oversight

Broward County, FL, Did Not Accurately Report Recovery Act Grant Information for Its Community Development Block Grant Recovery Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-09-19.

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

                                                                Issue Date
                                                                    September 19, 2011
                                                                Audit Report Number
                                                                     2011-AT-1017




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: Broward County, FL, Did Not Accurately Report Recovery Act Grant Information
          for Its Community Development Block Grant Recovery Program


                                   HIGHLIGHTS

 What We Audited and Why

             We audited Broward County’s Community Development Block Grant Recovery
             program funded under the American Recovery and Reinvestment Act of 2009. We
             selected the County for review because it was awarded more than $1 million in
             program funds and as of March 31, 2011, had spent 94 percent of its total
             allocation. The audit was in accordance with our audit plan to review funds
             provided under the Recovery Act.

             The audit objective was to determine whether the County administered its
             program in accordance with applicable U.S. Department of Housing and Urban
             Development (HUD) and Recovery Act requirements. Specifically, we wanted to
             determine whether the County’s program (1) met the national objective(s), (2) had
             allowable expenditures, and (3) met reporting requirements.

 What We Found


             The County demonstrated that it met the national objective and its expenditures
             were allowable. However, it did not accurately report program information on the
           Recovery Act Web site. This condition occurred because the County
           misinterpreted Federal regulations and did not have adequate controls to ensure
           proper reporting on the Recovery Act Web site. As a result, the public did not
           have access to accurate information on program funds.

What We Recommend


           We recommend that the Director of the Miami Office of Community Planning
           and Development require the County to (1) recalculate the number of jobs created
           or retained and (2) revise misstatements on the Recovery Act Web site.

           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 finding with the County during the audit. We provided the draft
           report to County officials for their comments on August 22, 2011, and discussed
           the report with them at the exit conference on August 29, 2011. The County
           provided its written comments to our draft report on August 29, 2011. In its
           response, the County agreed with our finding. The County indicated that it plans
           to implement our recommendations and it has submitted a request to change the
           necessary information on the Recovery Act Web site.

           The complete text of the County’s response, along with our evaluation of that
           response, can be found in appendix A of this report.




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                           TABLE OF CONTENTS

Background and Objective                                                          4

Results of Audit
      Finding: The County Did Not Accurately Report Program Information on the    5
               Recovery Act Web Site

Scope and Methodology                                                             9

Internal Controls                                                                11

Appendix
   A. Auditee Comments and OIG’s Evaluation                                      12




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                        BACKGROUND AND OBJECTIVE

The American Recovery and Reinvestment Act of 2009 became Public Law 111- 5 on February
17, 2009. The Recovery Act appropriated $1 billion in Community Development Block Grant
funds to State and local governments to expedite carrying out eligible activities under this
program. These funds were distributed to grantees that received Community Development
Block Grant funding in fiscal year 2008 on a formula basis. The grant program under the
Recovery Act is referred to as the Community Development Block Grant Recovery program.
The program funds are to be used to maximize job creation and economic benefit and carry out
infrastructure improvements on an expedited basis.

On August 25, 2009, Broward County was awarded more than $1 million in program funds. The
County’s Environmental Protection and Growth Management Department was created in 2008
when the County merged its urban redevelopment and planning functions with those of
environmental protection, emergency management, and consumer protection. Within this
department, the Housing Finance and Community Development Division is responsible for
administering the program. The mission of this division is to create partnerships, maximize
resources, and find new tools to develop and preserve affordable housing and improve
communities.

The County used its program funds to address capital improvements and infrastructure activities
in eligible census tracts located in the County’s participating urban cities. In addition, it
rehabilitated single-family residential structures occupied by low- and moderate-income
households with income not exceeding 80 percent of the area median income. The County was
the lead agency responsible for administering these funds, and it oversaw three city
subrecipients, which were responsible for the capital improvement and infrastructure activities.

