oversight

The Office of Healthy Homes and Lead Hazard Control Needs To Improve Its Monitoring of American Recovery and Reinvestment Act Grant Recipients

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-09-30.

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

                                                                   

                                                                  Issue Date
                                                                        September 30, 2011
                                                                  Audit Report Number
                                                                          2011-CH-0003




TO:        Jon L. Gant, Director of Healthy Homes and Lead Hazard Control, L

           //signed//
FROM:      Kelly Anderson, Regional Inspector General for Audit, 5AGA

SUBJECT: The Office of Healthy Homes and Lead Hazard Control Needs To Improve Its
           Monitoring of American Recovery and Reinvestment Act Grant Recipients

                                    HIGHLIGHTS

 What We Audited and Why

             We audited the Office of Healthy Homes and Lead Hazard Control’s monitoring
             of its American Recovery and Reinvestment Act of 2009 grant recipients. The
             audit was part of the activities in our fiscal year 2011 annual audit plan. We
             selected Healthy Homes for audit based upon an internal audit suggestion
             regarding Healthy Homes’ monitoring of its grant recipients related to the
             Recovery Act. Our objective was to determine whether Healthy Homes
             monitored its recipients of Recovery Act grants in accordance with Recovery Act
             and HUD requirements.

 What We Found

             Healthy Homes did not maintain documentation in accordance with its
             requirements to support payments to four recipients totaling more than $4.2
             million of the nearly $5 million in grant awards. The payments were made to
             reimburse the recipients for their claimed grant expenses. Additionally, Healthy
             Homes did not review the voucher requests for payments in a timely manner.

             Documentation to support the recipients’ voucher requests for payment was either
             missing or not adequate. Healthy Homes accepted operating ledgers, billing
             summaries, email lists, a list of expenditures, budgets showing the current request
           by category, and copies of check stubs as support for the voucher requests for
           payment.

           Healthy Homes also did not ensure that recipients’ working file included the
           required documents and reports such as annual and quarterly documents and
           reports.


What We Recommend

           We recommend that HUD’s Director of Healthy Homes and Lead Hazard Control
           (1) obtain adequate documentation to support the payment of $4,247,991 in
           Recovery Act funds as cited in this finding, (2) ensure that recipients’ voucher
           requests for payment are reviewed in a timely manner, (3) implement adequate
           procedures and controls to correct voucher processing deficiencies, and (4)
           implement adequate policies and procedures to ensure that recipients’ files
           contain the documentation and reports required by Healthy Homes’ issued
           guidance.

           For each recommendation 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 provided our review results to the Director of Healthy Homes and Lead
           Hazard Control during the audit. The Director declined our offer for an exit
           conference.

           We asked the Director to provide comments on our discussion draft audit report
           by September 13, 2011. The Director provided written comments, dated
           September 12, 2011. The Director disagreed with the finding. The complete text
           of the auditee’s response, along with our evaluation of that response, can be found
           in appendix B of this report.




                                            2
                            TABLE OF CONTENTS

Background and Objective                                                           4

Results of Audit
       Finding 1: Healthy Homes Needs to Improve Its Monitoring of Recovery Act
                  Grant Recipients                                                 5

Scope and Methodology                                                             12

Internal Controls                                                                 13

Appendixes
   A. Schedule of Questioned Costs                                                15
   B. Auditee Comments and OIG’s Evaluation                                       16
   C. Federal Requirements                                                        20
   D. Auditee Response to Draft Finding Outline                                   25




                                            3
                      BACKGROUND AND OBJECTIVE

Office of Healthy Homes and Lead Hazard Control. The U.S. Department of Housing and
Urban Development’s (HUD) Office of Healthy Homes and Lead Hazard Control was
established in 1991 to eliminate lead-based paint hazards in America’s privately-owned and low-
income housing.

The American Recovery and Reinvestment Act was signed into law on February 17, 2009. The
Recovery Act is an effort to jumpstart the economy, create or save jobs, and address neglected
challenges. It includes measures to modernize the Nation's infrastructure, enhance energy
independence, expand educational opportunities, preserve and improve affordable health care,
provide tax relief, and protect those in great need.

The Recovery Act provided $100 million to Healthy Homes to provide funds to State and local
governments, and academic and not-for-profit firms to develop cost-effective ways to reduce
lead-based paint hazards and other health hazards in the home environment that produce serious
diseases and injuries in children. Appropriation for the Recovery Act has a 3-year obligation
authority that expires on September 30, 2011.

Our objective was to determine whether Healthy Homes monitored its recipients of the Recovery
Act grants in accordance with the Recovery Act and HUD requirements. Specifically, whether
Healthy Homes established and maintained its recipients’ working files in accordance with the
Recovery Act and its requirements.




                                               4
                                RESULTS OF AUDIT

Finding 1: Healthy Homes Needs to Improve Its Monitoring of
Recovery Act Grant Recipients
Healthy Homes needs to improve its monitoring of its Recovery Act grant recipients. It did not
ensure that recipients’ requests for reimbursement were adequately supported by original
documentation and reviewed in a timely manner, and that the respective recipient’s working file
included the required documentation and reports. Its representative’s desk guide had not been
updated to comply with the monitoring process for the Recovery Act, other guidance used by the
representatives was not in agreement, and additional documentation in support of the requests for
reimbursement was not always requested. As a result, HUD lacked assurance that more than
$4.2 million in Recovery Act funds was used appropriately.


 More Than $4.2 Million in
 Program Funds Disbursed Not
 Adequately Supported

              Healthy Homes did not ensure that recipients’ requests for reimbursement were
              adequately supported by original documentation. It awarded Recovery Act grants
              to 53 recipients for its four programs funded under the Recovery Act. The four
              programs were its Demonstration grant, Technical Studies grant, Lead-Based
              Paint Hazard Control grant, and Lead-Based Paint Hazard Reduction
              Demonstration grant. We reviewed four recipients, one from each program, that
              were awarded nearly $7.5 million in Recovery Act funds. As of April 22, 2011,
              the four recipients had received reimbursements totaling more than $4.9 million
              without providing adequate documentation, including original documents, to
              support the nearly $4.25 million in expenses claimed (86 percent). See the
              schedule below for details.

