs That Were Ineligible or Unsupported
The Department awarded more than $2.2 million in HOME funds in two loans for development
of housing projects. Of the total awarded, more than $1.2 million was designated for costs that
were ineligible or unsupported expenses of the HOME program. This condition occurred
because the Department did not properly follow up with the developer at the time the loans were
issued to ensure that the costs to be charged to the loan were adequately supported. The
Department needs to reimburse $644,268 in ineligible costs (35 Creighton St. Project), and
provide support for the $11,752 in unsupported costs (35 Creighton St. Project), and provide
support for the $651,295 in unsupported costs (270 Centre St. project).
Predevelopment Funds Were
Provided to Developers for 35
Creighton St. and 270 Centre St.
Projects
The Department issued two loans directly to developers using HOME funds to
pay for nonspecific predevelopment and preconstruction costs in both affordable
housing and mixed use developments. The loans were issued to Church Square
SRO LLC for the 35 Creighton St. project and CWL Housing LLC for the 270
Centre St. project.
35 Creighton Street
The initial part of this loan was a $500,000 predevelopment loan, issued in
October 2007 to Church Square Community Partners LLC, which was
collateralized as a lien on the project development. This loan was later
incorporated into a 30-year non-interest-bearing and non amortizing loan of
$885,366 in April 2009.
Project documentation showed that the property being acquired for the
development was purchased for more than $1.6 million. The initial loan of
$500,000 was collateralized as a lien on the project. However, the deed for the
project recorded at the Suffolk County Registry of Deeds showed that the
acquisition of land (consisting of three parcels) occurred almost two years earlier
in December 2005.
A revised mortgage and security agreement that accompanied the loan revision
indicated that the developer received $885,366 in HOME funds to pay off the
19
initial $500,000 loan and $385,366 for other project costs. The other project costs
were described as construction, overhead, and hard and soft costs. Therefore, the
$500,000 provided in the revised loan represented a refinance of the original
$500,000 loan. As noted, the original loan was for the acquisition of land and
buildings; however, there is no record of the ownership of the land and buildings
being transferred.
Project files show that $100,000 in HOME funds has been charged to the project
as developer overhead costs. The developer, in turn, loaned the $100,000 to the
Center Street Retail project. In effect, the City permitted these funds to be passed
through to a project for a group of retail stores, which is not an eligible use of
HOME funds.
When the loan was revised in April 2009, the previous mortgage was voided, and
all available funds (except for 5 percent) became immediately available for
requisition by the developer. The remaining 5 percent, or $44,268, was retained
and as stated in the agreement, “shall be available for requisition by the Borrower
for payment of hard and soft costs related to the Project upon substantial
completion of the Project.” The revised loan identified the $44,268 in the
renovation costs; in effect the loan hold back was refinanced. Since the project is
not yet complete, the $44,268 should not have been paid out. The $44,268 is not
an eligible expense, and it should not have been refinanced.
The revised loan also noted estimated soft costs of $11,752, but did not provide
further support for these items as eligible predevelopment costs.
270 Centre Street
The initial promissory note for this project was signed in June 2006 and was later
incorporated into a revised loan amount for more than $1.3 million in December
2008. The amended loan, under Section 41 [Special Provisions] contained
provisions for an amount of $651,295 (in HOME funds) for “requisition by the
borrower for the preparation of the site and to help address existing conditions on
the property.”
The loan documents for this project showed that development funding was
provided from the following sources:
1. Massachusetts state low-income housing credits
2. Federal (HUD) HOME funds
3. Federal (HUD) Community Development Block Grant funds
4. Other public and private sources
The project documentation did not specify the amount of funding from each
source, nor did it provide further information and clarification of “other public
and private sources.” The “site preparation and existing property conditions”
noted in the amended loan documents referred to project site work that should
20
have been applied or allocated to all of the available funding sources for the
project. Since there was no evidence that these costs were allocated among all of
the funding sources for the project, we consider the $651,295 provided in HOME
funds to be unsupported, as the HOME funds were the only source of funding
charged for these costs.
Conclusion
The Department awarded more than $2.2 million in HOME funds in two loans for
predevelopment costs for housing projects. Of the total awarded, more than $1.2
million was designated for costs that were ineligible or unsupported for the
HOME program. This condition occurred because the Department did not
properly follow up with the developer to ensure that the costs charged to the loan
proceeds were adequately supported under the HOME program. In addition,
these two projects are mixed-finance, mixed-use developments that lacked proper
plans to allocate costs between their financing sources. Mixed-use development
projects need proper allocation plans for project costs to distinguish between the
use of HOME and other funding sources to ensure compliance with the
regulations that govern each funding source. The Department needs to reimburse
$644,268 in ineligible costs (35 Creighton St. Project), provide support for the
$11,752 in unsupported costs (35 Creighton St. Project), and provide support for
the $651,295 in unsupported costs (270 Centre St. project).
Recommendations
We recommend that the Director of the Office of Community Planning and
Development in Boston direct the Department to
4A. Reimburse the $544,268 in ineligible costs to the HOME program for the 35
Creighton St. project (loan refinance and loan hold-back cost).
4B. Reimburse the $100,000 in ineligible costs to the HOME program for the 35
Creighton St. project (developer overhead cost).
4C. Provide support for the $11,752 in unsupported costs for the 35 Creighton St.
project (soft costs) and if support cannot be provided, require the Department
to reimburse the HOME program for the questioned amount.
4D. Provide support for the $651,295 in unsupported costs for the 270 Centre St.
project (soft costs), and if support cannot be provided, require the
Department to reimburse the HOME program for the questioned amount.
21
4E. Develop procedures for the use of HOME funds in predevelopment loans that
comply with HUD requirements and that ensure that HOME funds are
properly allocated and expended for eligible purposes, and that costs are
adequately supported.
