oversight

Tarrant County Generally Administered Its Home Investment Partnerships Program Grants in Accordance with Requirements, Fort Worth, Texas

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-06-09.

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

                                                                  Issue Date
                                                                           June 9, 2009
                                                                  Audit Report Number
                                                                           2009-FW-1009




TO:         Katie S. Worsham
            Director, Community Planning and Development Office, 6AD


FROM:       Gerald R. Kirkland
            Regional Inspector General for Audit, Fort Worth Region, 6AGA

SUBJECT: Tarrant County Generally Administered Its Home Investment Partnerships
         Program Grants in Accordance with Requirements, Fort Worth, Texas


                                    HIGHLIGHTS

 What We Audited and Why

             We selected the Tarrant County Community Development Division (Tarrant
             County) HOME Investment Partnerships Program (HOME) and Neighborhood
             Stabilization Program (NSP) for review because the U. S. Department of Housing
             and Urban Development’s (HUD) management expressed concerns about Tarrant
             County’s HOME program. The objectives were to determine Tarrant County’s
             (1) compliance with HOME regulatory requirements, (2) eligibility of HOME
             activities and administrative costs, (3) oversight and performance of subrecipients
             and community housing development organizations (CHDO), and the NSP plan’s
             feasibility.

 What We Found


             Tarrant County generally administered its HOME grants in accordance with
             applicable program requirements. However, a Tarrant County CHDO,
             Development Corporation of Tarrant County (Corporation), lacked capacity.
             Also, Tarrant County did not monitor its CHDOs in 2008 and expended $2,041 in
             HOME funds on ineligible and unsupported costs.
What We Recommend


           We recommend that the Director, Community Planning and Development, Fort
           Worth Office (1) deny awarding additional grants to the Corporation for single-
           family purchase and rehabilitation activities until it demonstrates capacity to
           properly administer the activities, (2) reiterate to Tarrant County its
           responsibilities regarding monitoring all of its subrecipients, and (3) require
           Tarrant County to reimburse its HOME program $2,041 from nonfederal funds
           for ineligible and unsupported HOME funds expended.

           For each recommendation without a management decision, please respond and
           provide status reports in accordance with HUD Handbook 2000.06, REV-3.
           Please furnish us copies of any correspondence or directives issued because of the
           audit.

Auditee’s Response


           We provided a draft on May 14, 2009, and held an exit conference on May 26,
           2009. Tarrant County provided written comments on June 2, 2009. The complete
           text of the auditee’s response, along with our evaluation of that response, can be
           found in appendix B of this report.




                                            2
                            TABLE OF CONTENTS

Background and Objectives                                                   4

Results of Audit
      Finding:   Tarrant County Generally Administered Its HOME Grants in   5
                 Accordance with Requirements

Scope and Methodology                                                       8

Internal Controls                                                           9

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use        10
   B. Auditee Comments and OIG’s Evaluation                                 11




                                            3
                     BACKGROUND AND OBJECTIVES

Designated by Tarrant County Commissioners Court, Tarrant County Community Development
Division (Tarrant County) as lead agency is responsible for overseeing the HOME Investment
Partnerships Program (HOME) grants. The mission of Tarrant County is to provide decent
housing and a suitable living environment and expand economic opportunities for low- and
moderate-income persons residing in the urban county. Tarrant County provides services to the
unincorporated area of Tarrant County and 29 cities within the county. It does not provide
services to the cities of Fort Worth, Arlington, or Grand Prairie, which receive separate funds
allocations from HUD.

For fiscal years 2007 and 2008, Tarrant County received more than $2.4 million in HOME funds.
On March 20, 2009, pursuant to the Housing and Economic Recovery Act of 2008, the U. S.
Department of Housing and Urban Development (HUD) awarded Tarrant County a
Neighborhood Stabilization Program (NSP) grant totaling more than $3.2 million. At the time of
our review, Tarrant County had only performed preaward activities on this grant. We performed
only cursory work on the NSP grant.