As of June 30, 2011, the U.S. Department of Housing and Urban Development (HUD) had
reimbursed the County more than $1 million in program funds, or 100 percent of its total
allocation for five program activities. These activities consisted of (1) $361,056 for
rehabilitation of single-family residential properties, (2) $600,000 for capital and infrastructure
improvements, and (3) $71,944 in planning and administration.
                                                                                            Amount
  Activity                                                                               reimbursed by
  number               Activity name                     Activity description                 HUD
   1532      Broward County Housing Finance   Single-family residential rehabilitation      $361,056
   1533      City of Dania Beach              Capital and infrastructure improvements       $200,000
   1534      City of Oakland Park             Capital and infrastructure improvements       $200,000
   1535      Town of Pembroke Park            Capital and infrastructure improvements       $200,000
   1536      Program administration           Planning and administration                    $71,944
                                              Total                                       $1,033,000

The audit objective was to determine whether the County administered its program in accordance
with applicable HUD and Recovery Act requirements. Specifically, we wanted to determine
whether the County’s program (1) met the national objective(s), (2) had allowable expenditures,
and (3) met reporting requirements.


                                                    4
                                                RESULTS OF AUDIT

Finding: The County Did Not Accurately Report Program Information
on the Recovery Act Web Site
The County did not accurately report program information on the Recovery Act Web site.
Specifically, its quarterly reports contained errors in the (1) number of jobs created or retained
and (2) status of activities. This condition occurred because the County misinterpreted Federal
regulations and did not have adequate controls to ensure proper reporting on the Recovery Act
Web site. As a result, the public did not have access to accurate information on program funds.


To comply with the transparency and accountability requirements, section 1512(c) of the
Recovery Act requires recipients to submit quarterly reports. These quarterly reports are
submitted in federalreporting.gov and, once approved, become available to the public on the
recovery.gov Web site1. Office of Management and Budget (OMB) Memorandum 09-10,
section 1.2, requires that public benefits of Recovery Act funds be reported clearly, accurately,
and in a timely manner.

We reviewed all five quarterly reports submitted by the County as of March 31, 2011. The
County’s quarterly reporting was generally timely, but the information submitted was not always
accurate.

  Inaccurately Reported Number
  of Jobs Created or Retained


                      The County did not accurately report the number of jobs created or retained for all
                      five quarters reviewed. Section 1512(c) of the Recovery Act and OMB
                      Memorandum 09-10, section 1.2, require recipients to accurately report for each
                      quarter the number of jobs created and retained by the project or activity.

                      Discrepancies Within the Quarterly Reports
                      In two quarters, the County had a discrepancy between the number of jobs
                      reported and the narrative section that described the project or types of jobs
                      created or retained. It was unable to explain why this difference occurred.




1 The federalreporting.gov Web site works in conjunction with the recovery.gov Web site to provide a comprehensive solution for recipient
reporting of Recovery Act funds. Recipients of Recovery Act funds access the federalreporting.gov Web site to submit the quarterly reports.
Once the funding agency reviews the submitted data, those reports become available to the public via recovery.gov.



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                    Number of jobs reported on the Recovery Act Web site

Calendar year/                                            2010/ 2010/ 2010/ 2010/         2011/
quarter:                                                    1     2     3     4             1

Activity                Activity description                           Number of jobs *
  1532 Single-family residential rehabilitation              5     3       2      3        1
  1533 Capital improvement and infrastructure                -     -       1       -       -
  1534 Capital improvement and infrastructure                -     -       8       -       -
  1535 Capital improvement and infrastructure                4     -       -       -       -
  1536 Planning and administration                           -     -       -       -       -
Number of jobs according to description of jobs or           9     3      11      3        1
project narrative
Number of jobs according to number of jobs line item         9     3       12     3        3
                                             Difference      0     0        1     0        2
*For the purpose of this report, the number of jobs was rounded.


To support the jobs reported in the narrative section of the report, the County
provided a list of the employees that comprised the number of jobs reported for
each quarter by activity. We selected two employees to review from each of the
four program activities based on the most hours worked from the highest
generating quarter and found miscalculated job reporting. In addition, we found
incomplete job reporting for the administration activity.

