Issue Date
September 29, 2010
Audit Report Number
2010-AT-1015
TO: Maria R. Ortiz, Director of Community Planning and Development, Miami Field
Office, 4DD
//signed//
FROM: James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA
SUBJECT: The City of Deerfield Beach, FL, Did Not Properly Administer Its Community
Development Block Grant Program
HIGHLIGHTS
What We Audited and Why
We audited the Community Development Block Grant program (program)
administered by the City of Deerfield Beach, FL (City). The objective of the
audit was to determine whether the City administered its program in accordance
with applicable U.S. Department of Housing and Urban Development (HUD)
requirements. We selected the City for review because it had come under
increased scrutiny when various newspaper articles and reviews highlighted City
problems. In addition, HUD’s 2010 risk assessment indicated that the City had
demonstrated a record of poor performance with the program.
What We Found
The City did not administer its program in accordance with applicable HUD
requirements. It did not request exception to HUD’s conflict-of-interest provision
before the awarding of funds. This condition occurred because the City lacked
effective management controls to ensure compliance with HUD’s conflict-of-
interest regulation. As a result, HUD had no assurance that the City did not
practice favoritism in the awarding of funds and may have placed HUD’s funds at
risk.
The City did not maintain adequate supporting documentation to demonstrate that
it properly allocated salaries to the program. This condition occurred because the
City did not have effective controls in place to ensure that salary allocations were
properly documented. Without supporting documentation to substantiate the
allocation of actual services performed by personnel, there was no assurance that
the salary expenditures were accurate and program related.
The City did not comply with HUD requirements in meeting the national objective
for its housing activities. It did not maintain adequate supporting documentation to
demonstrate that the individuals served were low- and moderate-income persons.
This condition occurred because the City lacked effective management controls and
disregarded HUD requirements. As a result, there was no assurance that expended
program funds achieved the intended national objective.
What We Recommend
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to (1) reimburse $224,742 in HUD funds from
non-Federal funds for ineligible costs, (2) provide supporting documentation or
reimburse its program $142,248 from non-Federal funds for unsupported salary
expenditures, and (3) provide supporting documentation or reimburse its program
$28,298 from non-Federal funds for an activity in which the national objective was
unsupported.
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 discussed the findings with the City during the audit. We provided the draft
report to officials on August 27, 2010, for their comments and discussed the
report with the City at the exit conference on September 9, 2010. The City
provided its written comments to our draft report on September 16, 2010. In its
response, the City disagreed with finding 1. However, it generally agreed with
findings 2 and 3. In addition, the City provided recently obtained documentation
to show that it met the national objective for two of the three activities discussed
in finding 3.
2
The complete text of City’s response, along with our evaluation of that response,
can be found in appendix B of this report. Attachments to the City’s comments
were not included in the report, but are available for review upon request.
3
TABLE OF CONTENTS
Background and Objective 5
Results of Audit
Finding 1: The City Did Not Seek Exception to HUD’s Conflict-of-Interest 7
Provision
Finding 2: The City Did Not Adequately Support Salary Expenditures Allocated 10
to the Program
Finding 3: The City Did Not Demonstrate Compliance in Meeting the National 12
Objective for Its Housing Activities
Scope and Methodology 15
Internal Controls 17
Appendixes
A. Schedule of Questioned Costs and Funds To Be Put to Better Use 19
B. Auditee Comments and OIG’s Evaluation 20
4
BACKGROUND AND OBJECTIVE
The City of Deerfield Beach, FL (City) receives annual Community Development Block Grant
program (program) funds from the U.S. Department of Housing and Urban Development (HUD).
HUD awards annual grants to entitlement community recipients to carry out a wide range of
community development activities directed toward revitalizing neighborhoods, economic
development, and providing improved community facilities and services, principally for low-
and moderate-income persons. An activity that receives program funds must meet one of three
national objectives:
Benefit low- and moderate-income families,
Aid in the prevention or elimination of slums or blight, or
Meet community development needs having a particular urgency because existing
conditions pose a serious and immediate threat to the health or welfare of the community
and when other financial resources are not available.