                                                              Program funds
                                                                                    Unsupported
                                 Most                                                or missing
                                recent                                                 original
           Grant number       payment        Award    Reimbursed Adequate            documents
          AZLHH0173-08        4/22/2011      $875,000    $503,058      $0               $503,058
          CALHB0415-08        4/20/2011     3,000,000   2,414,347 576,742              1,837,605
          DCLHD0193-08        3/22/2011     2,616,843   1,505,349 114,766              1,390,583
          ILLHH0191-08        4/12/2011       973,982     521,812   5,067                 516,745
              Totals                       $7,465,825 $4,944,566 $696,575             $4,247,991



                                               5
        Documentation provided by recipients was inadequate and at times not provided
        in support of the requested amount. In addition to reviewing supporting
        documentation for each request and as part of Healthy Homes’ monitoring
        responsibilities, at least once per year and for any one voucher from each
        recipient, Healthy Homes was required to review original supporting
        documentation (see Appendix C for all criteria and explanations of requirements).
        Original copies of supporting documentation were not always requested. The
        front end risk assessment required receipts and invoices to justify expenditures.
        Instead, representatives accepted recipients’ operating ledgers, billing summaries,
        email lists, expenditures lists, budgets showing the current request by category,
        and copies of check stubs as support for the voucher request for payment.
        Healthy Homes’ requirements state that the representative may approve the
        payment request and its supporting documentation using the Line of Credit
        Control System including faxed or email versions. The requests were to include a
        detailed breakdown of the costs claimed. However, original copies of this
        material must be sent by mail to Healthy Homes and maintained in the
        representative’s working file within 5 days of the payment request.

        Healthy Homes did not always request additional supporting documentation to
        review. Of the more than $4.9 million reimbursed to the grant recipients, more
        than $4.25 million did not have adequate support, including original documents,
        for the expenses claimed. Healthy Homes was revising its policies to reflect
        alternate methods for submitting adequate documentation in support of voucher
        payment requests. Chapter 2.D. of Healthy Homes Grants Management Desk
        Guide states a critical component of monitoring is reviewing the grantee's
        payment requests and financial reports.

        The Recovery Act requires that grant recipients expend 50 percent of their award
        by the end of the second year of its grant period. We reviewed the grants for the
        four recipients and based upon the amount reimbursed to them, they all met the 2-
        year expenditure requirement. However, the representatives’ files for the four
        recipients contained adequate documentation to support $696,575 of the more
        than $7.4 million that was paid to them. This was more than $3 million less than
        the required 50 percent requirement ($7,465,825 x 50 percent = $3,732,913). The
        following schedule shows the award amount, amount reimbursed and its
        corresponding percentage of the award amount, and amount that was adequately
        supported and its corresponding percentage of the award amount.

                                             Percentage        Amount
                                              expended        adequately   Percentage
                                Amount           and         supported by expended and
 Grant number   Award         reimbursed     reimbursed     documentation   supported
AZLHH0173-08   $875,000         $503,058          57                    $0      0
CALHB0415-08 3,000,000          2,414,347         80              576,742      19
DCLHD0193-08 2,616,843          1,505,349         58              114,766       4
 ILLHH0191-08    973,982          521,812         54                 5,067     .5
    Totals    $7,465,825       $4,944,566       66.2             $696,575     14.1

                                         6
Voucher Payment Requests Not
Reviewed In a Timely Manner

            Healthy Homes did not review the voucher requests for payment in a timely
            manner. The voucher requests must be reviewed and the expenditures eligibility
            verified before payment is approved. Healthy Homes June 2003 Grants
            Management Desk Guide, Chapter 2.D., states that representatives must approve
            or reject payment requests within 5 working days of the grantee’s entry into the
            Line of Credit Control System. The representative’s working files did not always
            clearly identify the voucher approval dates for the respective recipients.
            Therefore, using the voucher request submission date, the date approved by
            Healthy Homes, when identified, or the Line of Credit Control System report
            history date, 12 of the 60 (20 percent) vouchers reviewed were from 1 to 21 days
            after the 5 business day requirement for reviewing the voucher request and
            supporting documents. We made minor changes to the schedule below based on
            Healthy Homes’ comments to our draft finding outline.

                                                                            Number of
                                                                             days the
                                                                              review
                                                Calendar     Business      exceeded the
                       Date                      days to     days to        5 business
                     voucher   Approval          review       review           day
  Grant number       received     date          voucher      voucher       requirement
  AZLHH0173-08       4/22/2011 5/02/2011           10            6               1
                     4/14/2011 4/23/2011            9            7               2
  CALHB0415-08
                     4/20/2011 5/04/2011           14           10               5
                      1/7/2010 2/16/2010           40           26              21
                     2/17/2010 3/10/2010           21           15              10
                     3/11/2010 3/24/2010           13            9               4
  DCLHD0193-08        4/8/2010 5/03/2010           25           17              12
                     6/17/2010 6/25/2010            8            7               2
                     8/26/2010 9/15/2010           20           13               8
                    10/28/2010 11/18/2010          21           14               9
                     7/20/2010 7/28/2010            8            6               1
  ILLHH0191-08
                     10/8/2010 10/21/2010          13            8               3


Recipients’ Working Files Not
Properly Maintained

            Healthy Homes did not ensure that recipients’ working files included the
            documents and reports as required by its Recovery Act Grant Provisions terms

                                            7
and conditions. Working files did not always include the annual and quarterly
documents and reports. Annual Race and Ethnic Data Reporting Form (form
HUD-27061) data reporting on program participants and the annual Section 3
Summary Report, Economic Opportunities for Low- and Very Low-Income
Persons (form HUD-60002) were not always included in the recipients’ working
file. Also missing from the working files were the following required quarterly
documents: eLogic Models, Performance Progress Reports (SF-PPR), Federal
Financial Reports (Standard Form 425), and progress reports results letters.
Additionally, the Request Voucher for Grant Payment (form HUD-27053) forms
were not original and the Federal Financial Reports (Standard Form 425) were not
signed originals. In addition, the respective grant recipient’s working file did not
include the recipients’ written policies and procedures, Office of Management and
Budget Circular A-133 audit, contractor agreement, memorandum of agreement,
memorandum of understanding, quality assurance plan, and an annual risk
analysis.

Healthy Homes did not ensure that grant recipients followed the Davis-Bacon and
Buy American Acts. According to the general provisions of the Recovery Act,
the Davis-Bacon Act applies to contractors and subcontractors performing on
federally funded or assisted contracts in excess of $2,000 for the construction,
alteration, or repair including painting and decorating. Federal agencies providing
grants, cooperative agreements, and loans under the Recovery Act must ensure
that the standard Davis-Bacon contract clauses found in 29 CFR (Code of Federal
Regulations) 5.5(a) are incorporated into any resultant covered contracts that
exceed $2,000 for construction, alteration or repair including painting and
decorating. According to HUD’s Office of Labor Relations, Regional Labor
Relations Officer, private owners are covered as Section 1606 states …“projects
funded directly by or assisted in whole or in part by and through the Federal
Government pursuant to this Act shall be paid wages at rates not less than those
prevailing on projects of a character similar in the locality as determined by the
Secretary of Labor.” Single and multifamily properties regardless of ownership
are subject to the Act as long as the cost exceeds the $2,000 requirement. In
addition, all buildings, whether public or privately owned, are subject to the Act.
There are no exceptions to the first 4 floors of a building. Also, if Recovery Act
funding is used for construction, alteration, or repair, the materials used should be
produced in America.