Miscalculation of Jobs Reported
The County miscalculated the number of jobs reported. OMB Memorandum 10-
08, part 2, section 5-2.4, states that the number of jobs created or retained is
expressed as “full time equivalents (FTE).” In calculating an FTE, the number of
actual hours worked in funded jobs is divided by the number of hours
representing a full work schedule. The FTEs are adjusted to count only the
portion corresponding to the percentage of the job funded by the Recovery Act.

The County did not calculate the jobs based on the correct portion funded by the
program for all eight employees reviewed. In addition, the number of actual
hours worked for three employees did not agree with supporting documentation.
This error occurred because the County lacked adequate controls and
misunderstood how to properly compute the correct percentage funded for each
job reported.

Incomplete Number of Jobs Reported
The County also did not count all of the jobs it created or retained with program
funds. OMB Memorandum 10-08, part 2, section 5-2.2, states that recipients
must include all jobs that are funded by the Recovery Act. As of March 31, 2011,
HUD had reimbursed the County $49,790 in salary expenditures for three
employees charged to the program administration activity. However, the County
did not report any of these jobs on the Recovery Act Web site.




                                          6
                                             Employees funded by the program
                                                                  Period              Amount
                         Employee        Percentage            (month/year)         reimbursed*
                            1                25            12/2009 to 09/2010           $5,981
                            2                25            12/2009 to 02/2011          $17,097
                                             50            12/2009 to 10/2010
                             3                                                         $26,712
                                             25            10/2010 to 03/2011
                                                                   Total               $49,790
                         *This amount excludes employee benefits of $12,318 funded by the
                         program.

             The County admitted that it inaccurately calculated the number of jobs and that it
             was an issue consistent throughout all quarters. The County indicated that it
             misinterpreted the OMB guidance by not including the three County employees in
             its job calculations. It believed that it only had to report jobs based on the number
             of contractors working on each activity.

Inaccurately Reported Status of
Activities

             The County inaccurately reported the status of activities in three quarters. Section
             1512(c) of the Recovery Act and OMB Memorandum 09-10, section 1.2, require
             that the quarterly reports contain an accurate detailed list of all activities funded
             by the Recovery Act, including the name, description, and completion status of
             the activity.
                                               Number of homes completed
                               Reporting period       Recovery Act
                               (calendar/quarter)        Web site            County records
                          1         2010/1                   3                     4
                          2         2010/2                   2                     0
                          3         2010/3                   3                     3
                          4         2010/4                   4                     4
                          5         2011/1                   4                     1
                                    Total                   16                    12


             As of March 31, 2011, the County had completed 12 homes for the single-family
             residential rehabilitation activity. However, the total of homes completed
             according to the Recovery Act Web site was 16.

             The County indicated that the misstatement occurred because it inadvertently
             reported the incorrect number of homes completed in the first and second quarters
             of 2010 and in the first quarter of 2011.

             In addition, for the first 2011 quarterly report, the County did not report the
             correct number of solar powered streetlights installed for its capital improvement
             and infrastructure activity. It reported 26 streetlights when it should have
             reported 35. The County explained that initially it planned to install 26, but due
             to the decrease in cost, it was able to install more streetlights than originally
             planned.


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             These conditions occurred because the County misinterpreted the OMB guidance
             and did not have adequate controls to ensure proper reporting on the Recovery
             Act Web site. It misinterpreted the regulations by not calculating jobs based on
             the correct portion funded by the program and by not counting all of the jobs
             created or retained by the program. As a result, the public did not have access to
             accurate information on program funds.

             The County indicated that it used the Recovery Act reports to update its Web site
             dedicated to Recovery Act funds. Since the Recovery Act requires an
             unprecedented level of accountability and transparency, it is important that the
             County also have accurate information reflected in its Web site.

Conclusion

             The County did not always accurately report program information on the
             Recovery Act Web site. Specifically, its quarterly reports contained
             misstatements of (1) the number of jobs created or retained, (2) the number of
             homes completed, and (3) the number of streetlights installed with program funds.
             This condition occurred because the County misinterpreted the OMB guidance
             and did not have adequate controls to ensure proper reporting on the Recovery
             Act Web site. As a result, the public did not have access to accurate information.

