oversight

Pioneer Civic Services, Inc., Peoria, IL, Did Not Properly Administer Its Supportive Housing Program and Housing Opportunities for Persons With AIDS Grants

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-1017




TO:         Ray E. Willis, Director of Community Planning and Development, 5AD

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

SUBJECT: Pioneer Civic Services, Inc., Peoria, IL, Did Not Properly Administer Its
            Supportive Housing Program and Housing Opportunities for Persons With
            AIDS Grants

                                   HIGHLIGHTS

 What We Audited and Why

             We audited Pioneer Civic Services, Inc’s Supportive Housing Program and
             Housing Opportunities for Persons with AIDS (HOPWA) competitive grants. We
             selected Pioneer based on a request by the U.S. Department of Housing and
             Urban Development’s (HUD) Office of Community Planning and Development.
             Our audit objective was to determine whether Pioneer effectively administered its
             Program and HOPWA grants in accordance with HUD’s and other Federal
             requirements.

 What We Found

             Pioneer did not effectively administer its Program and HOPWA grants in
             accordance with HUD’s and other Federal requirements. Specifically, Pioneer did
             not ensure that (1) its housing units met HUD’s habitability standards and local
             code, and (2) Riverside Apartments, a single-room occupancy rooming house for
             chronically homeless persons with HIV-AIDS, and its four-unit apartment
             building (Perry Street) met Federal and State accessibility requirements.
           Pioneer inappropriately used funds from its Program and HOPWA grants to pay
           ineligible and unsupported expenses. However, it generally provided services to
           program participants who were homeless with two exceptions. As a result, HUD
           lacked assurance that more than $483,000 in funds from its Program and HOPWA
           grants was used for eligible activities and to maintain its housing units in decent,
           safe, and sanitary condition.

What We Recommend

           We recommend that the Director of HUD’s Chicago Office of Community
           Planning and Development require Pioneer to (1) certify that the applicable
           violations have been corrected for the 30 housing units cited, (2) reimburse HUD
           $187,000 from non-Federal funds for the housing units that failed to meet HUD’s
           habitability standards and local code, (3) implement adequate procedures and
           controls to ensure that all of its units meet local and HUD habitability standards to
           prevent funds from its Program and HOPWA grants from being spent over the
           next year on units that do not comply with applicable requirements, (4) ensure
           that its inspector is properly trained on HUD’s habitability standards and local
           code, (5) discontinue funding for the operation of Riverside Apartments until
           Pioneer submits written confirmation that the applicable accessibility code
           violations cited have been corrected, and (6) implement adequate procedures and
           controls to ensure that the Perry Street building, including the one accessible
           housing unit, complies with applicable accessibility requirements.

           We also recommend that the Director of HUD’s Chicago Office of Community
           Planning and Development require Pioneer to (1) provide documentation to
           support the eligibility of $93,972 in Program and HOPWA grant expenditures and
           reimburse HUD $202,604 from non-Federal funds for ineligible expenses, (2)
           develop and implement adequate procedures and controls to ensure that funds
           from its Program and HOPWA grants are only used for eligible activities, and (3)
           implement adequate procedures and controls to ensure that it serves participants
           who are eligible to receive benefits from the Program.

           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 provided our discussion draft audit report and supporting schedules to Pioneer’s
           executive officer and HUD’s staff during the audit. We held an exit conference with
           Pioneer’s director on August 31, 2011.




                                             2
We asked Pioneer’s executive director to provide comments on our discussion draft
audit report by September 2, 2011. The director provided written comments, dated
August 29, 2011. The executive director generally disagreed with our findings and
recommendations. The complete text of the written comments, along with our
evaluation of that response, can be found in appendix B of this audit report except
for 40 pages of documentation that was not necessary for understanding Pioneer’s
documentation.




                                 3
                            TABLE OF CONTENTS

Background and Objective                                                              5

Results of Audit

      Finding 1: Pioneer Did Not Adequately Enforce HUD’s Habitability               7
                  Standards and Other Applicable Requirements
      Finding 2 Pioneer Did Not Ensure That Riverside Apartments and Its Perry       14
                 Street Apartment Building Complied With Accessibility
                 Requirements
      Finding 3 Pioneer Used $223,000 in Funds From Its HOPWA Riverside              20
                 Grant To Pay Ineligible and Unsupported Costs
      Finding 4 Pioneer Inappropriately Used $53,200 in Funds From Its Program and   23
                 HOPWA Grant To Pay Ineligible Expenses
      Finding 5 Pioneer Generally Provided Services to Program Participants Who      25
                 Were Homeless With Two Exceptions

Scope and Methodology                                                                27

Internal Controls                                                                    29

Appendixes
   A. Schedule of Questioned Costs                                                   31
   B. Auditee Comments and OIG’s Evaluation                                          32
   C. Federal, State, and City Requirements                                          37




                                            4
                      BACKGROUND AND OBJECTIVES

The Program. Authorized under Title IV of the McKinney-Vento Homeless Assistance Act of
1987, as amended, the Supportive Housing Program is funded for the purpose of promoting the
development of transition and permanent supportive housing and supportive services for homeless
households. Program funds are available to State or local governmental entities, private nonprofit
organizations, and public nonprofit community mental health associations for new construction,
acquisition, rehabilitation, and leasing of buildings to provide transitional permanent supportive
housing for homeless households, supportive services for homeless persons, operating costs, and
technical assistance. Homeless households must qualify as disabled to be eligible for permanent
supportive housing.

Authorized under the Aids Housing Opportunity Act of 1990, Housing Opportunities for Persons
with AIDS (HOPWA) is funded to provide resources and incentives to recipient communities
(program participants) to develop long-term, comprehensive plans for addressing the local housing
needs of low-income persons living with HIV-AIDS and their families. Grants allocated under this
chapter are available only for approved activities to carry out strategies designed to prevent
homelessness among eligible persons. Approved activities include activities that (1) provide
housing information and coordinate efforts to expand housing assistance, (2) facilitate the
development and operation of shelter and services, (3) provide rental assistance, (4) facilitate
(through project-based rental assistance or other means) the moderate rehabilitation of single-room-
occupancy dwellings, and (5) facilitate the development of community residences.

Pioneer Civic Services, Inc. Incorporated in October 1994 as a nonprofit corporation under the
laws of the State of Illinois, Pioneer Civic Services, Inc., is governed by a three-member board of
directors. Pioneer’s executive director manages its day-to-day operations. Pioneer’s overall
mission is to provide adequate, safe, and sanitary housing accommodations and civic services of all
kinds for persons of low and moderate income. Pioneer’s records are located at its administrative
office at 1318 West Adams Street, Peoria, IL.

