oversight

The City of San Antonio, TX, Demonstrated Capacity to Administer Its Recovery Act Grant

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-12-29.

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

                                                    U.S. Department of Housing and Urban Development
                                                    Office of Inspector General, Region VI
                                                    819 Taylor Street, Suite 13A09
                                                    Fort Worth, Texas 76102

                                                    (817) 978-9309 FAX (817) 978-9316
                                                     http://www.hud.gov/offices/oig/
                                                    OIG Fraud Hotline 1-800-347-3735



                                                    MEMORANDUM NO:
December 29, 2009                                   2010-FW-1802

MEMORANDUM FOR:             Richard Lopez
                            Field Office Director and Acting Director of Community Planning
                            and Development, 6JM

           //signed//
FROM:      Gerald R. Kirkland
           Regional Inspector General for Audit, Fort Worth Region, 6AGA

SUBJECT:      The City of San Antonio, TX, Demonstrated Capacity To Administer Its
              Recovery Act Grant

                                      INTRODUCTION

The City of San Antonio, TX (City), is scheduled to receive almost $10 million from the
Department of Housing and Urban Development (HUD) under the American Recovery and
Reinvestment Act of 2009 (Recovery Act). These funds do not include grants from other
agencies. As part of our organization’s commitment to ensure the proper use of these funds, we
conducted a capacity review of the City’s operations. Our objective was to determine whether
the City had the capacity to account for Recovery Act funds and the controls to ensure that it
expends those funds only for eligible program activities.

                               METHODOLOGY AND SCOPE

We limited our review to gaining an understanding of internal controls over the administration of
Recovery Act funds, including Community Development Block Grant - Recovery (CDBG-R) and
Homelessness Prevention and Rapid Re-Housing Program (HPRP) funds. As of October 1, 2009,
the City had not issued a contract or spent any Recovery Act funds. Therefore, there were no
expenditures or outputs and outcomes to verify. Our review period was October 1, 2007, through
July 31, 2009, although we expanded the scope as necessary. We performed the review from July
through October 2009. To accomplish our objective, we

       Reviewed Recovery Act documentation and funding agreements;
       Interviewed the City’s management and staff and HUD staff;
       Reviewed City documentation such as policies and procedures, organizational charts, and
       job descriptions;
       Reviewed financial audit results; and
       Reviewed HUD’s fiscal year 2009 risk analyses for several City programs including
       Community Development Block Grant (CDBG), HOME Investment Partnerships Program
       (HOME), Emergency Shelter Grant (ESG), and Housing Opportunities for Persons with
       AIDS (HOPWA).

Our review of documentation was limited to our stated objective and should not be considered a
detailed analysis of the City’s internal controls or operations.

                                         BACKGROUND

The Recovery Act became Public Law 111.5 on February 17, 2009. The Recovery Act makes
supplemental appropriations for job preservation and creation, infrastructure, energy efficiency,
science, assistance to the unemployed, State and local fiscal stabilization, and other purposes.

According to the Office of Management and Budget’s (OMB) implementing guidance for Recovery
Act funding, the following accountability objectives are applicable to the City’s programs:

       Funds are awarded and distributed in a prompt, fair, and reasonable manner;
       The recipients and uses of all funds are transparent to the public, and the public benefits
       of these funds are reported clearly, accurately, and in a timely manner;
       Funds are used for authorized purposes; and instances of fraud, waste, error, and abuse
       are mitigated;
       Projects funded under the Recovery Act avoid unnecessary delays and cost overruns; and
       Program goals are achieved, including specific program outcomes and improved results
       on broader economic indicators.

The City will receive almost $10 million in Recovery Act formula grant funding (see table below)
and has applied for additional competitive funding.

                     Grant                 Grant number              Amount

                     HPRP                 S09-48-MY-0508             $5,974,286
                     CDBG-R               Allocation under
                                          Recovery Act                3,906,924
                     Total                                           $9,881,210




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                                     RESULTS OF REVIEW

Based upon the limited review, the City appeared to have the capacity to adequately administer its
Recovery Act funding. It had written policies and procedures, a staffing plan including adequate
segregation of duties, and a plan for using Recovery Act funding.

However, HUD’s local field office determined that there was some risk in the City’s programs
funded through HUD’s Office of Community Planning and Development (CPD), San Antonio, TX.
The City’s audited financial statements for fiscal year 2008 contained no findings related to
capacity, but CPD’s risk analyses for fiscal year 2009 indicated high to medium risk in four
programs operated by the City—high risk in the City’s CDBG program and medium risk in its
HOME, ESG, and HOPWA programs.

The San Antonio CPD assessed the following to be significant risk factors for the City for fiscal
year 2009:

       High funding levels for the programs;
       Incomplete activities and reporting errors, including inaccurate data in key compliance
       areas;
       Untimely fund commitment or violation of expenditure deadlines;
       Failure to use program income before using new funds;
       Inadequate or undetermined quality of monitoring of subrecipients by the City;
       Excessive findings from past HUD monitoring reviews;
       Other potential weaknesses, including the presence of program income, the City’s use of
       subrecipients, City funding of a variety of eligible activities, a large number of projects
       with no recent activity, and recently hired key program staff who had no program
       training; and
       Lack of recent HUD monitoring.

According to CPD’s risk analysis, most of the risk in the City’s CDBG program was due to a very
high funding level (more than $10 million in fiscal year 2009). If not for the high funding level, the
City’s CDBG program would have been medium risk, while the HOME, ESG, and HOPWA
programs would have been medium to low risk.

