oversight

The City of Beaumont, TX, Should Strengthen Its Controls Over Its Homelessness Prevention and Rapid Re-Housing Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-06-30.

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

                                                                 Issue Date
                                                                          June 30, 2011
                                                                 Audit Report Number
                                                                          2011-FW-1013




TO:         Sandra H. Warren
            Director, Office of Community Planning and Development, 6ED

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

SUBJECT: The City of Beaumont, TX, Should Strengthen Its Controls Over Its
           Homelessness Prevention and Rapid Re-Housing Program


                                    HIGHLIGHTS

 What We Audited and Why

             In accordance with our goal to review funds provided under the American
             Recovery and Reinvestment Act of 2009 (Recovery Act), we reviewed the City of
             Beaumont’s (City) Homelessness Prevention and Rapid Re-Housing Program
             (Program). Our objective was to determine whether the City ensured that its
             Program complied with Recovery Act and U. S. Department of Housing and Urban
             Development (HUD) program expenditure and reporting requirements.

 What We Found

             The City should strengthen its controls over its Program to better comply with
             Recovery Act requirements. Specifically, it should improve controls over the
             timely obligation of funds, eligibility of participants, and monitoring of
             subrecipients. This lack of timely obligation of funds may cost the City’s program
             approximately $215,000. These conditions occurred because the City did not
             develop policies and procedures specifically for its Program to provide appropriate
             guidance to the subrecipients. If the City implemented the necessary controls, it
           could better manage its Program and demonstrate more effectively its compliance
           with requirements.

           We recommend that the Director, Houston, TX Office of Community Planning and
           Development, require the City to (1) provide support to HUD that it met the
           additional guidance allowing the $214,753 obligated after the deadline, or deobligate
           and return the funds to HUD and ensure that it obligates its Program grants in a
           timely manner, (2) provide supporting documentation for one participant lacking
           adequate documentation or reimburse its Program account $155 from non-federal
           funds, (3) develop and implement policies and procedures to govern its Program,
           and (4) conduct quarterly onsite monitoring of its subrecipients to ensure that they
           comply with Program rules and requirements and ensure that the subrecipients
           maintain adequate records of client eligibility. Also, we recommend that if the
           City cannot support the obligation of funds that HUD recapture and rescind the
           $214,753 in deobligated funds and deposit those funds with the U. S. Treasury in
           accordance with the Recovery Act, as amended.

           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 the auditee a discussion draft report on May 27, 2011, and held an
           exit conference with the appropriate officials on June 8, 2011. The auditee
           provided written comments on June 15, 2011, in which it disagreed with part of the
           finding and with the recommendation to repay approximately $215,000 that it did
           not obligate by the deadline, September 30, 2009. 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:   The City Should Strengthen Its Controls Over Its Program   5

Scope and Methodology                                                       10

Internal Controls                                                           11

Appendixes
   A. Schedule of Questioned Costs                                          12
   B. Auditee Comments and OIG’s Evaluation                                 13




                                             3
                         BACKGROUND AND OBJECTIVE

The City of Beaumont (City), TX, incorporated in 1838, is located in the southeast corner of the
State, and is the seat of Jefferson County. The City has a council-manager form of government.
It is governed by an elected council composed of a mayor and six council members, who each
serve 2-year terms. All powers of the City are vested in the council, which enacts local
legislation, adopts budgets, and determines policies. The council is also responsible for
appointing the city attorney, the city clerk and magistrates, and the city manager.

On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (Recovery Act)
was enacted. The Recovery Act appropriated $1.5 billion for the Homelessness Prevention and
Rapid Re-Housing Program (Program). Funding for the program was distributed based on the
formula used for the Emergency Shelter Grants program and is administered by the U. S.
Department of Housing and Urban Development’s (HUD) Office of Community Planning and
Development. The purpose of the Program is to provide homelessness prevention assistance for
households that would otherwise become homeless, many due to the economic crisis, and rapid
re-housing assistance for persons who are homeless. 1 The Program provides temporary financial
assistance and housing relocation and stabilization services to individuals and families who are
homeless or would be homeless but for this assistance.

On August 24, 2009, HUD entered into a grant agreement with the City to distribute more than
$741,325 in Program funds. The city manager was responsible for carrying out these grants. The
City distributed its Program funds to six subrecipients. Four subrecipients provided direct rental
assistance to participants. The other two subrecipients provided indirect support services
including legal aid; training; and collecting, monitoring, and reporting data for the Program.
HUD required the City to be responsible for ensuring that each entity fully complied with
Program requirements. According to HUD, the City’s Program had not been monitored, and the
City was not on track to meet the 2-year 60 percent expenditure requirement in 2011.