On October 31, 2001, Pioneer entered into an agreement with the U.S. Department of Housing
and Urban Development (HUD) to participate in its Program. It received an initial grant of
$399,565 to purchase and rehabilitate its Perry Street building. One of the units in the building
was designated as accessible for disabled persons. Pioneer received renewal grants from 2005
through 2011 for operating costs and to provide housing assistance.

In September 2007, HUD awarded Pioneer an initial HOPWA grant of $930,596 for the
rehabilitation, repair, and conversion of Riverside Apartments into 30 single-room-occupancy
housing units for chronically homeless persons with HIV-AIDS. This grant was for operating
costs, housing assistance, and supportive services.

The following table shows the amount of grant funds HUD awarded Pioneer for the period October
2000 through August 2011.




                                                 5
      Program grant                                               Type of      Program
         number                  Program grant period             program       funds
     Program
       IL01B007003          October 2001 through August 2005         Initial     $399,565
       IL01B407004        September 2005 through August 2006       Renewal        112,513
       IL01B507001        September 2006 through August 2007       Renewal        110.613
       IL01B607002        September 2007 through August 2008       Renewal        112,911
       IL01B707006        September 2008 through August 2009       Renewal        104,873
     IL0072B5T07801       September 2009 through August 2010       Renewal        114,126
     IL0072B5T07802       September 2009 through August 2011       Renewal        114,126
                                               Total Program                   $1,068,727
     HOPWA
       ILH990013           January 2000 through February 2003        Initial     $515,592
       ILH020002              March 2003 through March 2006        Renewal        440,166
       ILH050011                April 2006 through March 2009      Renewal        406,413
       ILH060014          September 2007 through August 2011         Initial      930,596
       ILH080006                June 2008 through August 2011      Renewal        402,281
                                                Total HOPWA                     2,695,048
                          Total Program and HOPWA grants                       $3,763,775

HUD’s monitoring review. HUD’s Chicago Office of Community Planning and Development
assessed Pioneer’s performance under Program grant number IL01B707006 through a November
17-19, 2009, monitoring review. The monitoring review focused on its Program grant records
and files, financial management, and supportive housing facilities. HUD identified six findings
and two concerns.

In addition, HUD’s Chicago Office of Community Planning and Development assessed
Pioneer’s performance under HOPWA grant number ILH060014 through an August 24-26,
2010, monitoring review. HUD identified five findings and one concern.

Our audit objective was to determine whether Pioneer effectively administered its Program and
HOPWA grants in accordance with HUD and other Federal requirements.




                                              6
                                       RESULTS OF AUDIT


Finding 1: Pioneer Did Not Adequately Enforce HUD’s Habitability
Standards and Other Applicable Requirements
Pioneer did not ensure that its housing units met HUD’s habitability standards and the
International Property Maintenance Code (local code) adopted by the City of Peoria, IL. All 30
housing units statistically selected for inspection failed to meet HUD’s habitability standards and
local code. Additionally, 29 of the 30 units had violations that predated Pioneer’s inspections.
The violations existed because Pioneer lacked adequate procedures and controls to ensure that its
housing units met HUD’s habitability standards and other applicable requirements. Additionally,
it failed to exercise proper supervision and oversight of unit inspections. As a result, Pioneer
spent approximately $187,000 in funds from its Program and HOPWA grants for housing units
that were not in good repair, order, and condition. Based on our results, we estimate that over
the next year, HUD will spend approximately $296,000 on housing units that are not decent,
safe, and sanitary.



    Pioneer Did Not Maintain Its
    Housing Units in Good Repair,
    Order, and Condition

                  Pioneer did not maintain its housing units in good condition. For the 33 housing
                  units for which it received either housing assistance or operating subsidies, we
                  inspected 301 for compliance with HUD’s habitability standards and local code.
                  Our appraiser inspected the 30 units during October 2010.

                  Pioneer did not adequately enforce HUD’s habitability standards and local code.
                  All 30 units inspected failed to meet HUD’s habitability standards 2 and local
                  code. In addition, 29 of the 30 units had violations that predated Pioneer’s
                  inspections. Collectively, the units contained 225 habitability standards and local
                  code violations. The following table categorizes the 225 violations in the 30
                  units.




1
 At the time of our inspections, three units were not available for inspection.
2
 Our appraiser did not identify exigent health and safety violations that required Pioneer to make corrections within
24 hours.


                                                          7
                Category of violations          Number of violations   Number of units
                        Electrical                     49                   18
                     Smoke detector                    37                   18
                         Window                        32                   13
                      Other interior                   14                   12
                   Heating equipment                   12                   12
                         Security                      10                    9
                      Water heater                      9                    5
                      Roof or gutter                    8                    7
                         Ceiling                        7                    5
                     Exterior surface                   7                    5
                      Other exterior                     7                   7
                           Wall                          6                   3
                          Range                          6                   6
               Exterior stair, rail, or porch            5                   3
                   Interior stair or rail                4                   3
                          Floor                          4                   2
                       Ventilation                       3                   3
                          Toilet                         2                   2
                       Lead paint                        1                   1
                       Foundation                        1                   1
               Garbage, debris, or refuse
                         disposal                        1                   1
                          Total                         225




            We provided our inspection results to the Director of HUD’s Chicago Office of
            Community Planning and Development and Pioneer’s executive director in
            October and November 2010.

Units Had Electrical Fixture
and System Deficiencies



            Forty-nine electrical violations were present in 18 of the units inspected. The
            following items are examples of the electrical violations listed in the table:
            outlets with open ground, non-ground-fault circuit interrupter outlets near kitchen
            or bathroom sinks, disconnect boxes with exposed electrical contacts, ground-
            fault circuit interrupters that did not turn off once tripped, exposed electrical
            outlets, and holes or gaps in a breaker box. The following pictures are examples
            of some of the electrical-related violations.




                                                  8
Household 08: Non-GFCI
outlet above the kitchen
sink.




Household 21: Old,
active, unsecured fuse box.




    Units Had Smoke Detector
    Violations


                   Thirty-seven smoke detector violations were present in 18 of the units Pioneer
                   inspected. The following items are examples of the smoke detector violations
                   listed in the table: smoke detectors missing because they were removed or never
                   installed as required by local code. Violations also included missing batteries that
                   were removed by the tenant.3


3
    This information was obtained through our interview with the tenant.



                                                          9
 Units Had Window Violations


                 Thirty-two window violations were present in 13 of the units Pioneer inspected.
                 The following items are examples of window violations listed in the table:
                 windows that did not stay up, windows that did not lock, rotted sashes and frames,
                 broken panes, and windows that would not open. The following pictures are
                 examples of the exterior window violations identified.


Household 03: First floor
window that does not stay
open and does not lock.




Household #22: Damaged
and poorly repaired drafty
bedroom window.