Our objectives were to determine Tarrant County’s (1) compliance with HOME regulatory
requirements, (2) eligibility of HOME activities and administrative costs, (3) oversight and
performance of subrecipients and community housing development organizations (CHDO), and
(4) the NSP plan’s feasibility.




                                               4
                                   RESULTS OF AUDIT

Finding: Tarrant County Generally Administered Its HOME Grants in
Accordance with Requirements
Tarrant County generally administered its HOME grants in accordance with applicable program
requirements. However, a Tarrant County CHDO lacked capacity. Also, Tarrant County did not
monitor its CHDOs in 2008 and expended $2,041 in HOME funds on ineligible costs. This
condition occurred because Tarrant County did not adequately monitor the CHDO or ensure that
it developed capacity. As a result, Tarrant County cannot ensure the effectiveness of its CHDO
or the CHDO run single family purchase and rehabilitation program and $2,041 was not
available for eligible activities.



    The Corporation Lacked
    Capacity

                Development Corporation of Tarrant County (Corporation), a Tarrant County
                CHDO, lacked capacity to administer its single-family HOME activities. It
                contracted services with an individual to perform all of the work in carrying out
                its activities of purchasing and rehabilitating housing for resale, including
                designing and implementing a single-family purchase and rehabilitation program
                for the Corporation. Further, the contract required the individual to oversee the
                single-family properties until their sale. The Corporation only participated in the
                signing of the sales contract. It only had one employee who worked part time.
                HUD required the Corporation to have capacity for carrying out activities assisted
                with HOME funds.1 Nothing in the individual’s contract required him to build
                capacity at the Corporation, and the Corporation did not have capacity.

                During the audit, the Corporation’s contractor accepted a position with Tarrant
                County. Thus, the Corporation lost the contractor’s expertise and its capacity to
                run its single-family purchase and rehabilitation activity. We recommend that
                Tarrant County not award any additional grants to the Corporation for single-
                family purchase and rehabilitation activities.

    Tarrant County Did Not
    Monitor CHDOs in 2008

                Tarrant County did not conduct monitoring of its CHDOs during 2008. HUD
                regulations required Tarrant County to review the performance of CHDOs


1
     CPD (Community Planning and Development) Notice 97-11.

                                                   5
                  annually2 and document and maintain evidence of these reviews.3 Tarrant County
                  conducted a monitoring review of the Corporation the day before we performed a
                  site review in 2009.

                  Further, Tarrant County did not monitor its other CHDO. According to Tarrant
                  County’s HOME coordinator, it was not necessary to monitor this CHDO because
                  the project was in the construction phase and there were no files to monitor.
                  However, HUD regulations4 state that Tarrant County was responsible for
                  managing the day-to-day operations of its HOME program, ensuring that HOME
                  funds were used in accordance with all program requirements and written
                  agreements, and taking appropriate action when performance problems arose.
                  Additionally, the performance of each contractor and subrecipient must be
                  reviewed at least annually. Tarrant County’s HOME coordinator stated that he
                  would schedule a monitoring visit soon. HUD should reiterate to Tarrant County
                  its responsibilities regarding monitoring all of its subrecipients.

    Tarrant County Paid Ineligible
    and Unsupported Expenses

                  Tarrant County used $2,041 in HOME funds for questionable costs, $1,947 for
                  ineligible expenses, and $94 for unsupported costs. These expenses included
                  payments for training that did not occur, payment for a license that was not
                  renewed, an incorrect invoice used to allocate a payment, payment for closing
                  costs that exceeded the amount on the HUD-1 settlement statement, late fees,
                  unsupported parking fees, and a cancelled check.

                  The Corporation has reimbursed the HOME grant $425 for the amounts that
                  exceeded the HUD-1 and offset $468 ineligible expenses and $94 unsupported
                  expenses. Also, Tarrant County corrected the $24 that was misallocated to the
                  HOME grant. Further, Tarrant County reimbursed $1,030 to its HOME grant.