Our objective was to determine whether the City ensured that its Program complied with
Recovery Act and HUD program expenditure and reporting requirements.




1
    42 U.S.C. (United States Code) 11302
                                                4
                                    RESULTS OF AUDIT

Finding: The City Should Strengthen Its Controls Over Its Program
The City should strengthen its controls over its Program to better comply with Recovery Act
requirements. Specifically, it should improve controls over the timely obligation of funds,
eligibility of participants, and monitoring of subrecipients. The lack of timely obligation of funds
may cost the City’s Program approximately $215,000. These conditions occurred because the
City did not develop policies and procedures specifically for its Program to provide appropriate
guidance to the subrecipients. If the City implemented the necessary controls, it could better
manage its Program and demonstrate more effectively its compliance with requirements.



    The City Did Not Ensure That
    Its Program Funds Were
    Obligated in a Timely Manner


                 The City did not obligate Program grant funds in a timely manner. As a result of
                 delays, it did not obligate the funds for two subrecipients by the September 30,
                 2009 deadline. 2 The Recovery Act required HUD to recapture unobligated funds
                 and reallocate such funds to entities that complied with the requirements. 3 As
                 shown in table 1, the two subrecipients did not sign their grant agreements until
                 October 7 and 13, 2009.

         Table 1 Comparison of when grant agreements were signed
          Grant agreement                   Date city        Date HUD signed        Date
                                            council passed   agreement              subrecipient
                                                                                    signed

          Lone Star Legal Aid                      5/12/2009            8/24/2009      10/13/2009
          Salvation Army                           5/12/2009            8/24/2009       10/7/2009
          Family Services                          5/12/2009            8/24/2009       9/29/2009
          Harvest For Lost Souls                   5/12/2009            8/24/2009       9/23/2009
          Some Other Place                         5/12/2009            8/24/2009       9/17/2009
          Southeast Texas Regional Planning        5/12/2009            8/24/2009       9/17/2009
          Commission




2
     According to Section E of HUD’s “Notice of Allocations, Application Procedures, and Requirements for
     Homelessness Prevention and Rapid Re-Housing Program Grantees under the American Recovery and
     Reinvestment Act of 2009,” grantees must obligate funds to their subgrantees by September 30, 2009.
3
     The Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203) amended the Recovery
     Act, requiring recaptured funds to be returned to the Treasury.
                                                     5
                 The City provided several reasons for the subrecipients’ delays, including needing its
                 headquarters approval and wanting to modify the agreement. 4 Further, according to
                 the City, it was a busy time as grant agreements for other programs were due at the
                 same time. In addition to risking the recapture of the funds, the City delayed the use
                 of the funds to serve its clients.

                 After the exit conference, HUD provided a frequently asked question (FAQ)
                 addressing the September 30, 2009 obligation deadline.5 The FAQ stated if the City
                 issued “award letters to subgrantees by the deadline, HUD will consider the grantee
                 to have met” the requirement that the City “award or enter into legally binding
                 agreements with all subrecipients by September 30, 2009.”6 Further, HUD strongly
                 encouraged the City to do everything possible to meet the deadline, and HUD would
                 not grant waiver requests. HUD provided what it considered “award” letters to the
                 entities that the City had sent in early September 2009.

                 However, according to the City and the letters, the City did not consider the award
                 executed until the subrecipients signed the grant agreement.7 Further, as previously
                 stated, the delays were caused by the subrecipients trying to modify the terms of the
                 grant agreement adding to the appearance that the City did not obligate the funds until
                 the subrecipient signed the grant agreement and not when the City sent out the letters.
                 The City should provide HUD with support that it had obligated the funds by
                 September 30, 2009. If it did not obligate the funds by September 30, 2009, the City
                 should deobligate $214,753 and return those funds to HUD.

                 The City must establish and implement procedures to ensure that subrecipients timely
                 sign and execute grant agreements. If the City had followed the guidance provided in
                 the FAQ to “do everything possible to meet this deadline,” it might have avoided this
                 issue. While the City did not obligate its entire grant in a timely manner, it was on
                 track to meet all expenditure deadlines. Recovery Act guidelines require the City to
                 expend 60 percent of their Program funds by August 24, 2011, with all funds
                 expended by August 24, 2012.8 As of March 30, 2011, the City had expended 55
                 percent of the funds and was on track to expend its Program funds by the deadlines.