                                                 10
 Other Interior Violations Were
 Identified

                 Fourteen other interior violations were present in 12 of the units Pioneer inspected.
                 The following items are examples of other interior violations listed in the table:
                 broken interior doors and doorknobs, interior door leaning against wall where small
                 children are present, tripping hazards in common area stairway, and latches removed
                 from stairway doors.

Household #01: Broken
doorknob on door to 2nd
floor.




Household #05: A
laundry closet door
removed from the frame
resting against a corridor
wall, endangering the
young children living there
if it should fall.




                                                  11
    Conclusion

                    Pioneer did not ensure that its housing units met HUD’s habitability standards and
                    local code. The violations existed because Pioneer lacked adequate procedures
                    and controls to ensure that its housing units complied with applicable
                    requirements. Additionally, it failed to exercise proper supervision and oversight
                    of unit inspections. Pioneer’s housing inspector said that he was not aware that
                    housing units had to meet local code and had not received training before
                    performing the inspections.

                    Pioneer receives housing assistance for 18 of the 30 units and receives operating
                    subsidies for the remaining 12. As a result, Pioneer spent $187,000 in funds from
                    its Program and HOPWA grants, $124,000 in operating subsidies, and $63,000 in
                    rental assistance for the 30 housing units that were not in good repair, order, and
                    condition. Therefore, if Pioneer implements adequate procedures and controls
                    regarding its unit inspections to ensure compliance with HUD’s habitability
                    standards and local code, we estimate that it can avoid spending more than
                    $296,0004 in future funds from its Program and HOPWA grants on housing units
                    that are not decent, safe, and sanitary over the next year.




4
    Our methodology for this estimate is explained in the Scope and Methodology section of this audit report.


                                                           12
Recommendations


          We recommend that the Director of HUD’s Chicago Office of Community
          Planning and Development require Pioneer to

          1A.     Certify that the applicable violations have been corrected for the 30 units
                  cited.

          1B.     Reimburse HUD $187,000 ($43,200 for its Program and $143,800 for the
                  HOPWA grants) for the 30 units that failed to meet HUD’s habitability
                  standards and local code.

          1C.     Implement adequate procedures and controls to ensure that all of its units
                  meet local and HUD habitability standards to prevent more than $296,000
                  in funds from its Program and HOPWA grants from being spent over the
                  next year on units that do not comply with applicable requirements.

          1D.     Ensure that its inspector is properly trained on HUD’s habitability
                  standards and local code and can apply them appropriately when
                  performing unit inspections.




                                           13
Finding 2: Pioneer Did Not Ensure That Riverside Apartments and Its
Perry Street Apartment Building Complied With Accessibility
Requirements
Pioneer did not ensure that Riverside Apartments and its Perry Street building met Federal and
State accessibility requirements. Specifically, Riverside Apartments, including nine rehabilitated
housing units, and its four-unit building, including one accessible housing unit, were not
accessible for physically disabled persons. The violations occurred because Pioneer lacked
adequate procedures and controls to ensure that it complied with applicable requirements for
accessible housing. Additionally, Pioneer did not get the funding needed to make Riverside
Apartments accessible. As a result, it excluded physically disabled persons from opportunities
for accessible housing.



 Pioneer’s Riverside Apartments
 Did Not Meet Accessibility
 Requirements

               Pioneer’s Riverside Apartments did not comply with HUD’s requirements and
               Illinois Accessibility Code. We inspected the nine rehabilitated units and the
               common areas of the building, and determined that the units and the building
               failed to meet Code.

               Pioneer stated in its application for funding Riverside that it would request from
               HUD operating funds and a small portion of funds for the installment of an
               elevator and other Americans with Disability Act (ADA) related modifications
               providing accessibility and visit ability to all areas of the building. Pioneer
               anticipated obtaining the balance of the $2,207,800 needed to make the necessary
               repairs to Riverside Apartments from Low-Income Housing Tax Credits, State
               Trust Funds, and deferred development fees.

               Our appraiser inspected Riverside Apartments in October 2010 and identified 13
               accessibility deficiencies. The following table categorizes the 13 identified
               violations.

                                                                      Number of
                                        Area of violations            violations
                           Accessible building and units                  5
                           Common bathroom                                4
                           Common kitchen                                 4
                                               Total                      13


               The building had no features to allow wheelchair users to enter or make use of the
               building. Specifically, the building entrance had steps and no ramp. The



                                                  14
                    management office was a full flight of stairs above the entrance. The single rooms
                    were on the third floor and accessible only by a stairway. A doorway in the corridor
                    was less than the required 32-inch width, measuring 30¾ inches, and the resident
                    room doors had less than the required 32-inch clearance, ranging from 30 to 31
                    inches. The following picture is an example of an accessibility-related violation
                    in the building.


   The building entrance has
   steps and no ramps.




Common Kitchen and
Bathroom Violations Were
Identified
                    In the common kitchen area, the kitchen range had controls in the back requiring
                    individuals to reach over the cooking surface to turn them on and off, there was no
                    clearance under the countertop for wheelchair-bound residents for food preparation,
                    and the refrigerator was not accessible with a top freezer. The kitchen had no sink or
                    water source; dishes were washed in a sink located in the laundry room. The
                    following picture is an example of the accessibility-related violation identified in
                    the common kitchen.




                                                     15
 There is no clearance
 under the countertop for
 wheelchair-bound
 residents.




                  The common bathroom had no accessible features. Examples of the accessible -
                  related deficiencies were as follows: toilet stalls were too narrow and had 16-inch-
                  tall water closets and no grab bars. According to Code, the water closet seats are
                  required to be between 17 and 19 inches from the floor. Additionally, the urinals
                  were not accessibility compliant; shower stalls had a 6-inch step-up at the entrance
                  of each shower stall; there were no shower seats, hand-held showers, or grab bars;
                  and the mixing valves were located too high and directly under the showerheads.


Pioneer Certified That It Would
Comply With Federal
Requirements

                  Pioneer’s application for the HOPWA Riverside grant stated that if HOPWA
                  funds were used for rehabilitation or new construction activities for housing
                  projects, the grantee was required to agree to begin the rehabilitation or
                  construction within 18 months, and all rehabilitation or construction work was
                  required to be completed within the terms of the grant agreement with HUD.
                  Such activities trigger certain accessibility requirements of Section 504 of the
                  Rehabilitation Act of 1973 and the design and construction requirements of the
                  Fair Housing Act of 1988.

                  Pioneer certified in its application for its HOPWA Riverside grant that it would
                  comply with the Americans with Disabilities Act of 1990, Section 504 of the
                  Rehabilitation Act of 1973, and HUD’s requirements at 24 CFR (Code of Federal
                  Regulations) 8.1, which prohibit discrimination based on disability in federally
                  assisted programs and activities and, where applicable, the design and construction
                  requirements of the Fair Housing Act.