Since the inception of the programs, there have been a total of eight reporting
periods beginning with the quarter April-June 2009 and ending with the quarter
January-March 2011. The following schedule shows the number of missing
documentation types in each recipient’s working file.




                                  8
   Documentation type          Annual documentation not maintained in recipients’ working file  
    required annually       AZLHH0173-08 CALHB0415-08 DCLHD0193-08 ILLHH0191-08  
Annual Race and Ethnic
Data Reporting Form                                                                                  
(form HUD-27061)                 None                   1                2               2
Annual Section 3
Summary Report (form                                                                                 
HUD-60002)                       None                   2                1             None
Annual Risk Analysis              1                     1                               1            


                              Quarterly documentation not maintained in recipients’ working file
  Documentation Type
                                                                                     ILLHH0191-
  Required Quarterly
                            AZLHH0173-08 CALHB0415-08 DCLHD0193-08                        08
Quarterly Performance
Progress Reports (SF-
PPR)                               4                    2                6               7
Quarterly eLogic Model             8                    7                7               7
Quarterly Progress Report
System review results
letter.                          None                 None               1               2
Original & Signed
Quarterly Federal
Financial Report
(Standard form 425)                8                    8                4               6

 General documentation           Documentation not maintained in recipients’ working file
          type              AZLHH0173-08 CALHB0415-08 DCLHD0193-08 ILLHH0191-08
Original Request
Voucher for Grant
Payment forms (form
HUD 27053)                       16                    7                2               19
Written policies and
procedures.                       1                    1                1                1
Compliance with OMB
Circular A-133                    1                  None               1

Quality Assurance Plan            1              Not applicable   Not applicable       None
Contractor(s)
memorandum of
agreement or
understanding                     1                  None               1              None
Compliance with the
Davis-Bacon Act.                None                   1                1          Not applicable
Compliance with ”buy
American”                       None                   1                1          Not applicable

                                             9
             According to the Healthy Homes’ Programs Division Director, the race and ethnic
             data report is a HUD requirement and not a Recovery Act requirement and
             therefore, it was not required to be documented in recipients’ working files.
             Because the front end risk assessment required 100 percent on-site monitoring,
             the annual risk analysis was not performed. Due to a system glitch, the quarterly
             eLogic Model reports could not be documented. A review by the representatives
             of the contract agreements between the recipient and its contractors was not
             required. Recipients’ are responsible for maintaining all documentation.
             Accordingly, recipients were made aware of their responsibility to comply with
             the Davis-Bacon Act. There was no need to include all hard copy documents in
             the working file as long as the documents can be obtained through other means.
             The Director further stated that the eLogic Model reports would no longer be a
             requirement in the fiscal year 2011 notice of funding availability.

             The technical assistant specialist stated that as of the September 1, 2010, revision
             to the terms and conditions, the quarterly performance progress report was no
             longer required.

             Although HUD Handbook 2210.17 REV-2, paragraph 5-14.b. does not require
             specific documents to be maintained in the recipient’s working file, Healthy
             Homes’ terms and conditions, dated April 24, 2009, states that representatives are
             responsible for establishing and maintaining a working file to include but not
             limited to the following: quarterly Federal Financial Report (Standard Form 425);
             quarterly performance progress reports; and quarterly eLogic models. Annual
             required reports include the Race and Ethnic Data Reporting Form (form HUD-
             27061); and Section 3 Summary Report, Economic Opportunities for Low- and
             Very Low-Income Persons, (form HUD-60002).

Conclusion

             Healthy Homes needs to improve its monitoring of grant recipients for its
             Recovery Act grants. Healthy Homes lacked adequate procedures and controls to
             ensure that its recipients complied with Recovery Act and its requirements. It did
             not ensure that adequate supporting documentation was provided for voucher
             payment requests, review was completed in a timely manner for the voucher
             payment requests, and that the grant recipients’ working files included the
             required documentation.

Recommendations

             We recommend that the Director of HUD’s Office of Healthy Homes and Lead
             Hazard Control




                                              10
1A.   Obtain adequate documentation to support the payment of $4,247,991 in
      Recovery Act funds as cited in this finding,

1B.   Ensure that recipients voucher requests for payment are reviewed in a
      timely manner,

1C.   Implement adequate procedures and controls to correct its voucher
      processing deficiencies,

1D.   Implement adequate policies and procedures to ensure that its recipient
      files contain the documentation and reports as required by its issued
      guidance.




                              11
                        SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

              Applicable laws; Federal Register volume 73, no. 92, dated May 12, 2008 ; 24
               CFR Parts 35, 84, 85, and 135; OMB Circular A123 and A-133; and Recovery
               Act Sections 1512, 1605 and 1606.

              HUD’s grant recipients’ files; terms and conditions dated April 7, 2009, April 24,
               2009, and September 1, 2010; front end risk assessment dated June 23, 2009;
               HUD’s 1044 agreements; Healthy Homes Grants Management Desk Guide dated
               June 2003, updated on November 23, 2010; policy guidance number 2001-03
               dated October 1, 2001; grantee reporting and program guidance dated September
               17, 2009; Healthy Homes grantee reporting requirement dated April 2009; HUD’s
               2008 Super Notice of Funding Availability; HUD Handbook 2210.17 REV-2,
               paragraph 5-14.b; and Line of Credit Control System report (hardcopy document)
               with history date.

              We interviewed key personnel at Healthy Homes and HUD’s Office of Labor
               Relations.

We established our sample by using the U.S. Army Audit Agency statistical sampling system,
with a 90 percent confidence level, single random numbers for the Healthy Homes
Demonstration Grant, Healthy Homes Technical Studies Grant, and the Lead Based Paint Hazard
Control Grant programs and selected the first grant recipient in each of the 3 programs. We
selected the only applicant for the Lead Based-Paint Hazard Reduction Demonstration Grant
program. We reviewed a total of 4 grant recipients. 