4
    The City confirmed that no modifications were made to the agreement.
5
    The City did not raise this as support for its actions.
6
    FAQ at HUDHRE.info
7
    The letters required the two subrecipients to attend a mandatory orientation meeting on September 15, 2009. The
    letter stated “your presence is required at this meeting in order to have the grant agreement signed and therefore
    executed as soon as possible.”
8
    Section E of HUD’s “Notice of Allocations, Application Procedures, and Requirements for Homelessness
    Prevention and Rapid Re-Housing Program Grantees under the American Recovery and Reinvestment Act of
    2009” requires grantees to expend 60 percent of Homeless Program grant funds within 2 years of the date that
    funds become available to the grantees for obligation (the date that HUD signs the grant agreement) and 100
    percent of funds within 3 years of this date. HUD signed the grant agreement on August 24, 2009.
                                                          6
    The City’s Subrecipients Did
    Not Properly Document Client
    Eligibility

                  The City’s subrecipients did not always properly document client eligibility by
                  verifying identification or income. Staff at two subrecipients 9 stated that during
                  the first few months, caseworkers did not obtain client identification information,
                  such as dates of birth and Social Security numbers for both the clients and their
                  family members. According to a subrecipient, the first year of the newly created
                  program was a learning curve for staff. Both subrecipients’ staffs stated that the
                  errors occurred because the City’s subrecipients did not receive timely Program
                  training.

                  In one of the four files reviewed, the subrecipient did not document client
                  identification or verify client income. In this instance, the $155 provided to the
                  client was ineligible. To correct the files, a subrecipient suggested sending letters
                  to previous Program clients requesting them to submit identification. City staff
                  members stated that they did not have policies and procedures to implement the
                  Program requirements. Therefore, the City could not ensure that clients who
                  received Program funds were eligible.

The City Did Not Develop
Policies and Procedures for
Its Program


                  The City did not develop policies and procedures for its Program because it
                  believed it could use the CDBG policies instead. The city manager believed
                  CDBG was the umbrella for the Program and it would have been redundant to
                  develop policies for the Program. Because the City did not follow the appropriate
                  policy, HUD could not be assured that the City’s Program met the overall purpose
                  of providing homelessness prevention assistance for households that would
                  otherwise become homeless.

                  Although the City did not develop policies and procedures for the Program, the
                  City’s subrecipients did try to address issues as they arose. For example, a
                  landlord claimed to have returned Program rent funds to the client. Afterward, the
                  subrecipient’s finance director notified landlords that Program rent and deposit
                  refunds were to be returned to the subrecipient.




9
     One of these subrecipients, Southeast Texas Regional Planning Commission, had contact with the other
     subrecipients.
                                                        7
The City Did Not
Document Its Monitoring

             The City did not document its monitoring of subrecipients’ performance. One of
             the City’s staff said she attended quarterly meetings to discuss issues with the
             subrecipients but did not document the meetings or discussions. Also, one of the
             City’s six subrecipients was supposed to assist the City by monitoring the
             Program’s Homeless Management Information System database to ensure that the
             information was accurate. However, the subrecipient’s support specialist did not
             complete the annual monitoring. The City could not ensure that the Program files
             contained accurate information. Instead the City relied on the subrecipients’
             expertise or previous experience in assisting the homeless.


Conclusion

             The City should strengthen its controls over its Program. Specifically, it needs to
             improve its controls over the obligation of funds, determining client eligibility, and
             monitoring of subrecipients. The City did not develop policies and procedures for
             its Program to provide sufficient guidance to its subrecipients or properly monitor
             their performance. It relied on subrecipients’ previous experience in assisting the
             homeless. As a result, it may not have met Recovery Act requirements regarding
             the obligation of Program funds and paid for ineligible clients.

Recommendations

             We recommend that the Director, Houston, TX Office of Community Planning and
             Development, require the City to

             1A. Implement controls to ensure it obligates funds in a timely manner.

             1B. Provide support to HUD that it met the guidance in the FAQ allowing the
                 $214,753, or deobligate and return the funds to HUD.

             1C. Support or repay to its Program $155 that was paid on behalf of a client for
                 whom a subrecipient did not verify eligibility.