                                                   16
Pioneer’s Four-Unit Building
Was Not Accessible


            We identified 14 accessibility deficiencies when our appraiser inspected Pioneer’s
            Perry Street building and the one accessible housing unit. The following table
            categorizes the 1 violation identified with the building and 13 violations of the
            accessible unit. The HUD Office of Inspector General (OIG) appraiser used the
            Illinois 2007 Accessible Code Standards in determining accessibility code
            deficiencies.

                                                                     Number of
                                     Area of violations              violations
                                        Bathroom                         6
                                         Kitchen                         5
                                       Pantry room                       1
                                          Ramp                           1
                                       Living room                       1
                                           Total                         14


            We provided our inspection results to Pioneer’s executive director and HUD’s
            Chicago Office of Community Planning and Development in October and
            November 2010.

Pioneer’s Housing Unit Had
Bathroom and Kitchen-
Accessibility Deficiencies

            The bathroom in Pioneer’s housing unit had six deficiencies, including (1) the door
            did not have the required clearance of 18 inches on the pull side and 12 inches on the
            push side of the door on the latch set side, (2) the floor did not have the required 60
            inches of turnaround clearances, (3) the toilet did not have the required grab bars, (4)
            the wash basin was not accessible, (5) the wash basin mirror was installed higher
            than the 40-inch above the floor maximum to be usable by person in a wheelchair,
            and (6) the bathtub was not accessible. The Illinois Accessibility Code requires that
            bathtubs be equipped with three grab bars, have a hand-held shower head, and have
            a seat in the bathtub. The following pictures are examples of some of the
            accessibility-related violations.




                                               17
The door did not have the
required clearances and
proper hardware, and the
floor did not have the
required turnaround
clearances.




                 The kitchen had accessibility deficiencies, including that a kitchen electrical outlet
                 was not within the reach limit of 9 inches above the floor, the door was not
                 accessible, and the refrigerator and the sink were not accessible for physically
                 disabled persons. In addition, space for the storage, preparation, and serving food
                 was not provided. The Illinois Accessibility Code requires that a section of the
                 counter be at 34 inches and have a 30-foot-wide clearance below it to provide
                 workspace access for a wheelchair. The following pictures are examples of some
                 of the accessibility-related violations.

The sink was not handicap
accessible.




                                                   18
             The living room had one accessibility code deficiency. The doorway clearance was
             only 30 inches, and Illinois Accessibility Code requires a 32-inch clearance. The
             pantry room was not accessible for physically disabled persons because there was no
             turnaround space. The access ramp to the unit was without curbs, and there was a 1-
             inch gap at ramp bottom.

Conclusion

             Pioneer did not ensure that Riverside Apartments and its Perry Street building met
             Federal and State accessibility requirements. The problems occurred because
             Pioneer lacked adequate procedures and controls to ensure that it complied with the
             applicable requirements. For Riverside Apartments, Pioneer anticipated receiving
             low-income housing tax credits, State trust funds, and deferred development fees to
             assist with financing the conversion of the property into accessible housing.
             However, it did not receive the funding. Therefore, Pioneer did not make the
             necessary modifications to the building and housing units to ensure that they were
             accessible. Additionally, for its Perry Street building, for which it receives Program
             funds, Pioneer’s executive director stated that he was unaware of all of the
             requirements for accessible housing. As a result, Pioneer excluded physically
             disabled persons from opportunities for accessible housing.

             HUD’s regulations at 24 CFR 8.1 state that no otherwise qualified individual with
             handicaps in the United States shall, solely by reason of his or her handicap, be
             excluded from the participation in, be denied the benefits of, or be subjected to
             discrimination under any program or activity receiving Federal financial
             assistance from HUD.

Recommendations

             We recommend that the Director of HUD’s Chicago Office of Community
             Planning and Development require Pioneer to

             2A.    Discontinue funding for the operation of the Riverside Apartments until
                    Pioneer submits written confirmation that the cited accessibility
                    deficiencies have been corrected.

             2B.    Implement adequate procedures and controls to ensure that the Perry
                    Street building, including the one accessible housing unit, complies with
                    accessibility requirements.




                                               19
Finding 3: Pioneer Used $223,000 in Funds From Its HOPWA
Riverside Grant To Pay Ineligible and Unsupported Costs
Pioneer used more than $223,000 from its HOPWA Riverside grant to pay ineligible and
unsupported costs. This condition occurred because Pioneer lacked adequate procedures and
controls to ensure that it complied with Federal requirements regarding the use of grant funds.
As a result, more than $142,000 in grant funds was used on costs that were not eligible, and
HUD lacked assurance that more than $81,000 was used for its intended purposes.



 Pioneer Used Grant Funds for
 Ineligible Costs

               On May 25, 2000, Pioneer obtained a $250,000 loan from National City Bank to
               purchase property from Pioneer Properties, Inc. The loan agreement required 119
               monthly principal and interest payments of $2,747 from June 25, 2000, until May
               25, 2010. In May 2000, Pioneer obtained a $245,000 loan from the Illinois
               Facility Fund to purchase Riverside Apartments (see finding 2). The loan
               agreement required monthly principal and interest installments of $2,383 from
               July 1, 2000, until August 2005, then $2,160 from September 2005 until August
               1, 2010.

               From September 1, 2007, to August 31, 2010, Pioneer used more than $67,000 in
               funds from its HOPWA grant, which was budgeted as operating costs for
               Riverside Apartments, to pay the principal and interest on the two loans. Pioneer
               stated in its grant application that its operating costs would include expenses such
               as wages for one full-time administrative director, a part-time assistant manager,
               and two maintenance staff; utilities; taxes; insurance; and maintenance. However,
               the funds were not used for the intended purposes.

               Further, Pioneer used another $26,000 from its operating funding to pay other
               ineligible costs such as a limited partnership fee, training costs, management fees,
               a fine for a falling wall, utilities, and costs for other properties.

 Pioneer Paid for an Idle Facility

               Riverside Apartments is located in a 35,865-square-foot building. It is comprised
               of housing units, located on the third floor, that consist of approximately 6,500
               square feet and administrative offices that consist of approximately 3,400 square
               feet. Therefore, only approximately 9,900 square feet of the 35,865-square-foot
               (28 percent) property were occupied, and the remaining 25,965 square feet were
               vacant (72 percent). However, from September 1, 2007, to August 31, 2010,
               Pioneer used more than $87,000 from its HOPWA grant to pay the utilities,


                                                20
              insurance, and property taxes for the entire building. Except for its HOPWA
              clients’ housing units and the administrative office space, the building was vacant.
              According to Office of Management and Budget (OMB) Circular A-122, costs of
              idle facilities are allowable for a reasonable period, ordinarily not to exceed 1
              year, depending on the initiative taken to use, lease, or dispose of such facilities.
              Therefore, excluding the costs from the first year, we determined that the costs
              were $68,300 (87,000 minus 18,700) and approximately 72 percent of the costs
              were ineligible ($49,176). The following schedule lists the operating costs for
              Riverside Apartments from September 2007 through August 2010.