We applied OMB’s accountability objectives when considering CPD’s significant risk factors.
Based on the presence of written policies and procedures, written plans for the Recovery Act funds,
the lack of capacity-related findings in the audited financial statements, and CPD’s risk assessments,
we believe that the City has the capacity to adequately administer its Recovery Act funding.
However, based on CPD’s risk assessments, the San Antonio, TX, CPD should closely monitor the
City’s spending of Recovery Act funds.

                                     RECOMMENDATIONS

Since we did not identify any deficiencies, there are no recommendations.



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Appendix A

            AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                              Auditee Comments

                                                CITY OF SAN ANTONIO
                                               CITY MANAGER’S OFFICE
                        TO:            Gerald R. Kirkland; Regional Inspector General for Audit

                        FROM:          A.J. Rodriguez, Deputy City Manager

                        COPY:          Executive Leadership Team; Ben Gorzell, Finance Director; Maria Villagomez,
                                       Interim Management & Budget Director; Carlos Contreras, Intergovernmental
                                       Relations Director; Denis Cano, City Auditor

                        DATE: December 17, 2009

                        SUBJECT:            RESPONSE TO U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                            INSPECTOR GENERAL REPORT ON THE CITY OF SAN ANTONIO’S
                                            DEMONSTRATED CAPACITY TO ADMINISTER RECOVERY ACT FORMULA
                                            GRANT FUNDS

               The City of San Antonio greatly appreciates the report provided by the Office of Inspector General,
               Region VI of the U.S. Department of Housing and Urban Development (HUD) which has determined
               that the City has the capacity to adequately administer funds from the American Reinvestment and
               Recovery Act of 2009 (ARRA). The report also cites that no deficiencies were found in (ARRA)
               documentation, policies and procedures, organizational charts, job descriptions, financial audit results,
               and in conducting interviews with city management staff.

               ARRA funding awards have been received from a number of federal agencies such as the Department
               of Justice, the Department of Health and Human Services, the Department of Homeland Security, the
               Department of Energy, the Department of Housing and Urban Development, and the Federal Highway
               Administration. Currently, the City of San Antonio is estimated to receive approximately $160 million
               in ARRA funds. Of this amount, $125 million has currently been awarded to the City. The City of
               San Antonio fully intends to meet all expenditure deadlines outlined by each individual funding award
               criteria, while ensuring compliance with all federal, state, and local regulations.

Comment 1      The City of San Antonio has taken aggressive steps in ensuring adequate administration of the various
               grant opportunities provided through ARRA, which involves extensive collaboration between city
               departments, external consultants, sub-recipient partners, and citizens of San Antonio. The following
               strategies have been established to expedite the administration of our recovery awards and to reduce
               any possible risk factors associated with these funds.

               Proper Use of Funds

               With the tremendous opportunity to address a multitude of community needs with the currently
               estimated $160 million in Recovery funds, the City of San Antonio is carefully examining the adequate
               use of ARRA funds in accordance with the federal mandates from the various ARRA programs.
               Coordination of community plans and request from citizens is taken into consideration through our
               public process with the San Antonio City Council. The City is confident that all ARRA funds will be


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              ARRA CAPACITY REPORT RESPONSE
              Page 5 of 5

              utilized in accordance with expenditure deadlines as outlined in the ARRA 2009 federal register; while
              being true to the intent of the funding which is to stimulate the economy through job creation and
              retention while provided critical needs of the community.

              Management & Staff Collaboration

              All ARRA funds are being coordinated through City Manager’s Office. The City Manager provides
              monthly updates to City Council on ARRA spending plans and progress to ensure transparency with
              the public. An organization-wide staff team has been created to assist designated city departments in
              coordinating, implementing, monitoring, and reporting actions involved with ARRA funding. This
              team meets bi-weekly for strategy sessions with forward planning as its focus. Individual project
              workplans have been developed for each ARRA funding award and is closely monitored by the staff
              team to ensure program milestones are being met. A separate committee has also been assigned to
              ensure standardization of reporting methodologies used in the calculation of jobs, program
              performance, and funding expenditures as required by the ARRA.

              Staff organization and training opportunities are also an ongoing consideration by management to
              reinforce the areas of grant implementation and fiscal reporting. HUD has been an integral partner in
              bringing these training opportunities to the City for all key stakeholders involved in federally funded
              projects in the past, and we look forward to working with HUD in identifying future development
              opportunities.

              Financial Oversight

              The City of San Antonio’s Finance Department is working with each city department which has
              received ARRA funding to integrate adequate fiscal controls in the City’s SAP accounting system
              which separates ARRA sourced funds from other City sources. Revenues generated by ARRA funds
              are also tracked using the City’s SAP accounting system although program income for Recovery
              projects is not expected to be substantial.

              The Office of the City Auditor is also tasked with evaluating adequacy and effectiveness of controls
              encompassing the City’s operations which includes reliability and integrity of financial and operational
              information, effectiveness and efficiency of operations, and compliance with laws, regulations, and
              contracts related to ARRA programs.

              The City respectively acknowledges that the San Antonio HUD Office of Community Planning and
              Development has assessed some risks factors for fiscal year 2009, but believes that the above described
              strategies now in place will address these concerns. The City is fully committed to ensuring that
              ARRA funds are used in accordance with the intentions of the American Recovery and Reinvestment
              Act of 2009.




                            OIG Evaluation of Auditee Comments

Comment 1   We recognize the City’s efforts to ensure adequate administration of its grant.



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