22
RESULTS OF AUDIT
Finding 5: The Department Did Not Submit Its Evaluation Reports in a
Timely Manner
The Department did not submit its evaluation reports4 to HUD in a timely manner. This
condition occurred because the Department had reduced its staff in the past few years and
because it allowed its program beneficiaries an excessive amount of time to submit data required
for the report. As a result of not meeting the evaluation report submission deadlines, the
Department is at risk of having its community planning and development funds (including
HOME) either suspended or withdrawn by HUD until submission is accomplished.
Report Submissions Had Been
Provided Late for the Past
Three Years
The Department had been late in submitting its evaluation reports for the past
three years. For example, the 2007 report was submitted five months late. The
2007 report was due no later than 90 days after the Department’s fiscal year end
(June 30) or on September 30, 2008. However, the 2007 evaluation report was
not submitted until March 9, 2009, and the 2005 and 2006 reports were not
submitted until November 11, 2006, and November 30, 2007, respectively.
Data Collection and
Verification Process Was
Inadequate
To prepare the evaluation report, the Department must collect, verify, and enter a
large volume of data into IDIS. Projects cannot be closed until the amounts
originally budgeted and expended for each are reconciled and the beneficiary
(vendor) information is entered into IDIS for each activity. One of the primary
sources of beneficiary information is human service vendors. The Department
allowed these vendors 90 days to submit financial and beneficiary data.
Department staff must verify the information and then forward the information to
the compliance division for entry into IDIS.
4
These reports are known as the consolidated annual performance evaluation reports (CAPER).
23
The Department attributed its delay in submitting its evaluation reports to the
departure of key staff who had not been replaced. These departures included
staff from the Department’s policy development and research division who were
responsible for generating data from the Department’s own tracking system and
reconciling it with IDIS, as well as staff who assisted in compiling the evaluation
reports and preparing the written narratives.
HUD requires (24 CFR 91.520) that evaluation reports be submitted to HUD
within 90 days after the close of the jurisdiction’s program year, and if a
satisfactory report is not submitted in a timely manner, HUD may suspend or
withdraw funding in a jurisdiction that does not submit a satisfactory report.
Conclusion
The Department had been late in submitting its evaluation report for the last three
years. This condition occurred in part because the Department allowed program
beneficiaries 90 days to submit data for the report and did not replace key staff
who entered this information into IDIS. If the Department continues to submit its
evaluation reports late, it is at risk of having its community planning and
development funds (including HOME) either suspended or withdrawn by HUD.
Recommendations
We recommend that the Director of the Office of Community Planning and
Development in Boston direct the Department to
5A. Consider assigning additional staff to its policy development and research
division to lessen the workload.
5B. Consider changing the time requirements for data collection for IDIS
submissions and submit its evaluation reports on time.
24
SCOPE AND METHODOLOGY
We performed an audit of the HOME program administered by the City’s Department. Our
fieldwork was completed at the Department’s offices located at 26 Court Street, Boston,
Massachusetts, from December 2008 to May 2009. Our audit generally covered the period July
2006 to December 2008 and was extended when necessary to meet our objective.
To accomplish our audit objective, we
• Reviewed applicable Code of Federal Regulations sources, Office of Management and
Budget (OMB) circulars, HUD handbooks/guidebooks, and HUD notices pertaining to the
HOME program.
• Reviewed media articles related to the Department, its staff, and its use of HOME
funding via Lexis-Nexis and the Department’s Web site.
• Reviewed the Department’s policies and procedures and held discussions with Department
officials to gain an understanding of the Department’s accounting controls, procurement
practices, and monitoring policies.
• Reviewed independent public auditors’ reports as well as HUD monitoring reviews and
risk assessments.
• Evaluated the internal controls and conducted sufficient tests to determine whether
controls were functioning as intended.
• Evaluated computer systems to determine whether automated information could be
readily downloaded, sorted, manipulated, and displayed. Verified that the Department
was entering information into IDIS.
• Reviewed the latest evaluation report and identified activities that were slow to reach
completion and/or did not meet goals and identified what corrective actions the
Department took to complete activities. In addition, we compared accomplishments
reported for various housing programs in the evaluation report to the data entered by the
Department into IDIS.
• Evaluated the Department’s administrative activities to ensure that administrative and
planning costs did not exceed HUD funding limits and performed a cursory review of
administrative costs for eligibility and reasonableness.
• Evaluated the Department’s procurement practices through a review of procurements
under the HOME loan program. We selected a nonrepresentative sample of six
procurements based on the largest amounts of funds expended per contract/project with
funding commitments of $200,000 or greater and commitment dates between July 1,
2006, and November 30, 2008. The six procurements totaling $2,771,578 were selected
from a universe of 189 activities totaling $7,135,684. In addition, we reviewed the
Department’s written procurement policies and procedures for compliance with HUD’s
regulations and state laws.
• Reviewed the Department’s organizational chart and job descriptions to determine
responsibilities of staff and whether job descriptions were consistent with federal
programs. Also, we reviewed for any indications of overlap in job duties/responsibilities.
25
• Selected a nonrepresentative sample of 12 employees totaling $56,074 based on largest
salaries from a universe of 17 employee time sheets totaling $79,140 for employees
working on not more than two programs, with one of those programs being the HOME
program. Our objective was to determine whether employees working on one or two
activities/programs properly reported their time on timesheets and whether the allocations
were in agreement with the Department’s monthly personnel allocation spreadsheets.