             1D. Develop and implement procedures to ensure that it administers its Program in
                 accordance with requirements.

             1E. Conduct quarterly onsite monitoring of its subrecipients to ensure that they
                 comply with Program rules and requirements and maintain adequate records
                 of client eligibility, and to ensure that the subrecipient assisting the City
                 properly monitors the Program’s database. The City should document its
                 monitoring results.
                                               8
                 Also, we recommend that the Director, Houston, TX Office of Community
                 Planning and Development,

                 1F. Recapture and rescind the $214,753 in deobligated funds and deposit the funds
                     with the the U. S. Treasury in accordance with the Recovery Act, as amended.10




10
     The Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203) amended the Recovery
     Act, requiring recaptured funds to be returned to the Treasury.
                                                     9
                         SCOPE AND METHODOLOGY

We performed our audit work at the City’s and three subrecipients’ offices and at our Houston,
TX office. The audit generally covered the period August 1, 2009, through December 31, 2010.
We expanded our audit period as needed to accomplish our objective. To accomplish our
objective, we reviewed

    •   Relevant criteria governing the program, including Recovery Act regulations, the Code of
        Federal Regulations, Program laws and policies, HUD’s guidance regarding the Program,
        the grant agreement between HUD and the City including the substantial amendment, and
        grant agreements between the City and the subrecipients providing direct and support
        services to clients.
    •   The City’s audited financial statements for fiscal years 2009 and 2010.
    •   The City’s organizational charts and written policies covering the Program.
    •   The City’s and subrecipients’ supporting documentation for invoices for reimbursement
        of Program expenses. All invoices reviewed were adequately supported and for eligible
        expenses.
    •   A random, nonstatistical sample of four client files from two different subrecipients
        providing direct services to homeless clients.
    •   Computer processed data was used for background purposes only; therefore, we did not
        assess the reliability of the data.
    •   Subrecipients’ monitoring and progress reports.

We also interviewed appropriate HUD program staff and City and subrecipient management and
staff.

We selected our sample of four client files from the City’s subrecipient files. The City used six
subrecipients—four that provided direct services to Program clients and two that provided support
services for the Program. We selected three of the higher funded subrecipients—two that provided
direct services and one that provided support services. We randomly selected and reviewed two
client files for each subrecipient that provided direct services. Since this was a nonstatistical
sample, the results are applicable only to the sample and cannot be projected. We also reviewed
monitoring and progress reports from the subrecipient that provided support services.

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.




                                                10
                               INTERNAL CONTROLS

Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

     •   Effectiveness and efficiency of operations,
     •   Reliability of financial reporting, and
     •   Compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.



 Relevant Internal Controls
               We determined that the following internal controls were relevant to our audit
               objective:

                  •   Controls to ensure that subrecipients comply with applicable Recovery Act
                      and Program laws, regulations, and policies.

               We assessed the relevant controls identified above.

               A deficiency in internal controls exists when the design or operation of a control does
               not allow management or employees, in the normal course of performing their
               assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
               impairments to effectiveness or efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws and regulations on a
               timely basis.

 Significant Deficiency

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

                  •   The City did not develop policies and procedures for its Program to timely
                      obligate funds; provide appropriate guidance to its subrecipients; and
                      properly monitor their performance to ensure that they complied with
                      requirements (finding).



                                                 11
                                   APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS


                  Recommendation         Unsupported1/
                         number
                                1B           $214,753
                                1C                155
                              Total          $214,908




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.




                                            12
Appendix B
        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                           Auditee Comments




            June 13, 2011

            Mr. Gerald R. Kirkland,
            Regional Inspector General for Audit
            U.S. Department of Housing and Urban Development
            Office of Inspector General, Region VI
            819 Taylor Street, Suite 13A09
            Fort Worth, Texas 76102


            Dear Mr. Kirkland:

            The City of Beaumont has received and reviewed the Draft Audit Report Number 2011-FW-
            100X for the City of Beaumont’s Homeless Prevention and Rapid Re-Housing Program activities.
            We appreciate the opportunity to review and comment on the Draft Audit. We are submitting the
            following comments and proposed changes for consideration in the final report.

            Draft Audit Comments :

            The City Did Not Ensure That Its Homeless Program Funds Were Obligated in a Timely
            Manner.

            The audit cites a four month delay between the time the City Council authorized entering into
            contracts for HPRP and the actual signing of the subrecipient contracts and that two subrecipients
            did not sign their grant agreements until after the September 30, 2009 deadline.