We performed our on-site audit work from March 14 through June 3, 2011 at Healthy Homes.
The audit covered the period April 10, 2009 through January 31, 2011, and was expanded as
determined 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 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.




                                               12
                              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:

                   ffectiveness and efficiency of operations - Policies and procedures that
                    E
                   management has implemented to reasonably ensure that a program meets its
                   objectives.

                  Reliability of financial reporting - Policies and procedures that management
                   has implemented to reasonably ensure that valid and reliable data are
                   obtained, maintained, and fairly disclosed in reports.

                  Compliance with applicable laws and regulations - Policies and procedures
                   that management has implemented to reasonably ensure that resource use is
                   consistent with laws and regulations.

               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 and efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws or regulations on a
               timely basis.




                                               13
    Significant Deficiencies

                    Based on our review, we believe that the following items are significant
                    deficiencies:

                       Healthy Homes did not ensure its grant recipients’ voucher payment
                        requests contained the adequate documentation, including the original
                        documents, to support the use of Recovery Act funds (see finding).

                       Healthy Homes did not ensure that its grant recipients’ voucher payment
                        requests were reviewed in a timely manner (see finding).
 
                       Healthy Homes did not ensure that its grant recipients’ working files
                        included the required documents and reports (see finding).




                                                 14
                                      APPENDIXES

Appendix A

                   SCHEDULE OF QUESTIONED COSTS

                       Recommendation
                           number            Unsupported 1/
                             1A                  $4,247,991
                            Totals               $4,247,991

 1/     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.




                                               15
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation                        Auditee Comments

                           U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                             WASHINGTON, DC 20410-3000


              OFFICE OF HEALTHY HOMES AND
              LEAD HAZARD CONTROL


                                                September 12, 2011


              MEMORANDUM FOR: Kelly Anderson, Regional Inspector General for Audit,
                                   (Region V), 5AGA

              FROM: Jon L. Gant, Director, Office of Healthy Homes and Lead Hazard Control, L

              SUBJECT: Response to Findings Identified in OIG Audit Report Number 2011-CH-
                          101X of American Recovery and Reinvestment Act Grantee
                          Monitoring

                  The Office of Inspector General's (OIG’s), Regional Inspector General for Audit
              in Region V, conducted an audit of the Office of Healthy Homes and Lead Hazard
              Control's (OHHLHC) monitoring of recipients of funding under the American
              Recovery and Reinvestment Act of 2009 (ARRA). The OIG issued the draft Audit
              Report Number 2011-CH-101X to OHHLHC for comment. During the audit,
              potential discrepancies were brought to the attention of the OHHLHC concerning four
              ARRA awardees. As a result of the OIG’s audit, one finding was issued in the draft
Comment 1     Report and is addressed in this response. However, in its July 15, 2011 response to the
              OIG Discussion Draft, the OHHLHC strongly disagreed with the finding that
              “Healthy Homes Did Not Adequately Monitor Its Recovery Act Grant Recipients” by
              highlighting the Office's extensive ongoing monitoring of both performance and
              financial reports. Nonetheless, the OHHLHC has made changes to its monitoring
              process in an effort to incorporate recommendations noted in the audit report.

              Finding 1: Healthy Homes Did Not Adequately Monitor Its Recovery Act Grant
              Recipients

                  Based on the review conducted, the OIG determined that “[OHHLHC] did not
              adequately monitor its Recovery Act grant recipients. It did not ensure that recipients’
              requests for reimbursement were adequately supported and reviewed in a timely
              manner, and that the respective recipient’s working file included the required
              documentation and reports. Its representative’s desk guide had not been updated to
              comply with the monitoring process for the Recovery Act, other guidance used by the
              representatives was not in agreement, and additional documentation in support of the 



                                                16
Ref to OIG Evaluation                       Auditee Comments

              requests for reimbursement was not always requested. As result, HUD lacked
              assurance that more than $4.2 million in Recovery Act funds was used appropriately.”
              The OIG determined that OHHLHC needed to improve its monitoring of ARRA grant
              recipients and recommended the following corrective actions:

                  1A. Obtain adequate documentation to support the payment of $4,247,991 in
                      Recovery Act funds as cited in this finding,
                  1B. Ensure that recipients’ voucher requests for payment are reviewed in a
                      timely manner,
                  1C. Implement adequate procedures and controls to correct voucher processing
                      deficiencies, and
                  1D. Implement adequate policies and procedures to ensure that recipients’ files
                      contain the documentation and reports required by [OHHLHC’s] issued
                      guidance.

              Response to OIG Recommendation 1A: Obtain adequate documentation to support
              the payment of $4,247,991 in Recovery Act funds as cited in this finding.

Comment 2         Pursuant to OHHLHC procedures and in conformance with OHHLHC Desk
              Guide requirements, adequate documentation was received to support payment of
              reimbursement requests cited in this finding. Staff approved LOCCS payment
              requests following receipt of voucher payment requests and Part 3 Financial forms
              (Form HUD 96006), as well as, any other requested back-up documentation submitted
              by the grant recipient. Nonetheless, the Office has reinforced current financial
              monitoring policy with Government Technical Representatives (GTR) as stated in the
              OHHLHC Desk Guide and Policy Guidance Issuance PGI 2010-01 (effective
              December 1, 2010).

                  In response to the recommendation, the OHHLHC has requested additional
              supporting documentation for payment cited in this finding from any recipients that
              had not complied with the existing requirements stated in PGI 2010-01. In addition,
              the OHHLHC will ensure that all ARRA grantees submit all supporting
              documentation for one reimbursement, chosen by the GTR, as part of the OHHLHC’s
              annual financial monitoring policies and procedures.

              Response to OIG Recommendation 1B: Ensure that recipients’ voucher requests for
              payment are reviewed in a timely manner.

Comment 2   H      Although the OHHLHC’s own review of the data found only 11 of the 60
              vouchers exceeding the time frame (2 of the 11 exceeded the time due to the
              illness/hospitalization of the GTR and 3 only exceeded the time established by 1 or




                                               17
Ref to OIG Evaluation                        Auditee Comments

              2 business days), the OHHLHC has reinforced with staff the Desk Guide, FERA, and
              PGI 2010-01 (effective December 1, 2010) requirement to send by mail within five
              (5) business days the original documents of the Request Voucher for Grant Payment
              and supporting documentation for inclusion in the GTR’s grantee working file.

              Response to OIG Recommendation 1C: Implement adequate procedures and
              controls to correct voucher processing deficiencies.