• Using the December 2008 personnel allocation Excel worksheet (entitled “Payroll”); we
isolated the employees working on more than two programs, with one of those programs
being the HOME program. We sorted by division and employee earnings and excluded
from review any employees making in excess of $6,000 per pay period. We identified a
total of 43 employees that represented the universe. The total dollar amount for the
universe consisted of $208,881 in employee earnings and represented four divisions,
including Accounting/Finance, Homebuyers Services, Neighborhood Housing
Development, and Homeowner Services. We identified a sample of 11employees for
review, consisting of employee earnings totaling $44,342. Our selection included a fair
representation of employees from each of the Department’s four divisions. We used
nonrepresentative sampling due to the large universe and selected employees in
nonmanagement or nonsupervisory positions based on probability and/or our past
experience, which has shown that there is a greater risk that employees in these less
responsible types of positions are not as well versed on what their job duties entail.
Therefore, to attain our sample, we selected the three employees with the lowest salaries
from each of the Department’s divisions. If there were three or fewer employees in a
division, we selected all of the employees in that division. If there was more than one
employee with an identical salary in the same division, we included all of those
employees in our sample. Our objective was to determine whether funding sources,
including allocation percentages reported on employee time sheets, were, for the most
part, consistent with employee job duties and whether the staff’s actual job duties were
correct as reported on the written job descriptions.
• Reviewed all 18 CHDOs to determine whether the organizations were appropriately
certified by the Department and met all requirements for designation as CHDOs.
• Determined and evaluated the reasons for the Department’s failure to submit its
evaluation reports to HUD in a timely manner.
• Evaluated the Department’s progress in its use of HOME funds to develop/rehabilitate
housing through its loan program.
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.
26
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 objective:
• Controls for ensuring that organizations qualify as CHDOs (Finding 1).
• Controls for ensuring that CHDO operating expense funding is used in accordance
with HUD regulations (Finding 1).
• Controls over procurement and contracting (Finding 2)
• Controls for implementing an effective system for allocation of salaries (Finding 3).
• Controls to ensure adequacy of reporting requirements (Finding 5).
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 Department’s failure to ensure its staff was knowledgeable of HUD’s CHDO
policies and procedures resulted in 18 organizations being improperly designated as
CHDOs.
27
• The Department did not adequately monitor the use of CHDO operating funds.
• The Department did not adequately monitor its procurement and contracting
process.
• The Department failed to implement an effective system for allocation of salaries.
• The Department did not design a system to ensure that it had the necessary data to
submit its evaluation reports to HUD in a timely manner.
28
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
The audit identified questioned costs totaling $15,191,869 as follows:
Recommendation Ineligible 1/ Unsupported Funds to be put
number 2/ to better use 3/
1E $3,914,150
1F $836,941
1G $1,022,802
1H $1,145,723
2A $5,178,543
3B $1,786,395
4A $544,268
4B $100,000
4C $11,752
4D $651,295
Total $2,626,932 $7,627,985 $4,936,952
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 case, the
set-aside funding of $3,914,150 will be put to good use by organizations that meet the CHDO
requirements; otherwise, funding can be used for eligible HOME activities. The unexpended
operating funding of $1,022,802 can also be used for eligible HOME activities.
29
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
30
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
Comment 2
Comment 3
31
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 4
Comment 5
Comment 6
Comment 7
Comment 8
32
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 9
Comment 10
33
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 11
34
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 12
Comment 13
35
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 13
36
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 13
37
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 13
38
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 13
Comment 13
39
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
40
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
41
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1 The Department is required under 24 CFR Part 92.300 (b) to make reasonable
efforts to identify CHDOs "that are capable, or can reasonably be expected to
become capable," of carrying out elements of the Department’s approved
Consolidated Plan. The use of the one-page CHDO checklist from the CHDO
Survivor Kit would not be considered a reasonable effort because the Survivor Kit
does not adequately describe all the applicable requirements identified in the laws
and regulations governing the administration of the HOME program. It states in
the Kit that this guide provides general information on the HOME program and
CHDOs; and this guide is not an introduction to CHDOs, the qualification criteria
and process, or HOME program rules. Readers are then referred to various HUD
websites for further information.
HUD regulations in the HOME Final Rule, 24 CFR 92.2 Community housing
development organization, (of April 1, 2009), and HUD Notice CPD-97-11,
provide official guidance and requirements relative to determining an
organizations’ qualifications for CHDO status. By contrast to the Kit’s CHDO
checklist, HUD Notice CPD-97-11 includes a recommended 3-page CHDO
Checklist that provides greater detail and allows for a more comprehensive review
of organizations’ qualifications for CHDO status. 24 CFR 92.2 and HUD Notice
CPD-97-11 thoroughly describe the CHDO eligibility criteria and the supporting
documentation that must be submitted by organizations that are applying as
CHDOs. The Department should certify the 18 nonprofit organizations as
CHDOs using 24 CFR 92.2 and HUD Notice CPD-97-11 to ensure that the
nonprofit organizations effectively meet the terms or requirements necessary for
CHDO designation.
Comment 2 As noted in Comment 1, the CHDO Survivor Kit is not an effective means of
ensuring that nonprofit organizations meet the qualifications to be designated as a
CHDO. The CHDO Checklist referred to in HUD Notice CPD-97-11 is a more
effective means to use in determining an organization’ qualifications for CHDO
designation. In addition, the CHDO requirements in 24 CFR 92.2 are designed to
ensure that CHDOs are capable of making decisions and performing actions that
address the community’s needs without undue influence from external agendas.
If the Department’s staff are to be adequately trained to ensure that organizations
qualify for the CHDO designation, the staff needs training on using the
requirements of 24 CFR 92.2 and HUD Notice CPD-97-11 which thoroughly
42
describe the CHDO eligibility criteria and the supporting documentation that must
be submitted by organizations that are applying as CHDOs.
Comment 3 The documentation must be provided to the HUD Director of the Office of
Community Planning and Development in Boston to verify that the organizations
met all the requirements for the CHDO designation before resuming program
expenditures.