                                                          Taxes
                                                           and                Percentage     Total
                   Grant period        Utilities        insurance   Totals      vacant     ineligible
              9-1-07 through 8-31-08   $6,100            $12,700    $18,700      N/A
              9-1-08 through 8-31-09   18,600             4,100     22,800       72%        $16,416
              9-1-09 through 8-31-10   19,800             25,700    45,500       72%         32,760
                       Total           $44,500          $42,500     $87,000                 $49,176



 Pioneer Was Unable To
 Sufficiently Support Incurred
 Expenses


              Between September 1, 2007, and August 31, 2010, Pioneer spent a total of
              $81,500 for expenses such as administrative fees, wages, the construction of an
              elevator that had not been constructed, telephone charges for the executive
              director, contracted services, and other miscellaneous items. However, Pioneer
              was unable to provide support for these expenses paid from its HOPWA Riverside
              grant.

 Conclusion

              Pioneer spent more than $223,000 from its HOPWA Riverside grant to pay
              ineligible and unsupported costs. This condition occurred because Pioneer lacked
              adequate procedures and controls to ensure that it complied with Federal
              requirements regarding the use of grant funds. As a result, it used more than
              $142,000 for ineligible costs and was unable to support its use of more than
              $81,000 in program funds. Pioneer lacked adequate procedures and controls to
              ensure that Federal requirements were appropriately followed.

Recommendations


              We recommend that the Director of HUD’s Chicago Office of Community
              Planning and Development require Pioneer to


                                                   21
3A.   Reimburse HUD $67,000 ($52,000 paid to National City Bank and
      $15,000 paid to the Illinois Facility Fund) from non-Federal funds for the
      mortgage payments.

3B.   Reimburse HUD $26,000 from non-Federal funds for the ineligible
      payments cited in this finding.

3C.   Provide supporting documentation or reimburse HUD from non-Federal
      funds for the $81,536 in unsupported costs cited in this finding.

3D.   Reimburse HUD $49,176 for ineligible utilities, taxes, and insurance paid
      for idle space.




                               22
Finding 4: Pioneer Inappropriately Used $53,200 in Funds From Its
Program and HOPWA Grant To Pay Ineligible Expenses
Pioneer inappropriately used funds from its Program and HOPWA grants to pay ineligible
expenses. Specifically, it used grant funds to pay the mortgage for its Perry Street property and
expenses for a company owned by the former executive director. This condition occurred
because Pioneer lacked adequate procedures and controls to ensure that it complied with HUD’s
requirements. As a result, more than $53,000 in funds from its Program and HOPWA grants was
not available to support eligible activities.



 Pioneer Inappropriately Used
 Grant Funds for Mortgage
 Payments

              Pioneer used grant funds from its Program to pay the mortgage on the Perry Street
              property instead of the costs of operating its Program. From September 1, 2006,
              through August 31, 2010, Pioneer paid a total of $39,000 ($24,000 from tenant
              rents and $15,000 from the grant) for mortgage payments to National City Bank.
              The funds were drawn down from its operating budget line item.

              HUD’s Supportive Housing Program Desk Guide describes operating costs as
              those costs associated with the day-to-day physical operation of supportive
              housing facilities. Also, included in operating costs are the actual expenses that a
              recipient incurs for conducting ongoing assessments of the supportive services
              needed by residents and the availability of these services. Grantees may not
              consider mortgage payments as an operational cost because the Program allows
              grantees to repay outstanding debt on a loan to purchase the structure under the
              acquisition activity.

 Pioneer Made Excess
 DrawDown Requests

              In August of 2008, Pioneer requested from HUD’s Line of Credit Control System
              $7,000 in Program funds that were budgeted to pay leasing costs. Pioneer wanted
              to use the funds to pay $2,800 for supportive service costs and $4,200 for
              operating costs. The requested amount was above the allowable $9,468 that was
              budgeted for operating costs. Pioneer did not adjust the budget line item in
              HUD’s System to reflect the change.

 Pioneer Used Grant Funds for
 Conflict-of-Interest Activities


                                               23
             Pioneer violated HUD requirements when it made payments to a company owned
             by its former executive director, thus creating a conflict of interest. Between
             September 1, 2004, and August 31, 2008, Pioneer paid a total of $38,200 to the
             company for the remodeling of two of its buildings, Perry Street and a building
             located on Martin Luther King Jr. Drive. Pioneer did not request a waiver from
             HUD to engage in the conflict-of-interest activity.

             HUD’s regulations at 24 CFR 574.625 state that no person, who is an employee,
             agent, consultant, officer, or elected or appointed official of the recipient and who
             exercises or has exercised any functions or responsibilities with respect to assisted
             activities or who is in a position to participate in a decision-making process or
             gain inside information with regard to such activities, may obtain a personal or
             financial interest or benefit from the activity or have an interest in any contract,
             subcontract, or agreement with respect thereto or the proceeds thereunder, either
             for himself or herself or for those with whom he or she has family or business ties
             during his or her tenure or for 1 year thereafter.

Conclusion

             Pioneer inappropriately used funds from its Program and HOPWA grants to pay
             ineligible expenses. This condition occurred because Pioneer lacked adequate
             procedures and controls to ensure that it complied with HUD’s requirements. As
             a result, more than $53,000 in funds from its grants was not available to support
             eligible activities.

Recommendations


             We recommend that the Director of HUD’s Chicago Office of Community
             Planning and Development require Pioneer to

             4A.    Reimburse HUD $15,000 from non-Federal funds for the ineligible
                    mortgage payments.

             4B.    Reimburse HUD $38,200 ($17,600 for its Program and $20,600 for its
                    HOPWA grant) from non-Federal funds for the ineligible payments to the
                    company owned by the prior executive director.

             4C.    Develop and implement adequate procedures and controls to ensure that
                    grant funds are only used for eligible activities.




                                              24
Finding 5: Pioneer Generally Provided Services to Program Participants
Who Were Homeless With Two Exceptions
Of the 13 persons served, Pioneer was unable to provide sufficient documentation to determine
that two were homeless. The deficiency occurred because Pioneer lacked adequate procedures
and controls to ensure that it complied with HUD’s requirements for serving the homeless. As a
result, HUD lacked assurance that nearly $20,000 in Program funds was used for clients who
were eligible to receive assistance.



