U.S. Department of Housing and Urban Development
Region 4, Office of Inspector General
Office of Audit, Box 42
Richard B. Russell Federal Building
75 Spring Street, SW, Room 330
Atlanta, GA 30303-3388
(404) 331-3369
MEMORANDUM NO:
2010-AT-1801
November 20, 2009
MEMORANDUM FOR: 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: Miami-Dade County, Florida, Needs to Strengthen Controls over Its
Neighborhood Stabilization Program
INTRODUCTION
Miami-Dade County (County), Florida, was awarded a $62.2 million Neighborhood Stabilization
Program (NSP) grant under the Housing and Economic Recovery Act of 2008 (HERA). As part
of our organization’s commitment to ensure the proper use of these funds, we performed a
review of the County’s operations to evaluate its capacity to administer NSP funding.
We provided a draft report to the County on October 28, 2009, and received written comments
on November 4 and 6, 2009. We have included the comments and our evaluation of those
comments in appendix A. Attachments to the County’s comments were not included in the
report, but are available for review upon request.
For each recommendation without a management decision, please respond and provide status
reports in accordance with U.S. Department of Housing and Urban Development (HUD)
Handbook 2000.06, REV-3. Please furnish us copies of any correspondence or directives issued
because of the audit.
METHODOLOGY AND SCOPE
To accomplish our objective, we
Reviewed and obtained an understanding of relevant HERA legislation, the Federal
Register, and HUD regulations;
Reviewed the County’s NSP substantial amendment to the 2008 action plan and the
special conditions placed on the County by HUD;
Reviewed relevant County policies and procedures;
Interviewed HUD and County officials; and
Reviewed County financial records.
We limited our review to assessing the County’s capacity and risks in the following areas: basic
internal controls, financial management, and cost allowability.
The County planned to use NSP funds for six activities. We selected two activities for review
because they had progressed further than the other four activities. The financing mechanism
activity provides second mortgages to assist eligible households in purchasing foreclosed-upon
homes. We reviewed County files for 7 of 80 home buyers to determine whether they were
eligible to receive NSP funds. The purpose of the other activity is to purchase and rehabilitate
foreclosed-upon single-family properties for sale to income-eligible households. We reviewed
County files for three of eight properties to determine whether the properties were eligible to be
purchased with NSP funds.
As of September 2009, the County had obligated $1.13 million for the financing mechanism
activity and $906,660 for the purchase and rehabilitation of single-family properties. We
selected $260,000 in obligations for the financing mechanism activity and $306,806 in
obligations for the purchase and rehabilitation of single-family properties to review because, as
indicated above, these activities had progressed further than the other four NSP activities. As of
August 2009, the County had expended $267,437 in NSP funds. We selected $131,529 in
expenditures to review based on their large dollar amounts. We reviewed County records to
determine whether NSP obligations and expenditures were allowable and adequate supporting
documentation was maintained.
The results of our review apply only to the items selected and cannot be projected to the universe
or population.
Our review generally covered the period July 2008 through June 2009, and we extended the
period as needed to accomplish our objective. We conducted our review from July through
October 2009 at the County Department of Housing and Community Development (HCD)1
located at 701 NW 1st Court, Miami, Florida.
For this capacity report, our work was not conducted in accordance with generally accepted
government auditing standards. Therefore, this report is significantly reduced in scope.
1
Beginning October 1, 2009, the County’s Office of Community and Economic Development was renamed the
Department of Housing and Community Development.
2
BACKGROUND
On July 30, 2008, the President signed HERA. On September 26, 2008, HUD provided $3.92
billion to states, territories, and local governments for the purpose of stabilizing communities by
redeveloping abandoned and foreclosed-upon homes and residential properties. On March 6,
2009, HUD awarded the County a $62.2 million NSP grant under HERA.
HCD is responsible for overall oversight and administration of the NSP grant. The table below
shows the County departments responsible for administering the six NSP activities, along with
the amount of NSP funds awarded and obligated as of September 30, 2009.
# Activity description County department Funds Funds
awarded obligated
1 Provide financing mechanisms (second HCD $ 9,790,000 $ 1,130,000
mortgages) to assist eligible households Homeownership section
in purchasing foreclosed-upon homes
2 Purchase and rehabilitate foreclosed-upon General Services 10,025,000 906,660
single-family properties for sale to Administration
eligible households
3 Purchase and rehabilitate foreclosed-upon General Services 21,571,480 0
multifamily properties for rental to Administration
eligible households
4 Demolish blighted structures Department of Building 1,000,000 0
and Neighborhood
Compliance2
5 Redevelop vacant land for a HOPE VI Public 8,600,000 0
project Housing Agency
6 Redevelop vacant land in the expanded HCD Housing 5,000,000 0
HOPE VI area Development and Loan
Administration
Subtotal $55,986,480 $ 2,036,660
Administration HCD 6,220,720 6,220,720
Total $62,207,200 $ 8,257,380
In July 2009, the County applied for an additional $162 million in NSP funds under the
American Recovery and Reinvestment Act of 2009. The application is under review.