Comment 4 It is not clear from the Department’s response whether they accurately interpreted
Recommendation 1D. The recommendation in requiring the Department to assist
organizations in achieving CHDO status, if feasible, was addressing the 18
unqualified organizations previously certified as CHDOs. The intent of the
recommendation was clarified with the Department’s compliance manager on
July 31, 2009. The compliance manager stated that the Department intends to
assist the 18 unqualified organizations to ensure that these organizations meet the
terms or requirements necessary for CHDO designation.
Comment 5 We disagree with the Department’s comments addressing Recommendation 1E,
and the response indicates that the Department incorrectly views the issues being
addressed as not being serious violations of the laws and regulation governing the
administration of the HOME program. The first step in the corrective action for
this recommendation is for the Department to deobligate the unexpended CHDO
set-aside funding of $3,914,150 because the obligations are not legally supported
since the basis of this support are ineligible organizations. The Department did
not have a definite commitment that created a legal liability. The organizations
identified in the finding did not qualify as CHDOs at the time funds were
obligated and there is no certainty that any of the current organizations will
achieve proper CHDO status. If some of the organizations become eligible
CHDO organizations at some later point in time, they could then seek funding at
that time. Therefore, we repeat the intent of the recommendation that the
Department must first deobligate unexpended CHDO set-aside funding of
$3,914,150, and when its identifies eligible CHDO organizations it then can
provide funding to organizations that are eligible to receive the funding, as
appropriate. The documentation showing the deobligation of the $3,914,150 must
be provided to the HUD Director of the Office of Community Planning and
Development in Boston for verification.
Comment 6 We disagree with the Department’s comments in addressing Recommendations
1F, 1G and 1H, and the response indicates that the Department incorrectly views
the issues being addressed as not being serious violations of the laws and
regulations governing the administration of the HOME program. The Department
must repay the $836,941 it expended and deobligate the unexpended $1,022,802
in CHDO set-aside funding because the expenditures and obligations were not
legally supported at the time of the expenditure or obligation since the basis of
this support are ineligible organizations. The Department did not have a definite
commitment that created a legal liability. The Department’s efforts to determine
43
whether or not these organizations can meet the requirements for a CHDO
designation are secondary to the reimbursement or deobligation of its illegal
expenditure or obligation of set-aside funds. The audit work described in Finding
1 shows that the organizations identified were not eligible to receive funding as
CHDOs, therefore the repayment and deobligation must occur immediately.
Also, the Department’s efforts to re-determine whether the nonprofit
organizations can meet or has met the requirement for a CHDO designation must
be reviewed by the HUD Director of the Office of Community Planning and
Development in Boston to verify and confirm the determination. The Department
must provide sufficient information to show that the designation was proper and
meets the requirements of 24 CFR 92.2 and HUD Notice CPD-97-11 for CHDO
eligibility, and that the appropriate supporting documentation was submitted by
organizations that applied for the CHDO designation.
Comment 7 The report did not conclude that the Department failed to conform to the financial
accountability standards of 24 CFR 84.21 “Standards for Financial Management
Systems” because there was no evidence of a notarized statement by the president
or chief financial officer of the organization, or a certification from a Certified
Public Accountant. Appendix D of the report identifies the criteria for
conforming to financial accountability standards. In following the criteria cited in
Appendix D, the Department should provide the audit summary to the HUD
Director of the Office of Community Planning and Development in Boston to make
a determination of whether they can accept the A-133 Audit report with a
management letter from the CPA firm as fully meeting the requirement for
certification under OMB Circular A-110.
Comment 8 During the audit, the Department did not have any evidence to support the
determination that the organizations certified as CHDOs had a history of serving
the community. The Department readily acknowledged that there was no
tangible evidence of a history of CHDOs serving the community in their files.
The Department’s comment that they would subsequently submit documentation
to HUD for review supports the conclusion that that they did not have evidence in
their files. HUD requirements for this history are clearly identified in the laws
and regulations governing the administration of the HOME program. The
Department was required to show in its certification of the nonprofit organization
that the organizations designated as CHDOs had a history of serving the
community within which housing to be assisted with HOME funds is to be
located. As such, HUD requires that the CHDO must be able to show one year of
serving the community prior to the date the participating jurisdiction provides
HOME funds to the organization, as evidenced by a statement that documents at
least one year of experience serving the community In the statement, the
organization must detail its history of serving the community by describing
activities which it provided such as, developing new housing, rehabilitating
existing stock and managing housing stock, or delivering non-housing services
that have had lasting benefits for the community, such as counseling, food relief,
or childcare facilities. The statement must be signed by the president or other
44
official of the organization. During the audit, the CHDO files did not have the
required evidence and the Department could not provide documented evidence
that they accomplished any of the above tasks.
Comment 9 In Recommendation 2E, the report advised the Department to revise its written
procurement regulations to ensure compliance with the applicable federal
requirements and regulations at 24 CFR 85.36. In its response, the Department
stated that it has drafted policies and procedures for bidding, but it did not
specifically state that its procurement regulations were in compliance with the
applicable federal requirements and regulations. The Department needs to revise
its response and stipulate that its revised procurement regulations will comply
with the applicable federal requirements and regulations found at 24 CFR 85.36.
The revised procurement regulation must be provided to the HUD Director of the
Office of Community Planning and Development in Boston to verify that it included
the requirements of 24 CFR 85.36.
Comment 10 The Department’s noncompliance with the requirements of 24 CFR 85.36 is a
valid discrepancy and cannot be removed as a reportable condition. Also, there
were no private developers included in this review, only nonprofit organizations.