 Pioneer Served One Person
 Who Was Not Homeless

              Pioneer provided services to one Program participant who was living with
              relatives but was being evicted by family members. Pioneer allowed the
              participant to rent the unit from a family member. HUD does not consider a
              person living with relatives or friends as homeless. According to HUD’s
              Supportive Housing Program Desk Guide, a homeless person is someone who is
              living on the street or in an emergency shelter or who would be living on the
              street or in an emergency shelter without supportive housing assistance.

              According to HUD’s Supportive Housing Program Desk Guide, if the person’s
              family is evicting him or her, a statement describing the reason for eviction must
              be signed by the family member and dated. The grantee and project sponsor must
              make efforts to confirm that these circumstances are true and have written
              verification describing the efforts and attesting to their validity. The verification
              must be signed and dated. The grantee and project sponsor must also have
              information on the income of the participant and what efforts were made to obtain
              housing and why, without the Program assistance, the participant would be living
              on the street or in an emergency shelter.

 Pioneer Lacked Documentation
 To Support That One Person
 Served Was Homeless


              Pioneer was unable to provide adequate documentation to support whether one
              Program participant met HUD’s homeless requirement. For example, this
              participant who was living on the street, participant’s file did not contain a signed
              certification from Pioneer’s staff to confirm that the person served resided on the
              street.




                                                25
             According to HUD’s Supportive Housing Program Desk Guide, recipients must
             maintain adequate documentation to demonstrate the eligibility of persons served
             using Program funds.

Conclusion

             Pioneer did not always ensure that it provided services to Program participants who
             were homeless. The deficiencies occurred because Pioneer lacked adequate
             procedures and controls to ensure that it complied with HUD’s requirements.
             According to Pioneer’s executive director, the staff did not know HUD’s
             requirements for providing services to homeless individuals. As a result, Pioneer
             used more than $7,200 in Program funds for one participant that was not eligible for
             participation and was unable to support more than $12,400 in supportive services
             provided for another participant.

Recommendations

             We recommend that the Director of HUD’s Chicago Office of Community
             Planning and Development require Pioneer to

             5A.    Reimburse HUD $7,228 from non-Federal funds for ineligible supportive
                    service costs paid for one person who was not homeless.

             5B.    Provide sufficient supporting documentation or reimburse HUD $12,436
                    from non-Federal funds for supportive services provided to one participant
                    whose eligibility had not been determined.

             5C.    Implement adequate procedures and controls to ensure that it serves
                    participants who are eligible to receive benefits from the Program.




                                              26
                         SCOPE AND METHODOLOGY

We performed our onsite audit work from February through January 2010 at Pioneer’s Office
located at 1318 S. W. Adams Street, Peoria, IL. The audit covered the period September 1,
2008, through April 30, 2010, and was expanded as determined necessary.

To accomplish our objective, we reviewed

               Applicable laws; HUD’s regulations at 24 CFR Parts 5, 8, 84, 574, and 583;
                HUD’s notice of funding availability; Office of Community Planning and
                Development notices, OMB Circulars A-110 and A-122; HUD’s HOPWA
                Grantee Oversight Resource Guide and Supportive Housing Program Desk Guide;
                the International Property Maintenance Code, 2003; and the Illinois Accessibility
                Code.

               Pioneer’s accounting records, annual audited financial statements for 2008,
                Program grant agreements and technical submissions, data from HUD’s System,
                Program files, computerized databases, and reviews for its Program grants.

We also interviewed Pioneer’s employees, HUD’s staff and the University of Illinois College of
Medicine at Peoria Staff.

Finding 1

From a universe of 33 units, we inspected 30 units (clients were not home in three units) for
habitability and local code violations. We inspected 10 units and 2 buildings that were required
to be accessible for disabled persons for accessibility.

To determine the estimated amount of future payments for units that did not meet habitability
standards and local code, we annualized the amount of funding Pioneer received under its
HOPWA and Program for housing. Pioneer received funding for the operating costs of units
owned by Pioneer that were rented to program participants and rental subsidy to help program
participants obtain permanent housing in the private rental housing market.

Finding 3

We obtained reports from HUD’s System to identify the amount of each voucher submitted by
Pioneer from September 1, 2007, through August 31, 2010. Each voucher represented a
drawdown request from Pioneer against HOPWA grant ILH060014. We analyzed the data and
concluded that the data were sufficiently reliable for our purposes. Pioneer submitted 79 draws
totaling more than $436,600.

We reviewed the supporting documentation for each of the 79 paid vouchers. We determined
whether each item included in the draw was supported by proper documentation and whether
each item was an allowable expense under the HOPWA program.


                                               27
We obtained Pioneer’s electronic bank activity reports to identify the amount of each
disbursement against the HOPWA grant from September 1, 2007, through August 31, 2010. We
analyzed the data and concluded that the data were sufficiently reliable for our purposes. Pioneer
disbursed 662 checks totaling more than $426,800.

Finding 5

We reviewed for eligibility the files of all 13 clients (100 percent) who participated in the
Program.

We performed our 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 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 the audit objective.




                                                 28
                              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
               objective:

                     Program operations - Policies and procedures that management has
                      implemented to reasonably ensure that a program meets its objectives.

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

                     Safeguarding resources - Policies and procedures that management has
                      implemented to reasonably ensure that resources are safeguarded 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 coreect
               (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 Deficiencies




                                                29
Based on our review, we believe that the following items are significant deficiencies:

   Pioneer did not have adequate controls in place to ensure that units met
    habitability standards and local code (see finding 1).

   Pioneer did not have adequate controls in place to ensure that buildings and
    units met accessibility standards (see finding 2).

   Pioneer did not establish or implement adequate procedures and controls to
    ensure compliance with laws and regulations, including the requirement of its
    HOPWA Riverside grant and applicable Federal regulations to ensure that
    expenses were eligible and properly supported (see finding 3).

   Pioneer did not establish or implement internal controls to ensure compliance
    with laws and regulations, including the requirement of its Program and
    HOPWA grants and applicable Federal regulations to ensure that expenses
    were eligible and properly supported (see finding 4).




                                 30
                                    APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

          Recommendation
              number            Ineligible 1/     Unsupported 2/    FTBPTBU 3/
                1B               $187,000
                1C                                                    $296,000
                3A                67,000
                3B                26,000
                3C                                   $81,536
                3D                49,176
                4A                15,000
                4B                38,200
                5A                 7,228
                5B                                    12,436
               Totals            $389,604            $93,972          $296,000


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.

2/   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.

3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     that are specifically identified. In this instance, if the Authority implements our
     recommendation, it will cease to incur program costs for units that are not decent, safe,
     and sanitary and, instead, will expend those funds in accordance with HUD’s
     requirements. Once the Authority successfully improves its controls, this will be a
     recurring benefit. Our estimate reflects only the initial year of this benefit.