Comment 3         The OIG Audit Report does not fully explain the basis for this recommendation.
              The OHHLHC maintains that its procedures and controls for processing
              reimbursement requests are compliant and sufficient. Nevertheless, the OHHLHC
              will reinforce current procedures and controls with staff to ensure voucher processing
              measures are fully understood and applied.

              Response to OIG Recommendation 1D: Implement adequate policies and
              procedures to ensure that its recipient files contain the documentation and reports
              as required by its issued guidance.

Comment 2   H     As part of its ongoing monitoring of award recipients, the OHHLHC conducts
              onsite reviews of grantee records. The current monitoring policy of the Office is
              consistent with the Department’s requirements. Nevertheless, the OHHLHC has
              issued guidance to GTRs regarding what documentation is to be maintained in grant
              recipient files when conducting monitoring visits. The documentation maintained in
              grantee files includes original or copies of: the Federal Financial Report (Standard
              Form 425), quarterly performance progress reports, quarterly eLogic models, Race
              and Ethnic Data Reporting Form (form HUD-27061) and Section 3 Summary Report,
              Economic Opportunities for Low- and Very Low-Income Persons, (form HUD-
              60002). The OHHLHC will continue to review grantee files for adherence to the
              reporting and documentation requirements above during scheduled onsite monitoring
              events.

                 Thank you for assisting the OHHLHC to improve its oversight and monitoring of
              ARRA grants. Insights learned from the OIG audit will enhance accountability and
              make certain that ARRA funds are expended properly. 




 




                                               18
                        OIG’s Evaluation of Auditee Comments

Comment 1   See Appendix D for the full text of Healthy Homes’ response to the draft finding
            outline

Comment 2   Healthy Homes failed to provide documentation to support that this finding has
            been corrected. However, Healthy Homes will have the opportunity to resolve the
            finding during the audit resolution process.

Comment 3   Healthy Homes did not review the voucher requests for payment in a timely
            manner. The voucher requests must be reviewed and the expenditures eligibility
            verified before payment is approved.




                                            19
Appendix C

                           FEDERAL REQUIREMENTS

American Recovery and Reinvestment Act of 2009 Subtitle A - Transparency and Oversight
Requirements, section 1512(c) states that at the end of each calendar quarter, each recipient that
received recovery funds from a Federal agency must submit a report to that agency that contains
detailed information on any subcontracts or subgrants awarded by the recipient to include the
data elements required to comply with the Federal Funding Accountability and Transparency Act
of 2006.

Title XVI – General Provision of the Recovery Act includes Sections 1605 and 1606. Use of
American iron, steel, and manufactured goods at section 1605 (a) states that none of the funds
appropriated or otherwise made available by this Act may be used for a project for the
construction, alteration, maintenance, or repair of a public building or public work unless all of
the iron, steel, and manufactured goods used in the project are produced in the United States.
Section 1606 states that notwithstanding any other provision of law and in a manner consistent
with other provisions in this Act, all laborers and mechanics employed by contractors and
subcontractors on projects funded directly by or assisted in whole or in part by and through the
Federal Government pursuant to this Act must be paid wages at rates not less than those
prevailing on projects of a character similar in the locality as determined by the Secretary of
Labor in accordance with subchapter IV of chapter 31 of Title 40, United States Code. With
respect to the labor standards specified in this section, the Secretary of Labor will have the
authority and functions set forth in Reorganization Plan Numbered 14 of 1950 (64 Stat. 1267; 5
U.S.C. (United States Code) App.) and section 3145 of Title 40, United States Code.

Healthy Homes’ Recovery Act Grant Provisions, established terms and conditions, dated April 7,
2009, revised on April 24, 2009, and again on September 1, 2010. The April 7, 2009 terms and
conditions states that representatives are responsible for establishing and maintaining a working
file to include but not limited to the following: quarterly Federal Financial Report (Standard
Form 425); quarterly Performance Progress Reports (SF-PPR Recovery); and quarterly eLogic
Models. Annual required reports include the Race and Ethnic Data Reporting form HUD-27061;
and form HUD-60002, Economic Opportunities for Low- and Very Low-Income Persons
(Section 3). Monitoring is the responsibility of the Departments official representative or
designee may review and monitor the practices of the grantee to determine whether it is in
compliance with this Agreement or other requirements that arise as a result of the grant award.
Each representative will also provide performance monitoring by tracking grantee’s progress in
meeting the goals and objectives of the program. Original vouchers shall be submitted for work
performed and shall be supported by a detailed breakdown of the cost(s) claimed. The April 24,
2009 version requires that all laborers and mechanics employed by contractors and
subcontractors on projects funded directly by or assisted in whole or in part by and through the
Federal Government pursuant to the Recovery Act must be paid wages at rates not less than
those prevailing on projects of a character similar in the locality as determined by the Secretary
of Labor. Federal agencies providing grants, cooperative agreements, and loans under the
Recovery Act must ensure that the standard Davis-Bacon contract clauses found in 29 CFR

                                                20
5.5(a) are incorporated into any resultant covered contracts that exceed $2,000 for construction,
alteration or repair (including painting and decorating). It also states that if the Grantee contracts
or sub-awards funds under this agreement with a person or entity to perform work under this
award, the grantee must include in the contract or subaward agreement such provisions as may
be necessary to ensure that all contractors and subgrantees comply with the requirements of the
grant and reporting provisions as set forth in these terms and conditions or as established by
HUD. Pursuant to Reorganization Plan No. 14 and the Copeland Act, 40 U.S.C. 3145, the
Department of Labor has issued regulations at 29 CFR Parts 1, 3, and 5, to implement the Davis-
Bacon and related Acts. Healthy Homes September 2010 terms and conditions stated that
original vouchers must be submitted for work performed and must be supported by a detailed
breakdown of the cost(s) claimed. Healthy Homes must receive a signed original document. If
the Grantee contracts or subawards funds under this agreement with a person or entity to perform
work under this award, the Grantee shall include in the contract or subaward agreement such
provisions as may be necessary to ensure that all contractors and subgrantees comply with the
requirements of the grant and reporting provisions as set forth in these terms and conditions or as
established by HUD.