Regulations at 24 CFR 92.505 “Applicability of Uniform Administrative
Requirements” on governmental entities provide that procurement requirements
of 24 CFR 85.36 apply to a participating jurisdiction receiving HOME funds,
including subgrantees. Therefore, the Department’s comments that these
developers were not required to comply with the procurement requirements are
incorrect. In addition, the general information on the referenced website cannot
be construed as governing guidance and instructions relative to HUD funded
programs.
Grantees are required to understand and follow the applicable regulations and
laws that govern the administration of the HOME program. The reliance on a
website, which provides only informational guidance, is a failure on the part of
the Department to fulfill its responsibilities of ensuring that the HOME funds are
used in accordance with all program requirements. HUD regulations at 24 CFR
92.504(a) provide that the participating jurisdiction (the Department) is
responsible for (1) managing the day-to-day operations of its HOME program, (2)
ensuring that HOME funds are used in accordance with all program requirements
and written agreements, and (3) taking appropriate action when performance
problems arise. The use of state recipients, subrecipients, or contractors does not
relieve the participating jurisdiction (the Department) of this responsibility.
Regulations at 24 CFR 92.505 “Applicability of Uniform Administrative
Requirements” on governmental entities provide that procurement requirements
of 24 CFR 85.36 apply to a participating jurisdiction and subrecipient receiving
HOME funds (i.e., Governmental entities. The requirements of OMB Circular No.
A-87 and the following requirements of 24 CFR part 85 apply to the participating
jurisdiction, State recipients, and any governmental subrecipient receiving HOME
funds: §§ 85.6, 85.12, 85.20, 85.22, 85.26, 85.32-85.34, 85.36, 85.44, 85.51, and
85.52.)
45
In addition, the Department’s position that developers are not required to follow
HUD procurement requirements is not consistent with the actions taken by some
developers, nor was it consistent with the Department’s own procurement policy.
For example, some developers procured contracts without soliciting bids, and
others followed HUD policy and procured contracts using full and open
competition. Even though the Department’s procurement policy was not always
consistent with HUD’s policy, some of the Department’s rules and regulations are
consistent with HUD’s written procurement policy. For example, the
Department’s blanket statement that developers are not required to comply with
procurement requirements cited in 24 CFR 85.36 is not consistent with the
Department’s written Housing Policy on Bidding quoted as follows: “Projects
must be competitively bid in order to achieve the lowest reasonable construction
cost and to provide increased fair access to the economic opportunities created
through the project. Developers must solicit and receive at least three bids, at
least two of which are from general contractors that have not previously
contracted with the developer.” As noted, the Department was not adhering to its
own regulations.
Comment 11 The results of the audit show that the Department’s staff were not fully aware of
their responsibilities for oversight and monitoring of the developer’s procurement
activities. Also, the Department is confusing the process of issuing requests for
proposals of the city-owned land/projects to potential developers who want to
develop the properties with HUD’s requirements that general construction
contracts be procured properly by using full and open competition. Note that the
developers identified in the audit were not general contractors, they were non-
profit entities. Therefore, the developers had to hire contractors to perform the
rehabilitation or construction work on the projects.
Comment 12 Payroll charges to the HOME program for FYs 2007 and 2008 are $1,786,395,
which is a correction to the total of $1,828,375 cited in the draft report. In the
draft report, we inadvertently included indirect costs in the total payroll charges.
Therefore, we deducted indirect costs of $42,130 and $39,858 for fiscal years
2007 and 2008, respectively, and have corrected the total shown in the report,
accordingly. The Department must submit all the documentation to support the
payroll allocation of $1,786,395 to HUD’s Director of the Office of Community
Planning and Development in Boston and HUD will make a determination of
whether it can accept the $1,786,395 allocation of payroll costs as valid program
expenditures.
Comment 13 The documentation included as part of the Department’s response did not correct
the discrepancies identified in the report. We determined that whether the loan
for Creighton Street was termed pre-development or pre-construction, the funds
provided were not for eligible expenses under the HOME Program. The $500,000
loan awarded to Church Square Community Partners LLC, on Oct. 12, 2007, was
for the purpose of acquisition. The loan was for carrying costs on three parcels of
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property acquired on December 8, 2005, from the Archdiocese of Boston for
$6,025,000. This $500,000 loan to Church Square Community Partners LLC was
subsequently paid off by a different LLC (Church Square SRO LLC) in April
2009.
In this case, the Church Square Community Partners, LLC acquired land and
building, and held the property allowing developers sufficient time to obtain
funding for rehabilitation and new construction of the projects. When the
$500,000 loan was paid off (refinanced) in April 2009, there was no subsequent
record of the ownership of the land being transferred. In addition, the $500,000
investment of HOME funds has been used in a mixed use development to
reimburse project costs associated with the property without establishing an
adequate method to ensure that this investment was only used for eligible
purposes under the HOME program. All the recommendations (recommendation
4A to 4D) remain valid.
Documentation obtained for $100,000 in developer’s overhead shows this amount
to be ineligible. This $100,000 in developer’s overhead was used in a loan to
finance work in the Centre Street Retail Development. Funding for
retail/commercial stores does not represent an eligible use of HOME funds. The
$11,752 in soft costs remains unsupported. Based upon our review of the
documents submitted by the Department in response to the draft report, we have
re-categorized the $100,000 from unsupported costs to ineligible costs in
Recommendation 4B.
The Department stated that projects costs of $691,295 were incurred for site
preparation related to the 270 Centre Street project. The Department has not yet
provided sufficient documentation to support the $651,295 in costs.
The Department must reimburse the $644,268 in ineligible costs, submit all the
documentation showing support for the $11,752 and the $651,295 in project costs
or show it reimbursed these amounts. Also, the Department must provide a copy
of the procedures it developed for predevelopment loans to HUD’s Director of the
Office of Community Planning and Development in Boston for approval.