Organized under the City’s Planning and Growth Management Department, the Community
Development Division (Division) is responsible for all phases of the grants process, including the
preparation of State and Federal grants. The Division administers the program, which is
designed to assist low-income citizens in a variety of programs; for example, housing
rehabilitation, first-time home-buyer assistance programs, economic development activities, and
youth and family counseling.
In addition, the City participated in the Broward County HOME Consortium, which awarded the
City $215,975 in HOME Investment Partnerships Program (HOME) funds. The City awarded
these funds to its community housing development organization (CHDO) to construct and sell a
new home for a low- or moderate- income first-time home buyer.
For program years 2008 and 2009, HUD allocated approximately $1.4 million in program funds
to the City, and the City disbursed $724,459 during program year 2008. As of May 13, 2010, the
City had disbursed $24,855 in 2009 program funds for one activity.
The City was reviewed because it had come under increased scrutiny when various newspaper
articles and City reviews highlighted City problems. One review indicated that the City had
problems with the administration of its program. In general, it identified mismanagement of
funds based on the City’s careless record keeping, unaccounted for funds, conflicts of interest,
and several incidents of possible fraud.
In addition, HUD’s 2010 risk assessment indicated that the City had demonstrated a record of
poor performance with the program. Based on HUD’s 2008 monitoring report, HUD found
problems with client eligibility, record keeping, conflict of interest, procurement, and financial
records.
5
On August 3, 2010, the City proposed to the City Commission that the Division be reorganized
and transferred to the Senior Services Department. In addition, it proposed the elimination of the
positions of the two Division coordinators, who were on administrative leave during our audit.
Our audit objective was to determine whether the City administered its program in accordance
with applicable HUD requirements. Specifically, we reviewed whether (1) the City’s program
met the national objective(s) and (2) program expenditures were allowable.
6
RESULTS OF AUDIT
Finding 1: The City Did Not Seek Exception to HUD’s Conflict-of-
Interest Provision
The City did not seek exception to HUD’s conflict-of-interest provision before the awarding of
funds. It awarded HUD funds to two organizations that were related to City officials. This
condition occurred because the City lacked effective management controls to ensure compliance
with HUD’s conflict-of-interest regulations. As a result, HUD had no assurance that the City did
not practice favoritism in the awarding of funds and may have placed HUD’s funds at risk.
Therefore, $42,211 in program and $182,531 in HOME funds were ineligible, and $33,444 in
undisbursed HOME funds should be put to better use.
Conflict of Interest Involving
Two City Officials
The City did not request HUD’s exception to the conflict-of-interest provision
before awarding Federal funds to two organizations that were associated with City
officials. The HUD conflict-of-interest regulations at 24 CFR (Code of Federal
Regulations) 570.611 and 92.356 are intended to protect the reputation of the
program and HOME from even the appearance of providing special treatment or
serving a special interest. These regulations prohibit elected or appointed officials
and family members from obtaining a financial interest or benefit from a HUD
assisted activity during their tenure or for 1 year thereafter. However, upon
written request of the recipient, HUD may grant an exception to the conflict-of-
interest provisions.
The City awarded funds to the Haitian American Consortium and Westside
Deerfield Businessmen Association, organizations that were related to City
officials. These relationships violated conflict-of-interest regulations, which
required a disclosure to HUD.
Haitian American Consortium
This subrecipient received $12,207 in program and $30,004 in Community
Development Block Grant Recovery program funds. These activities provided
public services to benefit low- and moderate-income persons. The conflict-of-
interest concerns involved two City officials.
One City official voted to approve both of these awards. This official may have
had an interest in the subrecipient because it used the official’s dry-cleaning
7
business address as its location in corporate filings and in a bank account.
According to the City, it did not know why this information was not disclosed to
HUD.
The other official voted to award program funds to the subrecipient. This official
voted to fund an activity in which the official was also designated as project
director. The official prepared the subrecipient grant application for the award.