    Tarrant County Only Recently
    Approved Its NSP Grant

                  HUD approved Tarrant County’s NSP agreement on March 20, 2009, and Tarrant
                  County’s Commissioner’s Court approved it on March 31, 2009. Thus, only
                  minimal activities had occurred at the time of our review. Tarrant County posted
                  its plan on the Internet but had not awarded any contracts and had only charged
                  $416 to the grant. Based on our cursory review, Tarrant County’s plan appeared
                  feasible. Given that we only found minimal problems with the HOME program


2
      24 CFR (Code of Federal Regulations) 92.504.
3
      24 CFR 92.508 6 iii.
4
      24 CFR 92.504.

                                                     6
          and that HUD’s Office of Community Planning and Development closely
          monitors Tarrant County, no additional work was performed on NSP.

Recommendations



          We recommend that the Director of the Fort Worth Office of Community
          Planning and Development instruct Tarrant County to

          1A. Deny awarding additional grants to the Corporation for single-family
              purchase and rehabilitation activities until it demonstrates that it has the
              capacity to properly administer the activities.

          1B. Reiterate to Tarrant County its responsibilities regarding monitoring all
              subrecipients.

          1C. Reimburse its HOME program $1,947 from nonfederal funds for ineligible
              HOME funds expended. Tarrant County reimbursed $1,054 of this amount
              and the Corporation reimbursed $425 to the HOME grant.

          1D. Support or reimburse its HOME program $94 from nonfederal funds for
              unsupported HOME funds expended.




                                            7
                           SCOPE AND METHODOLOGY

To accomplish the objectives, we

        Reviewed Tarrant County Commissioner Court minutes.
        Interviewed HUD and Tarrant County employees, a CHDO contractor, and HOME
        recipients to gain an understanding of Tarrant County’s HOME program.
        Tested one payment draw for each of the following areas for a total of $1,356,076 out of
        a total in $3,271,768 HOME grant funds: Tarrant County administration, CHDO
        operating, CHDO purchase and rehabilitation of single-family housing, HOME
        rehabilitation, and HOME down payment assistance.
        Performed a cursory review of the NSP agreement.
        Conducted on-site visits of HOME rehabilitations5 and houses purchased by the
        Corporation.

We conducted the survey at Tarrant County’s office located at 1509-B South University, Fort
Worth, Texas, and the Corporation’s office in Fort Worth, Texas.

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




5
    This includes the only on-going preaward HOME rehabilitation and one of 13 completed HOME
    rehabilitations.

                                                    8
                              INTERNAL CONTROLS

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

       Program operations,
       Relevance and reliability of information,
       Compliance with applicable laws and regulations, and
       Safeguarding of assets and resources.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.



 Relevant Internal Controls


              We determined that the following internal controls were relevant to our audit
              objectives:

                  Policies and procedures regarding its HOME program,
                  Policies and procedures regarding the monitoring of CHDOs, and
                  Policies and procedures regarding payment for goods and services.

              We assessed the relevant controls identified above.

              A significant weakness exists if management controls do not provide reasonable
              assurance that the process for planning, organizing, directing, and controlling
              program operations will meet the organization’s objectives.

 Significant Weaknesses


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

                  Controls over the monitoring, including determining capacity, of CHDOs were
                  ineffective.




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                                              APPENDIXES

Appendix A

                        SCHEDULE OF QUESTIONED COSTS




                       Recommendation                   Ineligible 1/        Unsupported 2/
                           number

                                1C                             $1,947
                                1D                                                         $94

                                 Totals                        $1,947                      $94




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.




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Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         11
Comment 2




            12
Comment 2




            13
                         OIG Evaluation of Auditee Comments

Comment 1   While Tarrant County's response stated it will continue to work with the
            Corporation and the Corporation will take action to find a new president, Tarrant
            County needs to ensure that the CHDOs it uses have capacity and meet HUD
            requirements.

Comment 2    We commend Tarrant County for addressing all the findings during the audit.
             We adjusted the findings as appropriate to reflect actions taken.




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