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Appendix C
REQUIRED CHDO DOCUMENTS AND CERTIFICATIONS
NOT RECEIVED FROM NONPROFIT ORGANIZATIONS
Organization IA IB IC ID II A II B II C III A III B III C III D IV A IV B(1) IV B(2)
Jamaica Plain Yes Yes Yes Yes No No No No No N/A No No No No
CDC
Lena Park Yes Yes No Yes No No No No No N/A No No No No
CDC
Urban Edge Yes Yes Yes Yes Yes Yes Yes Yes No N/A No No No No
Corporation
Viet Aid Yes Yes Yes Yes No Yes Yes No No N/A No No No No
Allston Yes Yes Yes Yes Yes Yes Yes No No N/A No No No No
Brighton CDC
Casa Yes Yes Yes Yes No Yes Yes No No N/A No No No No
Esperanza
Codman Yes Yes Yes Yes No Yes No No No N/A No No No No
Square EDC
Dorchester Yes Yes Yes Yes No Yes Yes No No N/A No No No No
Bay EDC
Fenway CDC Yes Yes Yes Yes No Yes Yes Yes No N/A No No No No
Grove Hall Yes Yes Yes Yes No Yes Yes No No N/A No No No No
Mattapan Yes Yes Yes Yes No Yes No No No N/A No No No No
Madison Park Yes Yes Yes Yes No Yes Yes No No N/A No No No No
Nuestra Yes Yes Yes Yes No Yes No No No N/A No No No No
Comunidad
Neighborhood Yes Yes Yes Yes No Yes No Yes No N/A No No No No
Affordable
South Boston Yes Yes Yes Yes No No No No No N/A No No No No
CDC
Southwest Yes Yes Yes Yes No Yes No Yes No N/A No No No No
Boston CDC
Dudley, Inc. No No No No No No No No No N/A No No No No
Asian CDC No No No No No No No No No N/A No No No No
NOTE: A “yes” or “no” indicates whether specific item was found in City’s records.
NOTE: N/A represents “not applicable.”
NOTE: See appendix D, Criteria, under finding 1 for a detailed description of IA through
IVB(2) above.
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Appendix D
CRITERIA
Finding 1
CHDO Checklist
The information contained in this checklist refers to the definition of CHDOs in subpart A, 24
CFR 92.2, of the HOME Rule. The checklist is a tool for participating jurisdictions concerning
the documents they must receive from a nonprofit before it may be certified or recertified as a
CHDO.
I. Legal Status
A. The nonprofit organization is organized under State or local laws, as evidenced by a (1)
Charter or (2) Articles of Incorporation.
B. No part of its net earnings inure to the benefit of any member, founder, contributor, or
individual, as evidenced by a (1) Charter or (2) Articles of Incorporation.
C. Has a tax exemption ruling from the Internal Revenue Service (IRS) under Section 501(c)(3)
or (4) of the Internal Revenue Code of 1986, as evidenced by a 501(c)(3) or (4) Certificate from
the IRS or Is classified as a subordinate of a central organization non-profit under section 905 of
the Internal Revenue code, as evidenced by a group exemption letter from the IRS that includes
the CHDO.
D. Has among its purposes the provision of decent housing that is affordable to low- and
moderate-income people, as evidenced by a statement in the organization’s: (1) Charter,
(2)Articles of Incorporation, (3) By-laws, or (4) Resolutions.
II. Capacity
A. Conforms to the financial accountability standards of 24 CFR 84.21, “Standards for
Financial Management Systems,” as evidenced by: (1) a notarized statement by the president or
chief financial officer of the organization; or (2) a certification from a Certified Public
Accountant; or (3) a HUD approved audit summary.
B. Has a demonstrated capacity for carrying out activities assisted with HOME funds, as
evidenced by: (1) resumes and/or statements that describe the experience of key staff members
who have successfully completed projects similar to those to be assisted with HOME funds, or
(2) contract(s) with consultant firms or individuals who have housing experience similar to
projects to be assisted with HOME funds, to train appropriate key staff of the organization
C. Has a history of serving the community within which housing to be assisted with HOME
funds is to be located, as evidenced by: (1) a statement that documents at least one year of
experience in serving the community; or (2) for newly created organizations formed by local
churches, service or community organizations, a statement that documents that its parent
organization has at least one year of experience in serving the community.
The CHDO or its parent organization must be able to show one year of serving the community
prior to the date the participating jurisdiction provides HOME funds to the organization. In the
statement, the organization must describe its history (or its parent organization’s history) of
serving the community by describing activities which it provided (or its parent organization
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provided), such as, developing new housing, rehabilitating existing stock and managing housing
stock, or delivering non-housing services that have had lasting benefits for the community, such
as counseling, food relief, or childcare facilities. The statement must be signed by the president
or other official of the organization.
III. Organizational Structure
A. Maintains at least one-third of its governing board’s membership for residents of low-
income neighborhoods, other low-income community residents, or elected representatives
of low-income neighborhood organizations as evidenced by the organization’s: (1) By-Laws; (2)
Charter; or (3) Articles of Incorporation.
Under the HOME program, for urban areas, the term “community” is defined as one or several
neighborhoods, a city, county, or metropolitan area. For rural areas, “community” is defined as
one or several neighborhoods, a town, village, county, or multi-county area (but not the
whole state).
B. Provides a formal process for low-income, program beneficiaries to advise the organization
in all of its decisions regarding the design, siting, development, and management of affordable
housing projects, as evidenced by: (1) By-Laws; (2) Resolutions; or (3) a written statement of
operating procedures approved by the governing body.
C. A CHDO may be chartered by a State or local government, but the following restrictions
apply: (1) the State or local government may not appoint more than one-third of the
membership of the organization’s governing body; (2) the board members appointed by the State
or local government may not, in turn, appoint the remaining two-thirds of the board members;
and (3) no more than one-third of the governing of the governing board members are public
officials (including any employees of the PJ), as evidenced by the organization’s: (1) By-Laws;
(2) Charter; or (3) Articles of Incorporation.