According to City board minutes,1 the official declared that the subrecipient had
not employed the official and had not paid the official for preparing the grant
application. The official indicated that there was no plan to work for the
subrecipient. However, a cursory review disclosed evidence that contradicted the
City official’s statement. For example, checks and a general ledger printout
indicated that the subrecipient paid the City official. Although the official
claimed to have no intention of working with the subrecipient, the grant
application contained the official’s resume and listed the official as project
director for the activity that received program funds. Further, corporate filing
reports indicated that this City official had been the subrecipient’s secretary since
its date of incorporation in 2007 through 2010.
Westside Deerfield Businessmen Association
This CHDO was awarded $215,975 in HOME funds2 to sell and construct one
single-family home in Deerfield Beach, FL. As of July 2010, $33,444 of the
$215,975 had not been drawn down. The single-family home was sold to a low-
to moderate-income individual who also received $40,000 in program home-
buyer assistance to purchase the home.
At the time of the HOME award, there was a City official who was related to this
organization. The City official’s daughter was the president of the CHDO. Also,
the executive director of the CHDO was the cousin of the official’s former
spouse. The City official abstained from voting on the basis that there was a
relationship with the executive director. However, the City was required to
disclose these relationships to HUD. The City did not know why this information
was not disclosed.
These conditions occurred because the City lacked effective management
controls. In both cases, the City was unable to explain why these relationships
were not disclosed to HUD. Due to the nature of these relationships, the City was
required to request HUD’s exception to the conflict-of-interest provision. As a
result of the City’s failure to do so, HUD had no assurance that the City did not
practice favoritism in the awarding of program funds.
1
City of Deerfield Beach Regular City Commission Meeting Minutes, dated March 3, 2009
2
The City received these HOME funds from Broward County, and then it awarded the funds to the Westside
Deerfield Businessmen Association.
8
Conclusion
The City did not seek exception to HUD’s conflict-of-interest provision before the
awarding of funds. It awarded HUD funds to two organizations that were related
to City officials. This condition occurred because the City lacked effective
management controls to ensure compliance with HUD’s conflict-of-interest
regulations. As a result, HUD had no assurance that the City did not practice
favoritism in the awarding of funds and may have placed HUD’s funds at risk.
Therefore, $42,211 in program funds and $182,531 in HOME funds were
ineligible, and $33,444 in undisbursed HOME funds should be put to better use.
Recommendations
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to
1A. Reimburse $42,211 in program and $182,531 in HOME funds for
ineligible costs from non-Federal funds.
1B. Develop and implement written procedures to ensure compliance with
HUD’s conflict-of-interest regulations at 24 CFR 570.611 and 92.356.
In addition, we recommend that the Director of the Miami Office of Community
Planning and Development require Broward County to
1C. Reprogram $33,444 in HOME funds awarded to Westside Deerfield
Businessmen Association.
9
Finding 2: The City Did Not Adequately Support Salary Expenditures
Allocated to the Program
The City did not maintain adequate supporting documentation to demonstrate that it properly
allocated salaries to the program. This condition occurred because the City did not have
effective controls in place to ensure that salary allocations were properly documented. Without
supporting documentation to substantiate that the salary allocations related to actual services
performed by personnel, there was no assurance that the salary expenditures were accurate and
program related. Therefore, the $142,248 allocated to the program for salaries is unsupported.
Unsupported Salary Allocation
The City did not maintain adequate supporting documentation to demonstrate that
it properly allocated salaries to the program. Regulations at 2 CFR Part 225,
appendix B, section 8h(4), require that when employees work on multiple
activities, a distribution of their salaries or wages be supported by personnel
activity reports or equivalent documentation.
HUD reimbursed the City $142,248 in program funds for 2008 salary
expenditures. These expenditures accounted for 96 percent of the total Planning
and Administration Program funds awarded. In some instances, the City allocated
up to 95 percent of an employee’s salary to the program. The following table
shows the City’s allocation.