                                                31
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation   Auditee Comments




Comment 1

Comment 2


Comment 1



Comment 3

Comment 4




                         32
Appendix B


Ref to OIG Evaluation   Auditee Comments




Comment 5




Comment 6

Comment 7

Comment 8




                         33
                        Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation     Auditee Comments




Comment 9



Comment 10

Comment 11




                            34
                        OIG’s Evaluation of Auditee Comments

Comment 1   The appraiser performed the inspections using Habitability Standards and Local
            Code. Pioneer did not provide documentation indicating which inspections it
            considered as inaccurate, unfounded or created by the tenant; therefore, we did
            not make any changes to the finding. The report acknowledges that we did not
            identify any health and safety violations. However, the inspection did identify
            violations that predated Pioneer’s inspections.

Comment 2   Pioneer did not provide documentation certifying that the violations have been
            corrected; therefore the recommendation remains in the report.

Comment 3   Pioneer did not provide documentation identifying the procedures and controls
            that are currently in place to serve the needs of the grant; therefore we did not
            make a change to the recommendation in the report.

Comment 4   Pioneer states that its inspector will now use both HUD’s habitability standards as
            well as local code. We acknowledge its commitment; however, the
            recommendation in the report is to ensure that its inspector is properly trained on
            HUD’s habitability standards and local code and can apply them appropriately
            when performing unit inspections.

Comment 5   The applications for funding for Riverside and Perry Street under its Program and
            HOPWA programs was approved based on the Riverside building and the one
            unit on Perry Street would be accessible for physically disabled persons. We
            acknowledge Pioneer Civic Services’ concern regarding the clients that currently
            reside at Riverside Apartments and it should consult with HUD regarding a
            waiver and a re-house plan for the individuals currently being housed.

Comment 6   We provided support documentation to Pioneer before the issuance of the
            discussion draft audit report of all items identified in the report.

Comment 7   Pioneer did not provide documentation therefore; we did not make any changes to
            recommendation 3C in the report.

Comment 8   Pioneer stated that it used the grant to pay the utilities, insurance and property
            taxes for the building, and HUD was aware of this practice. OMB Circular A-122
            states that under the exception, costs of idle facilities are allowable for a
            reasonable period, ordinarily not to exceed 1 year, depending on the initiative
            taken to use, lease, or dispose of such facilities. Therefore; we did not make any
            changes to recommendation 3D in the report.




                                             35
                         OIG’s Evaluation of Auditee Comments


Comment 9    Pioneer did not provide documentation identifying the procedures and controls
             that are currently in place; therefore we did not make a change to the
             recommendation in the report.

Comment 10 We reviewed the documentation provided by Pioneer and adjusted the finding and
           recommendations, as appropriate.

Comment 11 We reviewed the documentation by Pioneer and adjusted the finding and
           recommendations, as appropriate.




                                            36
Appendix C

             FEDERAL, STATE, AND CITY REQUIREMENTS

Finding 1

HUD’s HOPWA Grantee Oversight Resource Guide states that each unit subsidized with HOPWA
assistance must pass a housing quality inspection to ensure that the housing provided is safe and
sanitary and complies with local and State housing codes, licensing standards, and any other
jurisdictional requirements and the HOPWA program habitability standards as outlined in 24 CFR
574.310(b).

HUD’s regulations at 24 CFR 574.310 state that all housing assisted under section 574.300(b)(3),
(4), (5), and (8) must meet the applicable housing quality standards. It also states that each recipient
of assistance under this part must provide safe and sanitary housing that complies with all
applicable State and local housing codes, licensing requirements, and any other requirements in the
jurisdiction in which the housing is located regarding the condition of the structure and the
operation of the housing.

International Property Maintenance Code, 2003, applies to all existing residential and
nonresidential structures and all existing premises and constitutes minimum requirements and
standards for premises, structures, equipment, and facilities for light, ventilation, space, heating,
sanitation, protection from the elements, life safety, safety from fire, and other hazards and for
safe and sanitary maintenance; the responsibility of owners, operators, and occupants; the
occupancy of existing structures and premises; and administration, enforcement, and penalties.

According to HUD’s Supportive Housing Program Desk Guide each recipient of HUD funding
must ensure compliance with all State and local housing codes, licensing requirements, and any
other standards regarding the condition of a structure and the operation of the housing and/or
services. Specifically, each grantee or project sponsor must follow proper standards regarding
accessibility, sanitation, security, illumination, electricity, and fire safety. The habitability standards
are described in the program regulations at 24 CFR 583.300(b). Any variations from those
standards proposed by the grantee/project sponsor must be approved by HUD.

HUD’s regulations at 24 CFR 583.300(b) state that each recipient of assistance under this part must
provide housing or services that comply with all applicable State and local housing codes, licensing
requirements, and any other requirements in the jurisdiction in which the project is located
regarding the condition of the structure and the operation of the housing or services.

Finding 2.

HUD’s regulations at 24 CFR 8.1 state that the purpose of this part is to effectuate Section 504 of
the Rehabilitation Act of 1973, as amended (29 U.S.C (United States Code) 794), to the end that
no otherwise qualified individual with handicaps in the United States shall, solely by reason of
his or her handicap, be excluded from the participation in, be denied the benefits of, or be


                                                    37
subjected to discrimination under any program or activity receiving Federal financial assistance
from HUD.

If the project involves fewer than 15 units or the cost of alterations is less than 75 percent of the
replacement cost of the completed facility and the recipient has not made 5 percent of its units in
the development accessible to and usable by individuals with disabilities, then the requirements
of 24 CFR 8.23(b), Other Alterations, apply. Under this section, alterations to dwelling units
shall, to the maximum extent feasible, be made readily accessible to and usable by individuals
with disabilities. If alterations to single elements or spaces of a dwelling unit, when considered
together, amount to an alteration of a dwelling unit, the entire unit shall be made accessible.

Alteration of an entire unit is considered to be when all of the following individual elements are
accomplished: renovation of whole kitchens or at least replacement of kitchen cabinets and
renovation of the bathroom if at least a bathtub or shower is replaced or added or a toilet and
flooring are replaced and replacement of entrance door jambs.

HUD’s regulations at 24 CFR 574.603 state that a grantee or project sponsor must adopt
procedures to ensure that all persons who qualify for the assistance, regardless of their race,
color, religion, sex, age, national origin, familial status, or handicap, know of the availability of
the HOPWA program, including facilities and services accessible to persons with a handicap,
and maintain evidence of implementation of the procedures.

HUD’s regulations at 24 CFR 583.325 state that notwithstanding the permissibility of proposals
that serve designated populations of disabled homeless persons, recipients serving a designated
population of disabled homeless persons are required, within the designated population, to
comply with these requirements for nondiscrimination on the basis of race, color, religion, sex,
national origin, age, familial status, and disability.