D. If the CHDO is sponsored or created by a for-profit entity, the for-profit entity may not
appoint more than one-third of the membership of the CHDO’s governing body, and the board
members appointed by the for-profit entity may not, in turn, appoint the remaining two-thirds of
the board members, as evidenced by the CHDO’s: (1) By-Laws; (2) Charter; or (3) Articles of
Incorporation.
IV. Relationship with For-Profit Entities
A. The CHDO is not controlled, nor receives directions from individuals, or entities seeking
profit from the organization, as evidenced by: (1) By-Laws; or (2) a Memorandum of
Understanding.
B. A Community Housing Development Organization may be sponsored or created by a for-
profit entity, however: (1) the for-profit entity’s primary purpose does not include the
development or management of housing, as evidenced in the for-profit organization’s By-Laws,
and (2) the CHDO is free to contract for goods and services from vendor(s) of its own choosing,
as evidenced in the CHDO’s: (1) By-laws; (2) Charter; or (3) Articles of Incorporation.
Set-aside for CHDOs
Regulations at 24 CFR 92.300(a)(e) state that “within 24 months of HUD notifying the
participating jurisdiction of the execution of the HOME contract, the participating jurisdiction
must reserve not less that 15% of the HOME allocation for investment only in housing to be
developed, sponsored, or owned by the CHDOs. The funds are reserved when a participating
jurisdiction enters into a written agreement with the CHDO. HUD Notice CPD-91-11 states that
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if a CHDO is acting only as a subrecipient or contractor, the CHDO is not eligible to receive any
of the 5 percent available to participating jurisdictions for the payment of CHDO operating
expenses. The CHDO can be provided with CHDO operating expense funds if it is expected that
it will be receiving CHDO project set-aside funds within 24 months of receiving the operating
expense funds. The participating jurisdiction must enter into a written agreement with the
CHDO specifying the terms and conditions upon which this expectation is based.”
Finding 2
24 CFR 92.504(a)
(a) 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 written agreements and taking appropriate action when performance problems
arise. The use of state recipients, subrecipients, or contractors does not relieve the participating
jurisdiction of this responsibility. The performance of each contractor and subrecipient must be
reviewed at least annually.
92.505 Applicability of Uniform Administrative Requirements.
(a) Governmental entities. The requirements of OMB Circular No. A–87 and the following
requirements of 24 CFR part 85 apply to the participating jurisdiction, State recipients, and any
governmental subrecipient receiving HOME funds: §§ 85.6, 85.12, 85.20, 85.22, 85.26, 85.32
through 85.34, 85.36, 85.44, 85.51, and 85.52.
Sec. 85.36: Procurement.
(a) States. When procuring property and services under a grant, a State will follow the same
policies and procedures it uses for procurements from its non-Federal funds. The State will
ensure that every purchase order or other contract includes any clauses required by Federal
statutes and executive orders and their implementing regulations. Other grantees and
subgrantees will follow paragraphs (b) through (i) in this section.
(b) Procurement standards. (1) Grantees and subgrantees will use their own procurement
procedures which reflect applicable State and local laws and regulations, provided that the
procurements conform to applicable Federal law and the standards identified in this section.
(9) Grantees and subgrantees will maintain records sufficient to detail the significant history of
a procurement. These records will include, but are not necessarily limited to the following:
rationale for the method of procurement, selection of contract type, contractor selection
or rejection, and the basis for the contract price.
(c) Competition. (1) All procurement transactions will be conducted in a manner providing
full and open competition consistent with the standards of Sec. 85.36.
24 CFR 85.36(c)(3) Grantees will have written selection procedures for procurement
transactions. These procedures will ensure that all solicitations:
(i) Incorporate a clear and accurate description of the technical requirements for the material,
product, or service to be procured. (d) Methods of procurement to be followed. (1) Procurement
by small purchase procedures. Small purchase procedures are those relatively simple and
informal procurement methods for securing services, supplies, or other property that do not cost
more than the simplified acquisition
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threshold fixed at 41 U.S.C. [United States Code] 403(11) (currently set at $100,000). If small
purchase procedures are used, price or rate quotations shall be obtained from an adequate
number of qualified sources.
(2) Procurement by sealed bids (formal advertising). Bids are publicly solicited and a firm-
fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid,
conforming with all the material terms and conditions of the invitation for bids, is the
lowest in price. The sealed bid method is the preferred method for procuring construction, if the
conditions in Sec. 85.36(d)(2)(i) apply.
(i) In order for sealed bidding to be feasible, the following conditions should be present:
(A) A complete, adequate, and realistic specification or purchase description is available;
(B) Two or more responsible bidders are willing and able to compete effectively and for the
business; and
(C) The procurement lends itself to a firm fixed price contract and the selection of the
successful bidder can be made principally on the basis of price.
(ii) If sealed bids are used, the following requirements apply:
(A) The invitation for bids will be publicly advertised and bids shall be solicited from an
adequate number of known suppliers, providing them sufficient time prior to the date set for
opening the bids;
(B) The invitation for bids, which will include any specifications and pertinent attachments,
shall define the items or services in order for the bidder to properly respond;
(C) All bids will be publicly opened at the time and place prescribed in the invitation for bids;
(D) A firm fixed-price contract award will be made in writing to the lowest responsive and
responsible bidder. Where specified in bidding documents, factors such as discounts,
transportation cost, and life cycle costs shall be considered in determining which bid is lowest.
Payment discounts will only be used to determine the low bid when prior experience indicates
that such discounts are usually taken advantage of; and
(E) Any or all bids may be rejected if there is a sound documented reason.