Healthy Homes front end risk assessment, June 23, 2009, for voucher payment includes the
following: representatives are responsible for reviewing and approving voucher requests for
payment through the Line or Credit Control System within 5 business days of the Line or Credit
Control System date request for reimbursement. Costs are to be verified for eligibility. Original
documentation must be sent to the representative by mail within 5 business days. And not less
than once per year, require that all supporting documentation for any requests for reimbursement
be submitted to the representative regardless of the amount of reimbursement being requested

Front end risk assessment factor 4 states that representatives must review voucher requests and
expenditures within 5 days of receipt of supporting documentation and verify that expenses are
eligible for reimbursement. All expenditures must be approved before approval of vouchers.
Representatives maintain documentation and vouchers as part of the representatives working file.
It also states that representatives will also request additional back up documentation at least once
per year over the grant period of performance, and review these materials as part of onsite
monitoring visits. Additionally, factor 4 states the following: 1) Recipients will submit their
Line of Credit Control System request, and then submit the backup documentation (using the
Healthy Homes Form 3: Financial Reporting) to the representative for review. If any
information seems unusual, additional back-up documentation will be requested, such as receipts
and invoices, to justify expenditures. 2) Representatives will request additional back-up
documentation at least once per year over the grant period of performance, and review these
materials as part of onsite monitoring visits. 3) Recipient's will forward a hardcopy of the
payment requests along with supporting documentation verifying expenses. 4) Representatives
will maintain documentation and vouchers as part of their working files.

Factor 5 requires compliance with the following Office of Management and Budget Circulars: A-
21 - Cost Principles for Educational Institutions, A-87 - Cost Principles for State, Local, and
Indian Tribal Governments, A-102 - Grants and Cooperative Agreements with State and Local
Governments (Implemented by 24 CFR Part 85), A-110 - Uniform Administrative Requirements
for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-
Profit Organizations (Implemented by 24 CFR Part 84), A-122 - Cost Principles for Non-Profit

                                                 21
Organizations, and A-133 - Audits of States, Local Governments, and Non-Profit Organizations
(Implemented by 24 CFR Part 84 and Part 85)

Front end risk assessment factor 9 reporting and documentation, states that within 120 days,
grantees must submit information related to the environmental review and its written policies and
procedures. For the Healthy Homes Demonstration and Technical Studies grants, grantees are
also to develop a quality assurance plan. In addition, it states that existing reporting systems and
documentation requirements will be used to track and monitor Recovery Act grantees. Examples
of required documentation include updated work plans and benchmarks showing quarterly
progress, quality assurance plans, environmental reviews, and grantees’ written policies and
procedures.

Front end risk assessment factor 10 states that monitoring assesses the effectiveness of general
controls. It also states that a risk analysis is conducted by representatives for all grants, during
the fourth quarter of each fiscal year. Ongoing monitoring involves continuous communication
and evaluation through telephone calls, e-mails, and written communications; analysis of reports
and audits; and meetings. During the first year of the grant, Healthy Homes provides on-site
monitoring to its grantees. The Recovery Act recipients will also receive remote monitoring
approximately 6 months before the end of the second year of performance. Remote monitoring
ensures that the grantees are on track for completing all required draw downs and are not at risk
for grant deobligation. It also requires documenting all interaction and evaluations.

Front end risk assessment appendix 1, paragraph 9, process for validating payment requests
against an obligation, states that the voucher process requires grantees to enter their payment
requests into HUD’s voice response system and forward a hardcopy of the voucher along with
supporting documentation verifying expenses to the representative the same day the voice system
request is made. Within 5 days of receipt of supporting documentation, representatives review
the voucher request and expenditures, and validate that expenses are eligible for reimbursement
in accordance with grant agreement. Grantees are required to use HUD’s voice system when
requesting payments of vouchers. Grantees are eligible for reimbursement when a Request
Voucher for Grant Payment form, form HUD-27053, is submitted along with part 3 of the
financial reporting statement. Paragraph 10(F) further states that representatives maintain
official copies of all commitments, obligating documents, and payment of funds.

Healthy Homes’ June 2003 Grants Management Desk Guide states that representatives are
responsible for the technical and financial, oversight and evaluation of the recipient’s
performance and may approve Line of Credit Control System payment requests via fax with
supporting back-up documentation, but original copies of this material must be sent by mail for
the representative files. Representatives are to evaluate and document a grantee’s quarterly
performance and maintain the evaluation and documentation in the working file. A critical
component of monitoring is reviewing the grantee’s payment requests and financial reports. A
risk analysis is conducted by representatives for all grants, during the first quarter of each fiscal
year. The representative must approve or reject payment requests within 5 working days of the
grantee's entry into the Line of Credit Control System. Representatives may approve Line of
Credit Control System payment requests via fax with supporting back-up documentation, but
original copies of this material must be sent by mail for the representative files. Representatives
should regularly request complete sets of invoices from the grantee for specific Line of Credit

                                                 22
Control System payment requests, and review these invoices against the Line of Credit Control
System payment request to ensure quality control. It is essential that representatives conduct a
thorough analysis of recipient expectations versus actual accomplishments. Representatives
must keep good records of recipient reviews. Communications with recipients, results of report
evaluation and approval or disapproval, important telephone calls or other events must be
documented in the representatives working file. Recipient performance, progress or obstacles to
performance, and their solutions must be adequately documented. And not less than once per
year, require that all supporting documentation for any requests for reimbursement be submitted
to the representative regardless of the amount of reimbursement being requested.

Healthy Homes’ Grants Management Desk Guide dated November 23, 2010, states that it is the
responsibility of the assigned representative to review and approve requests for payment through
the Line of Credit Control System. The representative approves or rejects grantee payment
requests within 5 business days of the request for reimbursement. Grantees shall submit the
following documentation, including, but not limited to:
a. Part 3 of the financial reporting form,
b. Request Voucher for Grant Payment, form HUD-27053,
c. Supporting documentation for all costs on voice response system requests exceeding
$100,000,
d. Any other documentation requested by the representative.

The following reimbursement process is being implemented in connection with this new policy
guidance:
1. The grantee makes reimbursement request using the voice request system telephone system
and emails or faxes copies of original documents required in support of the request to the
grantee’s assigned representative.
a. Complete documentation in support of requests exceeding $100,000 will be required for
all direct costs, including personnel and fringe benefits. A description of direct costs is provided
in the notice of funding availability under which the award was made.
b. For requests less than $100,000, part 3 of the financial reporting form and the voice request
system Request Voucher for Grant Payment, form‐HUD 27053, are required, unless additional
provisions are required in the grant agreement. Healthy Homes will not approve Line of Credit
Control System requests without supporting documentation.

Healthy Homes’ Recovery Act grantee program guidance, dated September 17, 2009, states that
the signed copy of the sub-recipient and vendor determination worksheet will be included in the
representative’s files. The sub-recipient and vendor determination worksheets are designed to
document the relationship that exists between the organization and the organizations/entities that
provide grant program services for the program.