Employee Salary expenditure allocated
to program funds
Amount
Percentage allocated
1 85 $ 52,279
2 95 $ 51,427
3 85 $ 34,124
4 10 $ 4,418
$ 142,248*
*Salary expenditures include other employee benefits.
The City estimated the salary allocation for each employee based on work
distribution. However, it did not have records to substantiate the allocation used
to charge program funds. There were no records of the actual time spent by
employees between Federal and non-Federal funds. Regulations at 2 CFR Part
225, appendix B, section 8h(5)(e), state that budget estimates or other distribution
percentages determined before the services are performed do not qualify as
support for charges to Federal awards but may be used for interim accounting
purposes.
10
The condition described above occurred because the City did not maintain
effective management controls to ensure that salary allocations were properly
documented. Specifically, the City did not have written procedures for salary
allocation among program and other Federal and non-Federal programs. In
addition, it did not require its employees to maintain documentation supporting
the time worked on each Federal or non-Federal program. The City believed that
the methodology it used to allocate salary expenditures was adequate.
Without supporting documentation to substantiate salary allocations in relation to
actual services performed by personnel or some type of quantifiable measure of
employee effort, there was no assurance that salary expenditures were accurate
and program related. As a result, the City allocated $142,248 in unsupported
salaries to the program.
Recommendations
We recommend that the Director of the Miami Office of Community Planning
and Development require the City to
2A. Provide supporting documentation or reimburse its program $142,248 for
unsupported salary expenditures from non-Federal funds.
2B. Develop a salary allocation method that complies with 2 CFR Part 225.
2C. Develop, implement, and enforce written procedures for salary allocation
among Federal and non-Federal programs to include documentation
requirements for its employees.
11
Finding 3: The City Did Not Demonstrate Compliance in Meeting the
National Objective for Its Housing Activities
The City did not demonstrate compliance with HUD requirements in meeting the national objective
for its housing activities. It did not maintain adequate supporting documentation to demonstrate
that the individuals served were low- and moderate-income persons. This condition occurred
because the City lacked effective management controls and disregarded HUD requirements. As a
result, there was no assurance that $28,298 in expended program funds achieved the intended
national objective.
Inadequate Supporting
Documentation
The City did not maintain adequate supporting documentation to demonstrate that
the national objective was met for two housing activities. Regulations at 24 CFR
570.506(b) state that records must be maintained to demonstrate that each activity
undertaken meets one of the national objective criteria set forth in 570 CFR Part 208.
We reviewed the first-time home-buyer assistance (HUD’s Integrated
Disbursement and Information System (IDIS) activity 121) and homeowner
rehabilitation (IDIS activity 122) activities. These activities provided housing
assistance to low- and moderate-income individuals who met eligibility criteria
based on the size and income of the household.3
Three of the six files reviewed contained missing or inconsistent information that
the City did not consider in determining the recipient’s eligibility. Regulations at
24 CFR 570.506(b)(4)(iii) and (vii) and 570.208(a)(3) require records
demonstrating that an activity that provides or improves permanent residential
structures is occupied by low- and moderate-income households.
Home-Buyer Assistance – IDIS Activity 121
Client #0125 – This file contained conflicting information on the size of the
recipient’s household. On the application, the recipient claimed a household size
of four, while the lease agreement indicated five. There was no evidence in the
file that the City addressed this inconsistency.
In addition, the file did not indicate whether the recipient’s 18-year-old child held
a job. The Section 8 housing assistance payment program definition of annual
income indicates that although a full-time student is technically considered a
3
The City used the Section 8 housing assistance payment program definition of annual income to determine
eligibility.
12
dependent, a small amount of income may be counted toward calculating annual
income. An affidavit or disclosure should have been obtained to clarify these
issues. Therefore, the eligibility requirement was not adequately supported as
having been met, and $25,000 in program funds was unsupported.
We issued the draft report to City officials on August 27, 2010. In response to the
draft report, the City provided additional documentation on September 16, 2010.