             As of June 30, 2011, HUD had reimbursed the County 100 percent of its program
             allocation and all activities are completed. Therefore, we will not recommend
             that the County develop written policies and procedures to ensure accurate
             reporting of program funds on the Recovery Act Web site because the projects are
             complete and there will be no new information to report on the website.

 Recommendations

             We recommend that the Director of the Miami HUD Office of Community
             Planning and Development require the County to

             1A. Recalculate the number of jobs created or retained and maintain that
                 information in its records until the Recovery Accountability and
                 Transparency Board determines the best approach for making the
                 information available to the public on recovery.gov.

             1B. Restate the number of homes completed for the first and second quarters of
                 2010 and the first quarter of 2011 on the federalreporting.gov Web site.

             1C. Restate the number of streetlights installed for the first quarter of 2011 on the
                 federalreporting.gov Web site.

             1D. Update the County’s Web site to reflect the correct program information.



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                         SCOPE AND METHODOLOGY

Our audit objective was to determine whether the County administered its program in accordance
with applicable HUD and Recovery Act requirements. Specifically, we wanted to determine
whether the County’s program (1) met the national objective(s), (2) had allowable expenditures,
and (3) met reporting requirements.

To accomplish our objectives, we

       Reviewed and obtained an understanding of relevant Recovery Act and HUD regulations,

       Reviewed relevant County policies and procedures,

       Interviewed HUD and County officials,

       Reviewed County activity files and records,

       Reviewed reports from HUD’s Integrated Disbursement and Information System and
       federalreporting.gov,

       Reviewed subrecipients’ agreements,

       Reviewed and analyzed County financial records,

       Reviewed the County’s Web site dedicated to Recovery Act funds, and

       Conducted site visits to confirm the completion of the capital improvement and
       infrastructure activities.

The County used program funds for five activities, which included three capital improvement
and infrastructure activities, one single-family residential rehabilitation activity, and planning
and administration. HUD awarded more than $1 million in program funds and as of March 31,
2011, HUD had reimbursed the County $ 972,417, or 94 percent of its award.

We reviewed all three capital improvements and infrastructure activities for compliance with
national objective requirements because they were completed. These activities represented
$600,000, or 62 percent of the total reimbursement.

To determine whether expenditures were allowable, we selected the single-family residential
rehabilitation activity based on its high dollar amount. This activity totaled $303,890 of the total
$972,417 reimbursed. Due to the volume of transactions for this activity, we selected the 20
largest dollar transactions to review, which totaled $285,577 and represents 94 percent of the
$303,890 reimbursed.


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To determine whether the County complied with the Recovery Act’s buy American
requirement,2 we selected the largest dollar transaction from each of the three capital
improvement and infrastructure activities. These three transactions totaled approximately
$317,848, or 53 percent of the total capital improvement and infrastructure activities
reimbursement. The single-family residential rehabilitation activity was not reviewed because
this requirement did not apply to privately owned housing.

We did not perform a 100 percent review or statistical sample. We applied the results to only the
items reviewed and did not project them to the universe of activities.

As of March 31, 2011, the County had submitted five quarterly reports in federalreporting.gov,
which we reviewed for accuracy, timeliness, and completeness. To assess the reliability of data
in federalreporting.gov, we (1) determined whether the status of activities was supported by the
source documents, (2) interviewed County officials about the data, and (3) verified that the
number of jobs was accurate and complete. To support the number of jobs, the County provided
us with the list of employees that comprised the number of jobs reported. We selected two
employees to review from each of the four program activities based on the most hours worked
from the highest generating quarter.

The results of our work indicated errors in the reporting of the number of homes completed,
number of streetlights installed, and number of jobs created or retained. Therefore, we
determined that these data elements reported in federalreporting.gov were unreliable (see
finding).

We performed our onsite work from April through July 2011 at the County’s Housing Finance
and Community Development Division located at 110 Northeast 3rd Street, Suite 300, Fort
Lauderdale, FL. The audit covered the period August 2009 through March 2011 and was
expanded as necessary.