HUD’s 2008 notice of funding availability states that the Lead Hazard Reduction Demonstration
grant program is the same as the Lead-Based Paint Hazard Control program, with the exception
that the Lead Hazard Reduction Demonstration grant program is targeted for urban jurisdictions
with the greatest lead-based paint hazard control needs.

HUD’s eLogic model reports on goals, policy priority, planning, programming, measures
program outcome, and addresses accountability for the program.

                                                 23
Office of Management and Budget Circular A-123 required HUD to conduct a front end risk
assessment for any new programs created as a result of the American Recovery and
Reinvestment Act of 2009. The assessment required HUD’s managers to consider the
appropriate balance between controls and risk in their programs and operations. Too many
controls can result in inefficient and ineffective government. Managers must ensure an
appropriate balance between the strength of controls and the relative risk associated with
particular programs and operations. The benefits of controls should outweigh the cost.

Office of Management and Budget Circular A-133 Subpart B-Audits section 200 Audit
requirements state that (a) non–Federal entities that expend $300,000 ($500,000 for fiscal years
ending after December 31, 2003) or more in a year in Federal awards must have a single or
program–specific audit conducted for that year in accordance with the provisions of this (b)
Single audit. Non-Federal entities that expend $300,000 ($500,000 for fiscal years ending after
December 31, 2003) or more in a year in Federal awards must have a single audit conducted.




                                               24
Appendix D

     AUDITEE’S RESPONSE TO DRAFT FINDING OUTLINE

                                         July 15, 2011

MEMORANDUM FOR:              Ronald Farrell, Assistant Regional Inspector General
                              For Audit, SEGA

FROM:                        Jon L. Gant, Director, Office of Healthy Homes
                               And Lead Hazard Control, L

SUBJECT:                     Response – Draft Finding Audit – Internal Audit – Office of
                              Healthy Homes and Lead Hazard Control ARRA Grant
Recipients
                               Monitoring Nationwide Review

Summary

       The following is in response to the HUD Office of Inspector General (OIG) Draft Finding
Outline on the Office of Healthy Homes and Lead Hazard Control (OHHLHC) Monitoring of
American Recovery and Reinvestment Act Grant Recipients.

        The OIG report stated that “Healthy Homes and Lead Hazard Control Did Not Adequately
Monitor its American Recovery and Reinvestment Act Grant Recipients.” The OIG also noted
that “Healthy Homes did not maintain adequate documentation to support the use of $4,298,508
(86%) of the $4,994,566 in expenses claimed by the recipients” and that the recipient’s working
files were not adequately maintained by the GTR. In addition, the OIG indicated that Healthy
Homes did not review the Line of Credit Control System (LOCCS) request for payment vouchers
according to the established time frame. Finally, the OIG indicated that “Healthy Homes did not
adequately monitor its Recovery Act grant funds. It did not ensure that the voucher requests for
payment were adequately supported and grant recipient’s [GTR] working files were not properly
maintained.”

       Based on the OIG audit, the following recommendations were made to HUD’s Director of
the Office of Healthy Homes and Lead Hazard Control:

   1. Implement adequate procedures and controls to correct the voucher processing
      deficiencies to include the following:
          a. Obtain supporting documentation for each voucher request for payment submitted
              by the recipient
          b. Ensure that recipients maintain files with the required documentation; and
          c. Ensure the Voucher Request for Payments are reviewed timely.




                                              25
        Although OHHLHC accepts the recommendation made by the OIG to correct the voucher
processing deficiencies noted, OHHLHC strongly disagrees with the conclusion made by the OIG
that the OHHLHC did not adequately monitor its American Recovery and Reinvestment Act
Grant recipients.

OHHLHC Response

       The OIG did not fully evaluate OHHLHC’s monitoring efforts of Recovery Act grantees.
The OIG, in arriving at its conclusion that OHHLHC did not adequately monitor its Recovery
Act grantees, did not include in its review, the extensive ongoing OHHLHC monitoring of
Recovery Act performance in meeting both program and expenditure requirements. These
extensive efforts and accomplishments included, but were not limited to the following:

                     Completed a Front End Risk Assessment to minimize risk
                     Developed appropriate guidance documents and provided technical
                      assistance to Recovery Act grant recipients pertaining to Davis-Bacon
                      Act, Recovery Act Section 1512 Reporting and other requirements on an
                      ongoing basis
                     Provided on-site visits to all Recovery Act grantees
                     Provided continuous communication, monitoring and evaluation of grant
                      recipient performance in meeting benchmark milestones conducted by the
                      GTRs and the ARRA Coordinator
                     Provided Recover Act Training and Updates to Grantees through
                      Meetings and Conferences:
                          o New Grantee Orientation (Orlando, FL) – June 2010
                          o Program Manager School Sessions (Memphis, TN) – June 2010
                          o ARRA Grantee Workshop (Annapolis, MD) – December 2010

        The following comments highlight what OHHLHC perceives as shortcomings in the
report and forms the basis of OHHLHC’s disagreement with the conclusion made by the OIG.

   1. The OIG made its determinations after conducting a review of only four (4) Government
      Technical Representatives (GTR) working files representing one file from each of the
      OHHLHC grant program areas: 1) Lead-Based Paint Hazard Reduction (LBPHC); 2)
      Lead Hazard Reduction Demonstration (LHRD): 3) Healthy Homes Demonstration
      (HHD): and 4) Healthy Homes Technical Studies (HHTS). OHHLHC believes this is a
      limited sample size. OHHLHC, at the time of the review, monitored 52 Recovery Act
      grants. The four (4) files reviewed only represented 7.7% of the ARRA GTR files
      available. Further, since the audit was conducted using only 1 file from each of the
      program areas, only 2 files or 3.8% were from the major program areas (LBPHC and
      HHD) and both files selected were assigned to the same GTR. The file for the LHRD
      grant program was only transferred to a new GTR just prior to the audit entrance
      conference, as the previous GTR left federal service.

   2. The OIG limited its review primarily to the financial reports of the Recovery Act grant
      recipient. HUD’s primary tool for grant monitoring is both recipient performance and


                                              26
   financial reports. The OIG’s draft finding outline primarily focused on the GTR
   monitoring of the financial reports of a grant recipient without any discussion or
   recognition of the GTR monitoring of the grant recipient’s performance in meeting
   established program milestones and requirements, including the Recovery Act reporting
   and expenditure requirements. GTRs and other OHHLHC staff have consistently
   communicated with grantees in person, by phone and by mail in order to ensure the
   highest levels of performance and accountability.