The City provided an affidavit and supporting documentation to show that the
client’s household size was four. OIG and HUD reviewed and accepted the
additional information provided. As a result, the eligibility requirement is now
satisfied and $25,000 in unsupported costs for this activity is now supported. We
reduced the questioned costs totals for this finding.
Homeowner Rehabilitation - IDIS Activity 122
Client # 0092 – The household size reported in the application was questionable.
The file indicated that the coapplicant had a child whose father was not included
in the application. The coapplicant may have been married, because some
documents referred to the coapplicant by her married name. In addition, there
was no evidence in the file indicating that the coapplicant was divorced.
Clarification of the marital status is important in determining whether there is
additional income that should have been considered. As a result of the
coapplicant’s undocumented marital status, $33,0604 in program funds was
unsupported.
The City provided additional documentation for this finding on September 16,
2010. The City provided the client’s ex-husband’s death certificate, which
supported the client’s household size. OIG and HUD reviewed and accepted the
additional documentation provided. As a result, the eligibility requirement is now
satisfied and $33,060 in unsupported costs is now supported. We reduced the
questioned costs totals for this finding.
Client # 0106 – The file contained inconsistent information on the size of the
recipient’s household. The application indicated a household size of one, while a
court record revealed that another person may have been living with the recipient.
A property search was conducted, and the recipient’s application indicated that
the recipient owned another property at the time of application. The City did not
include this property when it calculated the recipient’s annual income. According
to the definition of annual income in the Section 8 housing assistance payment
program, the annual income includes equity in real property. The City stated that
this oversight may have occurred because the program coordinator did not
perform the property search as required by the City’s policies and procedures. As
a result, $28,298 in program funds was unsupported.
4
The City disbursed $33,060 in program funds to rehabilitate the client’s home. City staff explained that $3,280 of
the $33,060 came from the 2009 program funds and $29,780 from the 2008 program funds.
13
These conditions occurred because the City lacked effective management controls
over its housing program activities and disregarded HUD requirements.
Specifically, the City did not follow its own policies and procedures to ensure
effective performance and compliance with Federal regulations for meeting
national objectives. The City agreed with our findings and was not surprised by
the issues encountered. For this reason, the City was working on strengthening
and enforcing its policies and procedures.
Conclusion
The City did not demonstrate compliance with HUD requirements for meeting the
intended national objective for two program activities. Three of the six files
reviewed contained missing or inconsistent information that the City did not
consider in determining the recipient’s eligibility. This condition occurred
because the City lacked effective management controls and disregarded HUD
requirements. On September 16, 2010 the City provided additional
documentation to show that two clients serviced met the national objective.
However, the remaining activity is still unsupported. As a result, there was no
assurance that $28,298 in program funds benefitted the intended persons as
required by HUD.
Recommendations
We recommend that the Director of the Miami Office of Community Planning and
Development require the City to
3A. Provide supporting documentation or reimburse its program line of credit
$28,298 from non-Federal funds for one activity that was not supported as
meeting the national objective according to 24 CFR 570.506 and 570.208.
3B. Revise and implement its policies and procedures to ensure that its housing
program activities comply with Federal regulations for meeting program
national objectives.
14
SCOPE AND METHODOLOGY
Our audit objective was to determine whether the City administered its program in accordance
with applicable HUD requirements. Specifically, we reviewed whether (1) the City’s program
met the national objective(s) and (2) program expenditures were allowable. To accomplish the
audit objective, we
Reviewed relevant HUD regulations,
Reviewed relevant City policies and procedures,
Interviewed HUD and City officials,
Reviewed reports issued on the City’s Community Development Division,
Reviewed City financial records related to the program expenditures,
Reviewed reports from IDIS, and
Reviewed City recipient files and records.
In program year 2008, HUD awarded the City $738,902 in program funds. We selected two
activities and the planning and administration activity for review because of the large
expenditure amounts. These activities totaled approximately $523,473 and represented 71
percent of the total program funds awarded in program year 2008. We did not review program
year 2009 because as of May 2010, it had minimal disbursements of $24,855 for one activity.