24 CFR 85.36(d)(3), Procurement by competitive proposals. The technique of competitive
proposals is normally conducted with more than one source submitting an offer, and either a
fixed-price or cost-reimbursement type contract is awarded. It is generally used when conditions
are not appropriate for the use of sealed bids. If this method is used, the following requirements
apply:
(i) Requests for proposals will be publicized and identify all evaluation factors and relative
importance. Any response to publicized requests for proposals shall be honored to the maximum
extent practical;
(ii) Proposals will be solicited from an adequate number of qualified sources;
(iii) Grantees and subgrantees will have a method for conducting technical evaluations of the
proposals received and for selecting awardees;
(iv) Awards will be made to the responsible firm whose proposal is most advantageous to the
program, with price and other factors considered; and
(v) Grantees and subgrantees may use competitive proposal procedures for qualifications-
based procurement of architectural/engineering (A/E) professional services whereby
competitors’ qualifications are evaluated and the most qualified competitor is selected, subject to
negotiation of fair and reasonable compensation. The method, where price is not used as a
selection factor, can only be used in procurement of A/E professional services. It cannot be used
52
to purchase other types of services though A/E firms are a potential source to perform the
proposed effort.
(4) Procurement by noncompetitive proposals is procurement through solicitation of a
proposal from only one source, or after solicitation of a number of sources, competition is
determined inadequate.
(i) Procurement by noncompetitive proposals may be used only when the award of a contract
is infeasible under small purchase procedures, sealed bids or competitive proposals and one of
the following circumstances applies:
(A) The item is available only from a single source;
(B) The public exigency or emergency for the requirement will not permit a delay resulting
from competitive solicitation;
(C) The awarding City authorizes noncompetitive proposals; or
(D) After solicitation of a number of sources, competition is determined inadequate.
(f) Contract cost and price. (1) Grantees and subgrantees must perform a cost or price analysis
in connection with every procurement action including contract modifications. The method and
degree of analysis is dependent on the facts surrounding the particular procurement situation, but
as a starting point, grantees must make independent estimates before receiving bids or proposals.
Department of Neighborhood Development Housing Policy (DND) - Section 3 on Bidding
Projects must be competitively bid in order to achieve the lowest reasonable construction cost
and to provide increased fair access to the economic opportunities created through the project.
Developers must solicit and receive at least three bids, at least two of which are from general
contractors that have not previously contracted with the developer. Bids shall be solicited after
the project has received DND Final Design Approval, i.e. plans and specifications are 95%
complete, and following DND approval of the bid package. Developers are not required to select
the contractor with the lowest bid, but must demonstrate there is sufficient justification if a
contractor with a higher cost is selected. Developers that are general contractors are not required
to bid the general construction contract but must competitively bid all sub-trades. Copies of each
contractor bid and/or sub-trade bids must be submitted to DND for review and maintained in the
project files.
Finding 3
2 CFR Appendix B to Part 225(h)(4)(5)(6)
4) Where employees work on multiple activities or cost objectives, a distribution of their salaries
or wages will be supported by personnel activity reports or equivalent documentation which
meets the standards in subsection 8.h.(5) of this appendix unless a statistical sampling
system (see subsection 8.h.(6) of this appendix) or other substitute system has been approved by
the cognizant Federal agency. Such documentary support will be required where employees
work on: (a) more than one Federal award, (b) a Federal award and a non-Federal award, (c) an
indirect cost activity and a direct cost activity, (d) two or more indirect activities which are
allocated using different allocation bases, or (e) an unallowable activity and a direct or indirect
cost activity. (5) Personnel activity reports or equivalent documentation must meet
the following standards: (a) they must reflect an after-the-fact distribution of the actual
activity of each employee, (b) they must account for the total activity for which each employee
53
is compensated, (c) they must be prepared at least monthly and must coincide with one or more
pay periods, and (d) they must be signed by the employee. (e) 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,
provided that: (i) the governmental unit's system for establishing the estimates produces
reasonable approximations of the activity actually performed; (ii) at least quarterly, comparisons
of actual costs to budgeted distributions based on the monthly activity reports are made. Costs
charged to Federal awards to reflect adjustments made as a result of the activity actually
performed may be recorded annually if the quarterly comparisons show the differences between
budgeted and actual costs are less than ten percent; and (iii) the budget estimates or other
distribution percentages are revised at least quarterly, if necessary, to reflect changed
circumstances. (6) Substitute systems for allocating salaries and wages to Federal
awards may be used in place of activity reports. These systems are subject to approval if required
by the cognizant agency. Such systems may include, but are not limited to, random moment
sampling, case counts, or other quantifiable measures of employee effort.
Finding 5
24 CFR 91.520, Performance Reports.
(a) General. Each jurisdiction that has an approved consolidated plan shall annually review and
report, in a form prescribed by HUD, on the progress made in carrying out its strategic plan and
its action plan. The performance report must include a description of the resources made
available, the investment of available resources, the geographic distribution and location of
investments, the families and persons assisted (including the racial and ethnic status of persons
assisted), actions taken to affirmatively further fair housing, and other actions indicated in the
strategic plan and the action plan. This performance report shall be submitted to HUD within 90
days after the close of the jurisdiction’s program year. (f) Evaluation by HUD. HUD shall
review the performance report and determine whether it is satisfactory. If a satisfactory report is
not submitted in a timely manner, HUD may suspend funding until a satisfactory report is
submitted, or may withdraw and reallocate funding if HUD determines, after notice and
opportunity for a hearing, that the jurisdiction will not submit a satisfactory report.
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The City of Boston's Department of Neighborhood Development in Boston, Massachusetts, Did Not Administer Its HOME Program in Compliance with HUD Requirements
Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-08-19.
Below is a raw (and likely hideous) rendition of the original report. (PDF)