If the procedures that the recipient intends to use to make known the availability of the
supportive housing are unlikely to reach persons of any particular race, color, religion, sex, age,
national origin, familial status, or handicap who may qualify for admission to the housing, the
recipient must establish additional procedures to ensure that such persons can obtain information
concerning availability of the housing. The recipient must adopt procedures to make available
information on the existence and locations of facilities and services that are accessible to persons
with a handicap and maintain evidence of implementation of the procedures.

Illinois Accessibility Code, 1997, states that the purpose of this Illinois Accessibility Code is to
ensure that the built environment, including all spaces and elements of all applicable buildings
and facilities in the State of Illinois, is so designed, constructed, and/or altered to ensure the
safety and welfare of all members of society and to be readily accessible to and usable by
environmentally limited persons.

The Code was also intended to resolve areas of difference between the Federal accessibility
standards; Americans with Disabilities Act Accessibility Guidelines, which are applicable to
buildings and facilities covered by the Americans with Disabilities Act of 1990; and the Illinois
accessibility standards, which are applicable to buildings and facilities in the State of Illinois



                                                  38
covered by the Environmental Barriers Act. The Code, together with the Environmental Barriers
Act and the standards incorporated by reference identified in Section 400.120, has the force of a
building code and, as such, is law in the State of Illinois.

Finding 3

HUD’s regulations at 24 CFR 574.3 define administrative costs as costs for general management,
oversight, coordination, evaluation, and reporting on eligible activities.

HUD’s regulations at 24 CFR 574.300(b) list the following eligible activities, such as
(8) Operating costs for housing including maintenance, security, operation, insurance, utilities,
furnishings, equipment, supplies, and other incidental costs;
(9) Technical assistance.
(10) Administrative expenses:
(i) Each grantee may use not more than 3 percent of the grant amount for its own administrative
costs relating to administering grant amounts and allocating such amounts to project sponsors;
and (ii) Each project sponsor receiving amounts from grants made under this program may use
not more than 7 percent of the amounts received for administrative costs.

OMB Circular A-122 states that the costs of idle facilities are unallowable except to the extent
that (1) they are necessary to meet fluctuations in workload or (2) although not necessary to meet
fluctuations in workload, they were necessary when acquired and are now idle because of
changes in program requirements, efforts to achieve more economical operations, reorganization,
termination, or other causes which could not have been reasonably foreseen. Under the
exception stated in this subparagraph, costs of idle facilities are allowable for a reasonable
period, ordinarily not to exceed 1 year, depending on the initiative taken to use, lease, or dispose
of such facilities.

Pioneer’s 2006 HOPWA Performance Grant application states that operating cost would include
usual expenses for 1 administrative director, .50 assistant manager, 2 maintenance staff, utilities
of $25,715, taxes and insurance of $13,032, and maintenance expenses of approximately
$40,000.

Finding 4

HUD’s Supportive Housing Program Desk Guide, 2008, describes operating costs as those costs
associated with the day-to-day physical operation of supportive housing facilities. They also
include the actual expense that a recipient incurs for conducting ongoing assessments of the
supportive services needed by residents and the availability of these services. Operating costs
differ from supportive services costs in that operating costs support the function and the
operation of the housing project while supportive services costs cover the actual costs of new or
increased services. Only operating costs for a new project or the expanded portion of an existing
project are eligible for Program funding. Program funds may not be used for the cost of
operating a supportive service’s only facility.




                                                39
Grantees may not consider mortgage payments as an operational costs because the Program
allows grantees to repay outstanding debt on a loan to purchase the structure under the
acquisition activity. This means that when the operating budget is calculated, mortgage
payments should not be included. Grantees should consider this provision when planning their
budgets.

Beginning with grants made in the fiscal year 2000 competition, Program funds can be used to
pay up to 75 percent of the operating costs in each year of the grant term. Resident rent and fees
may be used to meet the cash match requirement for transitional housing, safe haven, and
permanent housing providers (24 CFR 583.315(b)). However, match requirements must be met
by funds used to cover costs associated with eligible Program activities. If resident rents are
used to fund ineligible Program costs, then other sources must be used to meet the annual
Program match obligations.

If the program match obligation is met through other means, then resident rents can be used for
other program costs and may cover activities that are not eligible under Program. For example,
funds could be used to support administrative costs beyond those eligible under Program. Note
that resident rents are considered program income and must be accounted for and reported
appropriately on annual reports.

HUD’s regulations at 24 CFR 583.330 state that in addition to the conflict-of-interest
requirements in 24 CFR Part 85, no person, who is an employee, agent, consultant, officer, or
elected or appointed official of the recipient and who exercises or has exercised any functions or
responsibilities with respect to assisted activities or who is in a position to participate in a
decision-making process or gain inside information with regard to such activities, may obtain a
personal or financial interest or benefit from the activity or have an interest in any contract,
subcontract, or agreement with respect thereto or the proceeds there under, either for himself or
herself or for those with whom he or she has family or business ties, during his or her tenure or
for 1 year thereafter.

Finding 5

HUD’s regulations at 24 CFR 583 describe a homeless person as an individual or family that is
described in Section 103 of the McKinney Act (42 U.S.C. 11302).

The McKinney-Vento Homeless Assistance Act of 1987, 42 U.S.C. 11302(a), states that the term
homeless or homeless person includes (1) a person who lacks a fixed, regular, and adequate
nighttime residence and (2) a person who has a primary nighttime residence that is a supervised
publicly or privately operated shelter designed to provide temporary living accommodation
(including welfare hotels, congregate shelter, and transitional housing for the mentally ill), an
institution that provides a temporary residence for persons intended to be institutionalized, or a
public or private place not designed for or ordinarily used as a regular sleeping accommodation
for human beings.

HUD’s Supportive Housing Program Desk Guide, 2008, states that a person is considered
homeless only when he or she resides in one of three places: (1) places not meant for human



                                                40
habitation, such as cars, parks, sidewalks, and abandoned buildings; (2) an emergency shelter; or
(3) transitional housing for homeless persons.

Persons who are not homeless may not receive assistance under the Program. Examples of
people who are not homeless are those who are in housing, even though they are paying an
excessive amount for their housing, the housing is substandard and in need of repair, or the
housing is crowded; incarcerated; living with relatives or friends; or living in a board and care,
adult congregate living facility, or similar place.

Persons Living on the Street

For persons who reside on the street, it may not be feasible to require the homeless persons to
document that they reside on the street. It is sufficient for the outreach staff to certify that the
persons served reside on the street. The outreach or service worker should sign and date a
general certification verifying that services are going to homeless persons and indicating where
the persons reside.




                                                 41