For the two selected activities, the City provided us a list of expenditures by recipients. Due to
the volume of recipients for each activity, we did not perform a 100 percent review. Instead,
based on the total expenditures, we selected the three largest or most recent dollar recipients
from each activity totaling approximately $152,943 of the total $378,048 disbursed or 40
percent. For the planning and administration activity, we selected salary expenditures which
represented approximately $142,248 of the total $147,425 disbursed or 96 percent. The results
of this audit apply only to the items reviewed and cannot be projected to the universe of
activities.
Two of the six recipients reviewed received a service or property from organizations that had
been under media scruitiny for their alleged relationships with City officials. One of these
recipients also received $215,975 in HOME funds. The City received these HOME funds from
Broward County, and then it awarded the funds to the recipient. Since the City awarded HUD
funds to these organizations, we reviewed whether the City awarded these funds in accordance
with HUD’s conflict-of-interest regulations.
Finally, we assessed the reliability of computer-processed data reported in IDIS. To assess the
reliability of expenditure amounts reported in IDIS, we (1) interviewed City officials about the
15
data, (2) reviewed existing documentation related to the data source, and (3) traced data to the
City’s financial system for accuracy and completeness. The City was unable to provide
documentation to support that it properly allocated salaries to the program. This condition
occurred because the City did not have effective controls in place to properly allocate salary
expenses to the program. Without supporting documentation to substantiate the salary
allocations as they related to actual services performed by personnel, the City may have
inaccurately charged salaries to the program.
Considering the results of the review, the expenditure amounts reported in IDIS were reliable.
However, the administration costs reported in IDIS were unreliable. Since IDIS was supported
by the City’s financial system, we used the program expenditures reported in the City’s financial
system and IDIS for purposes of determining questioned costs.
Our review generally covered the period of October 2008 through April 2010 and was extended
as necessary during the audit. Our review was conducted from May through August 2010 at City
Hall located at 150 NE Second Avenue, Deerfield Beach, FL.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.
16
INTERNAL CONTROLS
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to
Effectiveness and efficiency of operations,
Reliability of financial reporting, and
Compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls 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 over program operations;
Controls over the reliability of data;
Controls over compliance with laws and regulations; and
Controls over the safeguarding of resources against waste, loss, and misuse.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does
not allow management or employees, in the normal course of performing their
assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
impairments to effectiveness or efficiency of operations, (2) misstatements in
financial or performance information, or (3) violations of laws and regulations on a
timely basis.
Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:
The City did not seek exception to HUD’s conflict-of-interest provision (see
finding 1).
17
The City did not adequately support salary expenditures allocated to the
program (see finding 2).
The City did not demonstrate compliance in meeting the national objective for
its housing activities (see finding 3).
18
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Ineligible 1/ Unsupported Funds to be put
number 2/ to better use 3/
1A $224,742
1C $33,444
2A $142,248
3A _______ 28,298 ______
Total $224,742 $170,546 $33,444
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 instance, these funds could be put to better use
because HOME funds have not been drawn down.
19
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
20
Comment 1
Comment 1
Comment 1
Comment 2
21
22
23
24
Comment 3
Comment 4
Comment 5
25
Comment 6
Comment 7
Comment 8
26
OIG Evaluation of Auditee Comments
Comment 1 The City stated that it did not seek an exception to HUD’s conflict of interest
provision because the requirements to initiate the waiver were not met. The City
argued that while the president of Westside Deerfield Businessmen Association
satisfied the “immediate family ties” test, the president had no financial interest in
the HUD assisted activity. The City indicated that a City official stated on record
that the president was an unpaid volunteer of the recipient. The City also
indicated that although the executive director had a financial interest in the HUD
assisted activity, the executive director was not an immediate family member of
the City official.
