oversight

The City of Augusta, GA, Demonstrated the Capacity To Obligate Its NSP1

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-24.

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

                                                                           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-1806

September 24, 2010


MEMORANDUM FOR:                   Mary D. Presley, Director, HUD Atlanta Office of Community
                                   Planning and Development, 4AD


               //signed//
FROM:          James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA

SUBJECT:       The City of Augusta, GA, Demonstrated the Capacity To Obligate Its NSP1
                Funds

                                             INTRODUCTION

We completed a review of the City of Augusta, GA’s (City) Neighborhood Stabilization Program
(NSP1). The review was conducted based on the City’s overall poor progress in obligating its
grant funds before the 18-month deadline and, in particular, obligating at least 25 percent of its
grant funds for occupants with incomes below 50 percent of the median income in the locality
(LH25 set-aside). As of June 3, 2010, the City had only committed 23.8 percent overall of its
$2.4 million NSP1 grant and only 0.9 percent of the grant toward LH25 set-aside activities.

Our objective was to determine whether the City had demonstrated the capacity to properly
obligate all NSP1 grant funds and at least 25 percent of the grant toward the LH25 set-aside by
the September 5, 2010, statutory deadline.

                                   METHODOLOGY AND SCOPE

We reviewed 100 percent of the City’s obligations toward its $2.4 million NSP1 grant and
performed detailed testing of the procurements for its obligations toward the LH25. To
accomplish our objective, we

       Obtained an understanding of Housing and Economic Recovery Act (HERA) legislation,
       program guidance, and criteria;



            Visit the Office of Inspector General on the World Wide Web at http://www.hud.gov/offices/oig
       Reviewed the City’s relevant controls including applicable policies and procedures;

       Performed site inspections of the NSP1 project sites,

       Interviewed U.S. Department of Housing and Urban Development (HUD) and City
       officials;

       Reviewed the City’s files and records including its NSP1 grant agreement with HUD, board
       minutes, annual independent audits, financial records, procurement records, contracts, and
       site development plans; and

       Analyzed data from HUD’s Disaster Recovery Grant Reporting (DRGR) system and the
       corresponding reporting to the public by the City on its Web site.

Our review generally covered the period March 1 through May 31, 2010, and we extended the
period as needed to accomplish our objective. We performed onsite work from June through
July 2010 at the City’s office located at 925 Laney Walker Boulevard in Augusta, GA.

                                         BACKGROUND

The City’s government was created by legislative act in the State of Georgia from the unification
of two governments, the City of Augusta and Richmond County. The unified government
combined all functions and began financial operations on January 1, 1996. The City is governed
by a full-time mayor, with a term of 4 years, and a 10-member commission, serving on a part-
time basis and elected to staggered terms of 4 years.

The City’s Housing and Community Development department was responsible for administering
the NSP1 grant and several other HUD programs including the Community Development Block
Grant, HOME Investment Partnerships Program, Emergency Shelter Grant, and the Economic
Development Initiative. The mission of the Augusta Housing and Community Development
department is to create positive change by promoting self-sufficiency through partnership in
economic development, quality housing, and neighborhood reinvestment.

On March 5, 2009, HUD awarded the City an NSP1 grant of more than $2.4 million. NSP1
grants were provided through HERA funding to States and units of general local government for
the redevelopment of abandoned and foreclosed-upon homes and residential properties. Section
2301(c)(1) of HERA requires the grantee to use all of its NSP1 funds not later than 18 months
after the receipt of the funds or September 5, 2010. Section 2301(f)(3)(A)(ii) further requires
that not less than 25 percent of the NSP1 funds be used for the purchase and redevelopment of
abandoned or foreclosed-upon homes or residential properties that will be used to house
individuals or families with incomes that do not exceed 50 percent of area median income, which
is the LH25 set-aside requirement. NSP Policy Alert, Volume 3, dated April 2010, defines “use”
as the obligation of funds for approved specific activities that must be linked to a specific address
and/or household.

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                                     RESULTS OF REVIEW

The City demonstrated the capacity to properly obligate its entire $2.4 million NSP1 grant by the
September 5, 2010, statutory deadline. This capacity was evidenced by the City’s substantial
progress in committing its grant funds during our review. Specifically,

       As of August 2, 2010, the City had obligated 92 percent of its NSP1 grant funds and was in
       the process of obtaining commitments for the remaining 8 percent.

       The City had fulfilled the LH25 set-aside requirement by obligating more than 25 percent of
       its funds toward low-income occupants.

       Detailed testing of the LH25 set-aside obligations revealed that the obligations were
       incurred and entered into for eligible uses and could be linked to a specific address or
       household as required by HUD’s NSP Policy Alert, Volume 3, April 2010.

       Site inspections of the LH25 set-aside project verified that the activity existed and the funds
       were obligated to be used as intended for the project. The site corresponded with the terms
       of each contract and the site development drawings and plans for the development.

       The City met reporting requirements for NSP1 grants. HUD Guidance on the
       Neighborhood Stabilization Program - Federal Register, Volume 73, No. 194, dated October
       6, 2008, requires each grantee to report on its NSP funds to HUD using the online DRGR
       system, which uses a streamlined, Internet-based format. The City met this requirement and
       the Federal Register requirement that grantees post the NSP report on a Web site for its
       citizens when it submits the report to HUD.

During the review, we identified two concerns regarding internal controls and entering
obligations before contracts were fully executed.

       The City did not have internal controls in place to perform continuous and routine
       monitoring of its obligation process to ensure that its obligations were processed as intended
       and were valid. We discussed this matter with the City during the review, and the City
       agreed to develop monitoring procedures.

       The City entered its NSP1 obligations into the DRGR database in June 2010 for its LH25
       set-aside activities. At that time, the obligations were not valid because the contracts for
       those obligations had not been signed by all parties. However, the City obtained the
       required signatures and fully executed the contracts in August 2010, ahead of the September
       5, 2010, deadline. We discussed this matter with the City, and it agreed that its obligations
       were not valid until the contracts were fully signed and executed by all parties.

Our review of the City’s actions taken or planned regarding the issues indicated its willingness to
make necessary improvements.

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                                  RECOMMENDATIONS

Based on the results of the review, this memorandum contains no recommendations.

                                   AUDITEE RESPONSE

We provided a draft memorandum to the City on September 3, 2010. We explained that the City’s
comments were not necessary, but if it chose to provide comments, we requested that they be
provided within 10 days. The City generally agreed with the memorandum and declined an exit
conference and had no comments since the report has no findings or recommendations,




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