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 finding 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.




2
  Section 1605(a) of the Recovery Act provides that all of the iron, steel, and manufactured goods used for a project for the construction,
alteration, maintenance, or repair of a public building or public work be produced in the United States.



                                                                        10
                              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
               objectives:

                      Controls over program operations;
                      Controls over 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 Deficiency


               Based on our review, we believe that the following item is a significant deficiency:

                      The County did not accurately report program information on the Recovery
                      Act Web site (see finding).


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                                                      APPENDIX

Appendix A

        AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation                                          Auditee Comments

              August 29, 2011

              Mr. James D. McKay
              Regional Inspector General for Audit
              U.S. Department of Housing and Urban Development
              Office of Audit, Box 42
              Richard B. Russell Federal Building
              75 Spring Street, SW, Room 330
              Atlanta, GA 30303-3388

              SUBJECT:           Draft CDBG-R Audit!
                                 Broward County, FL, Did Not Accurately Report Recovery Act Grant Information for Its
                                 Community Development Block Grant Recovery Program

              Dear Mr. Mckay:

Comment 1     Thank you for the opportunity to review the draft audit. The following comments are offered subsequent
              to our review of the draft.

              Auditor's Conclusion:

              The County did not always accurately report program information on the Recovery Act Web site.
              Specifically, its quarterly reports contained misstatements of (1) the number of jobs created or retained
              (2) the number of homes completed, and (3) the number of streetlights installed with program funds. This
              condition occurred because the County misinterpreted the OMB guidance and did not have adequate
              controls to ensure proper reporting on the Recovery Act Website. As a result, the public did not have
              access to accurate information.

              Auditor's Recommendations:

              We recommend that the Director of the Miami HUD Office of Community Planning and
              Development require the County to

                         1A.          Recalculate the number of jobs created or retained and maintain that information in its
                                      records until the Recovery Accountability and Transparency Board determines the best
                                      approach for making the Information available to the public on recovery.gov.

                                                           Broward County Board of County Commissioners
                 Sue Gunzburger· Dale VC. Holness· Kristin Jacobs· Chip LaMarca· Ilene Lieberman· Stacy Ritter· John E. Rodstrom, Jr. • Barbara Sharief· Lois Wexler
                                                                                www.broward.org



                                                                   12
County's Response:

         We agree with this finding and we are recalculating the number of jobs created. Once
         finalized, the County will submit the reports and documentation to HUD.

Auditor's Recommendation:

         1B.      Restate the number of homes completed for the first and second quarter
                  of 2010 and the first quarter of 2011 on the FederalReporting.gov website.

County's Response:

         We agree with this finding and have recalculated the number of homes completed by the
         single-family residential rehabilitation activity as of March 31, 2011 to be 12 instead of the
         16 reported. A request to change the FederalReporting.gov website was made on August
         26, 2011. (See attached).

Auditor's Recommendation:

         1C.      Restate the number of streetlights installed for the first quarter of 2011 on the
                  federalreporting.gov Web site.

County's Response:

         We agree with this finding that the number of street lights installed was 35 and not the 26
         reported. A request to change to the FederalReporting.gov website was made on August
         26, 2011 (See attached).

Auditor's Recommendation:

         1D.      Update the County's Web site to reflect the correct information on
                  program funds.

County's Response:

         We agree with this finding. The County's website will be updated to reflect the correct grant
         program information for each CDBG-R funded project.

We appreciate the opportunity to review and discuss the draft audit.


Sincerely,


Ralph Stone, Director

Cc: Maria Ortiz, CPD Field Office Director, Department of Housing and Urban Development
Suzanne R. Fejes, Assistant Director, Housing Finance and Community Development
Yvette Lopez, Section Manager, Housing Finance and Community Development




                                        13
                         OIG Evaluation of Auditee Comments

Comment 1   The County agreed with our finding and plans to implement our
            recommendations. In addition, it has submitted a request to change the necessary
            information in federalreporting.gov.




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