The conflict of interest regulation at 24 CFR 92.356 prohibits elected or appointed
officials and family members from obtaining monetary and nonmonetary benefits
from the HUD assisted activity. Although the City has the City official’s
statement on record, the City did not provide documentation to show it
corroborated the official’s statement with the recipient or its president. In
addition, the statement did not clarify whether the recipient’s president received
any nonmonetary benefits.
HUD Counsel stated that because of the family ties, the City was required to
disclose these relationships to HUD. Therefore, the City did not seek exception to
HUD’s conflict of interest provisions as required.
Comment 2 The City stated that the second City official referenced in finding 1 was not in
office when the City awarded HUD funds to the Haitian American Consortium on
June 16, 2009.
Our report did not state that this official voted on the June 2009 award. Our
report states that the second City official voted on March 3, 2009 to approve
$12,207 in program funds to the Haitian American Consortium. We questioned
the June 2009 award of $30,004 in Community Development Block Grant
Recovery program funds because of the involvement of the first City official.
Comment 3 The City maintained that although it did not have program specific timesheets, the
salary allocation was consistent with the scope of work and salary expenditure of
similar entities. The City indicated that going forward it would implement a
program specific timesheet to track salary expenditures.
The City did not provide documentation to support that the salary expenditures
were properly and accurately charged to the program in accordance with
Regulations at 2 CFR Part 225, appendix B. Therefore, the City did not
adequately support salary expenditures and $142,248 in salary expenditures is
unsupported.
27
Comment 4 The City indicated that it contacted the client in question and obtained additional
information to show that the clients met the income eligibility requirement.
According to 24 CFR 570.208 (a), activities meeting the low and moderate
housing criteria will be considered to benefit low and moderate income persons
unless there is substantial evidence to the contrary. To comply with this criterion,
the City should have obtained this information before it approved funding.
Furthermore, the City recently obtained this information in response to our audit.
As a result, the City risked awarding program funds to non-eligible clients. The
City needs to strengthen its controls to ensure it complies with Federal
regulations.
Comment 5 The City provided an affidavit and documentation to demonstrate that the
household size was four.
Upon reviewing the additional documentation to support eligibility and the
household size, we determined that the student’s income would not affect the
household income eligibility. We also provided and discussed this documentation
with HUD. The additional documentation provided by the City supports this
client’s eligibility. However, the City should have requested this information
from the client at the time of the income certification, prior to awarding program
funds. As a result, the eligibility requirement is now satisfied and $25,000 in
unsupported costs for this activity is now supported. We reduced the questioned
costs totals for this finding.
Comment 6 The City stated that it spoke to the co-applicant and obtained the death certificate
for the co-applicant’s former husband.
The death certificate clarifies the household size, and supports that the client was
eligible. However, the City should have clarified the co-applicant’s marital status
at the time of the application. Without the applicant’s complete information, there
is an increased risk that it could award program funds to a non-eligible person.
We also provided and discussed this documentation with HUD. The additional
documentation provided by the City supports this client’s eligibility. As a result,
the eligibility requirement is now satisfied and $33,060 in unsupported costs is
now supported. We reduced the questioned costs totals for this finding.
Comment 7 The City responded that the client verbally represented that the client’s daughter
did not live with the client during the time the client applied for program funds.
The City did not provide any documentation to support this statement. Therefore,
the City did not provide adequate documentation to support it achieved the
national objective for this activity.
Comment 8 The City indicated that when it calculated the value of the property of $14,880
into the client’s total income, the client would still be eligible for assistance.
28
The City used the Broward County’s 2010 assessed value to determine the
property’s value. The Section 8 housing assistance payment program explains
that the land is valued at market value. Therefore, the City’s calculation is
incorrect because the County’s assessed value is not the market value of the
property. Furthermore, the City used a value from 2010, when the program funds
were awarded in 2008. Therefore, the City did not provide documentation to
support it achieved the national objective for this activity and $28,298 in program
funds remain unsupported.
29
The City of Deerfield Beach, FL, Did Not Properly Administer Its Community Development Block Grant Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-29.
Below is a raw (and likely hideous) rendition of the original report. (PDF)