   From the inception of the Recovery Act Programs, OHHLHC has been one of HUD’s
   stalwart performers in monitoring grantee reporting, expenditures, and in remediating
   health and safety risks to children and families. Through GTR monitoring efforts,
   LHHLHC achieved 100% compliance for reporting in all FederalReporting.gov reporting
   periods beginning in October 2009. GTRs were primarily responsible and instrumental
   in ensuring that grant recipients achieved the 2 year 50% expenditure requirement.
   The OIG did not reference any program performance achievements even though they
   were documented and available for the review.

3. The OIG indicated that the OHHLHC did not review the Line of Credit Control System
   (LOCCS) request for payment vouchers according to the established time frame.
   Although the OIG referenced 5 business days as the time line for GTRs to review
   LOCS payment voucher requests, the OIG calculated the variance between the date the
   voucher was received and the date the voucher was approved using calendar days.
   The OIG noted that 17 of 60 (28.3%) of the vouchers reviewed exceeded the time frame
   (with 10 of the 17 or 58.8% from the LHRD grantee).

   OHHLHC’s own review of the data using the 5 business days as the established time
   frame, found only 11 of the 60 vouchers exceeding the time frame (2 of the 11 exceeded
   the time line due to the illness/hospitalization of the GTR, 6 were late from the LHRD
   grantee and the final 3 only exceed the time line by 1 or 2 business days).

4. Finally, the OIG indicated that “Healthy Homes did not adequately monitor its Recovery
   Act grant funds. It did not ensure that the voucher requests for payment were adequately
   supported and grant recipient’s [GTR] working files were not properly maintained.”
   This statement by the OIG is not entirely accurate. GTRs followed the Desk Guide
   requirements and approved LOCCS payment requests via fax transmission of voucher
   payment requests and Part 3 Financial forms (Form HUD 96006) and any other requested
   back-up documentation submitted by the grant recipient. Specifically, the Desk Guide 2-
   18 D. Reviewing Voucher Payment Requests indicates that:

   “GTRs may approve LOCCS payment requests via fax with supporting back-up
   documentation, but original copies of the material must be sent by mail for the GTR files.
   The grantee is required to submit the LOCCS-VRS Request Voucher for Grant Payment
   (form HUD-27053–See Appendix 3) and back-up documentation (at a minimum a Part 3
   – Financial Reporting of HUD Form 96006 – See Appendix 3) every time a request for
   payments from LOCCS is made…”



                                           27
        Since the “fax” of the Request Voucher and the Part 3 Financial Report constitutes the
        minimum requirements to “support” the approval and reimbursement of expenses
        claimed by the grant recipient, GTRs met the minimum requirements to initially approve
        the payment. OHHLHC accepts the “fax” transmission as supporting documentation and
        does not agree with the OIG classification that these are “unsupported” expenses.
        OHHLHC
        does acknowledge that the original copies of the documentation were absent in the GTR
        files and will take the necessary steps to ensure that original copies are in the GTR file.
        However, OHHLHC is also exploring the use of electronic transmission of
        documentation in support of the Request Voucher for Grant Payment and other required
        forms that may prompt changes in the GTR working file content and requirements.

    5. The OIG noted that “as part of Healthy Homes monitoring, at least one voucher for each
       recipient was required to contain all original supporting documentation at least once per
       year.” According to the OHHLHC Desk Guide, GTRs should regularly request complete
       sets of invoices from the grantee for specific LOCCS payment requests. The Front End
       Risk Assessment (FERA) indicates that the request for complete sets of invoices is to be
       done at least once a year. GTRs should review these invoices against the LOCCS
       payment request to ensure quality control. OHHLHC acknowledges that this requirement
       was not met. However, OHHLHC has taken steps to ensure that all ARRA grantees will
       have this accomplished by December 31, 2011.
 
    6. The OIG noted that some forms and original documents were missing from the GTR
       working files. The OHHLHC disagrees with the OIG’s analysis that all these forms were
       missing from the GTR files. HUD Handbook 2210.17 REV 2, 5-14 b. outlines what the
       GTR shall maintain in a working file. However, the Handbook does not specifically
       identify whether original or copies of specific forms and documents are required to be
       included. With the exception of the “Request Voucher for Grant Payment” forms, copies
       of the original forms and documents are sufficient for the GTR working file since
       OHHLHC has the discretion to determine the content of the GTR working file.

        Further, the OIG’s review of the files indicated that “Original and signed” documentation
        was not maintained in the grantee working file yet there was no mention whether copies
        of the documents were maintained in the GTR files. Certain documents such as written
        policies and procedures, contractor agreements, memorandum of agreement or
        understanding, compliance with using materials produced in American, and compliance
        with OMB A-133 are not required in the GTR working file per HUD Handbook 2210.17.

OHHLHC Corrective Actions

       OHHLHC has taken the following steps to ensure that the OIG recommendation is
implemented and that adequate documentation in support of the grant recipient’s financial reports
and records is included in the GTR files.

       Reaffirmed with OHHLHC GTRs, the Desk Guide, FERA, and Policy Guidance Issuance
        2010-01: Revised Line of Credit Control System (LOCCS) Reimbursement Procedures
        (dated December 1, 2010) requirement to send by mail within five (5) business days, the

                                                28
       original copies of the Request Voucher for Grant Payment and supporting documentation
       for inclusion in the GTR file. 
      GTRs will request a complete set of invoices in support of LOCCS payment requests
       from grant recipient at least once prior to December 1, 2011, regardless of the amount of
       the request. 
      OHHLHC will add a requirement/note to accompany the Part 3 Financial Report that the
       grantee “affirms/certifies” that invoices, purchase orders, time sheets, receipts and other
       documentation in support of the Request for voucher Payment Request and Part 3
       Financial Form are on file and maintained by the program or grant organization. 
      OHHLHC has effectively monitored grantee performance in meeting Recovery Act and
       Program and Grants requirements. As a result, the following actions have been taken for
       grantees that failed to meet expectations or requirements: 
           o Recovery Act grantees that were designated as High Risk:
                Waterbury, CT
                Wisconsin Department of Commerce
                Utica, NY
                Galveston, TX
           o Recovery Act grantees that were terminated for poor performance and/or failure
               to meet Recovery Act requirements:
                Utica, NY
                Galveston, TX

Conclusion
        For the variety of reasons outlined above, the OHHLHC respectfully requests that the
overall conclusion by the OIG that “Healthy Homes Did Not Adequately Monitor its American
Recovery and Reinvestment Act Grant Recipients” be changed to more accurately reflect the
facts of our monitoring process and to recognize the diligent and consistent oversight provided
by the OHHLHC to all of the ARRA grantees.




                                               29