RESULTS OF REVIEW
Agreements Were Not Executed Between HCD and Other County Departments
Under HERA, except as otherwise provided, NSP funds made available to state and local
governments shall be treated as though such funds were Community Development Block Grant
(CDBG) funds. Regulations at 24 CFR [Code of Federal Regulations] 570.501 state that a
2
Beginning October 1, 2009, the County Office of Neighborhood Compliance and the Building Department
combined to create the Department of Building and Neighborhood Compliance.
3
public agency designated by the grantee to undertake CDBG-funded activities is subject to the
same requirements as a subrecipient. Regulations at 24 CFR 570.503 require that no CDBG
funds are disbursed to the subrecipient until an agreement is executed between the grantee and
the subrecipient. The regulation also requires the agreement to include certain provisions.
The County had not executed agreements between HCD and the other County departments
responsible for administering the NSP grant. In October 2009, HCD executed an agreement with
the General Services Administration to administer two NSP activities but had not executed
agreements with the other two County departments. County officials informed us that they were
developing the agreements with the other County departments. In addition, the executed
agreement between HCD and the General Services Administration did not include two of the
seven minimum provisions required by 24 CFR 570.503. The executed agreement did not (1)
contain a schedule for completing the work and (2) list all federal regulations that needed to be
followed.
Existing Policies and Procedures Did Not Address NSP Requirements
NSP requirements at section 2301 of HERA, applicable Federal Register notices, and 24 CFR 85
and 570 were not addressed in the policies and procedures for County departments responsible
for administering the NSP grant. County officials stated that the implementation order approved
by the Board of County Commissioners constituted a written NSP policy and they were
developing an NSP procedures manual. The manual would be a compilation of existing
procedures.
We reviewed the implementation order and the procedures of two HCD sections and one County
department. These policies and procedures did not provide detailed guidance for complying with
the following NSP requirements: (1) eligibility of an activity, (2) monitoring, (3) national
objective, (4) supporting documentation to be maintained for expenditures and drawdowns, (5)
accounting for and reporting of program income, and (6) reporting to the HUD Disaster
Recovery Grant Reporting system.
The County Did Not Maintain Adequate Supporting Documentation for an NSP Activity
Section 2301(c)(3)(A) of HERA states that NSP funds may be used to establish financing
mechanisms for purchase of foreclosed-upon homes and residential properties.
We reviewed County files for seven home buyers under the financing mechanism activity. The
County did not maintain adequate supporting documentation showing that one home buyer
purchased a foreclosed-upon property. A County official acknowledged that staff failed to
obtain the documentation.
NSP Expenditures Were Improperly Classified
Regulations at 24 CFR 85.20(b) state that the grantee’s financial management system must
maintain accurate, current, and complete disclosure of the financial results of financially assisted
activities. Salary expenditures totaling $17,104 were improperly classified to the wrong NSP
4
index code in the County’s financial management system. The salary expenditures were
classified to the home-buyer counseling index code instead of the second mortgage index code.
A County official explained that the salaries had been inadvertently classified to the wrong index
code.
Conclusion
The County needs to strengthen its controls to fulfill NSP requirements under HERA. It needs to
(1) revise the executed agreement, (2) execute agreements between HCD and the other County
departments that administer the NSP grant, (3) maintain and enforce policies and procedures that
comply with NSP requirements, (4) maintain adequate supporting documentation for NSP
activities, and (5) properly classify NSP expenditures.
RECOMMENDATIONS
We recommend that the Director of the Office of Community Planning and Development require
the County to
1A. Revise the executed agreement between HCD and the General Services Administration to
include all provisions as required by 24 CFR 570.503.
1B. Develop and execute agreements between HCD and the other County departments
responsible for administering the NSP grant to comply with 24 CFR 570.503.
1C. Maintain and enforce policies and procedures that comply with NSP requirements.
1D. Provide documentation supporting that the property purchased by the home buyer was a
foreclosure to comply with NSP requirements.
1E. Reclassify the $17,104 from the home-buyer counseling index code to the second mortgage
index code.
5
Appendix A
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
Comment 1
Comment 1
Comment 2
Comment 3
6
7
Comment 2
Comment 3
8
OIG Evaluation of Auditee Comments
Comment 1 The County stated that it has begun implementing several corrective measures to
address our findings and recommendations. We believe that the corrective
measures when implemented and enforced would improve County administration
of the NSP.
Comment 2 The County agreed that it did not maintain adequate supporting documentation
that a property purchased for the NSP program was a foreclosed property. The
County removed the expenditure from its NSP records and provided
documentation that it transferred the $60,000 expenditure to its local Surtax
funds. Accordingly, we removed the issue of the $60,000 from the final report.
However, the County needs to ensure that adequate supporting documentation is
maintained for future properties purchased for NSP activities.
Comment 3 The County stated that it had reclassified the $17,104 in salary expenditures from
the home buyer counseling index code to the correct second mortgage index code.
The County provided documentation to support this transaction. We reviewed the
documentation but were unable to determine whether the $17,104 was
reclassified. The County indicated that $35,716.85 was reclassified but failed to
provide adequate documentation to support that this amount included the $17,104
in salary expenditures.
9
Miami-Dade County, Florida, Needs to Strengthen Controls over ItsNeighborhood Stabilization Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-11-20.
Below is a raw (and likely hideous) rendition of the original report. (PDF)