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.
10
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.
14
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)