oversight

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)

                                                                 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.

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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.

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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.




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