            Response:

Comment 1   With regard to the delay, the American Recovery and Reinvestment Act was approved on February
            17, 2009. However, our HPRP contract from HUD was not received by the City until September 2,
            2009, nearly seven months later. This would have been after the September 1, 2009 deadline found
            in “Notice of Allocations, Application Procedures, and “Requirements for Homelessness
            Prevention and Rapid Re-Housing Program Grantees under the American Recovery and
            Reinvestment Act of 2009”, the deadline-referencing document in the Audit. This need for
            timeliness on behalf of HUD was cited in the “Evaluation of the Final Front-End Risk Analysis for
            the Homelessness Prevention and



                            Community Development Department ● (409) 880 -3100 ● Fax (409) 880-3133

                                         801 Main ● Beaumont, Texas 77701

                                                    13
Rapid Re-Housing Program” memorandum issued by OIG, Audit Memorandum Number 2009 BO
0801.

Furthermore, Table 1 of the audit cites the time between City Council authorization of contracts
and the execution of the HPRP contracts as being months. As the contract between the City and
HUD was not provided to the City until September 2, 2009, how could we enter into contracts with
subrecipients prior to this? The audit report would be more proper if it referenced the subrecipient
contracts with Lone Star Legal Aid and the Salvation Army, which were only fourteen and eight
days beyond September 30th, respectively.

It should also be stated that while the consequences for not meeting the 60% expenditure rate were
clearly stated in the notice and guidelines, any consequences for executing after the September 30th
deadline were not clearly stated and certainly did not reference recapture. As a result, it should be
noted that the City readily acknowledged the 60% expenditure deadline and as a result, has now
met and exceeded this deadline in order to avoid recapture. Moreover, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, referenced in the Draft Audit, was not enacted until July,
2010. The Act’s “Pay-it-Back” provisions were enacted nearly a year after the September 30, 2009
date in question. More importantly, any changes to deadlines and alteration of the consequences
for not meeting them as a result of this later act should have been reflected in amended agreements
and guidance and clearly communicated in guidance documents, communications and technical
assistance. Below is the timeline from HUD’s “Requirements for Homelessness Prevention and
Rapid Re-Housing Program Grantees under the American Recovery and Reinvestment Act of
2009”.

•        Grantee signs agreements with subgrantees by September 30, 2009
•        Initial Performance Report is due to HUD October 10, 2009;
•        Quarterly Performance Reports are due to HUD 10 days after the end of each quarter, and
         Annual Performance Reports are due 60 days after the end of each federal fiscal year;
•        Grantee expends 60 percent of grant funds within 2 years of the date that HUD
         signed the grant agreement. Funds may be recaptured and reallocated if not spent;
•        Grantee expends 100 percent of grant funds within 3 years of the date HUD signed
         the grant agreement. Funds will be recaptured if not spent.


Furthermore, in an effort to determine if other jurisdictions had experienced any similar issues with
subrecipient grant agreements being finalized after the September deadline, we did review similar
issues with other grantees. To this end, we did review Audit Memorandum Number 2011-LA-
1007. In this report, it was stated that the grantee, the Sacramento Housing and Redevelopment
Agency also entered contracts with their subgrantees after the September 30th deadline, yet nothing
was mentioned in the report about this issue.




                Community Development Department ● (409) 880 -3100 ● Fax (409) 880-3133

                             801 Main ● Beaumont, Texas 77701




                                        14
            Furthermore, Audit Memorandum Number 2011-LA-1005 shows that the City and County of San
            Francisco, CA entered into contracts after the September 30, 2009 deadline with its six (6)
            subgrantees, yet again, the audit is silent on this issue.

            Again our purpose in reviewing other grantee’s audits of the HPRP program was merely to
            determine if other grantees experienced similar difficulties in ramping up this new program in the
            midst of the numerous other ARRA programs and slight overruns in deadlines and the resulting
            comments of the auditors.

            Again, the contract was signed by the City this very same day that it was received from HUD and
            subrecipient contracts were executed as quickly as possible immediately after.


            Draft Audit Comment:

            The City's Subrecipients Did Not Properly Document Client Eligibility.

            Response:

Comment 2   The sentence that states that "the City’s subrecipients did not receive timely Homeless Program
            training” is somewhat misleading, because the City conducted several trainings/meetings with
            applicants and recipients. These included an application meeting and program requirement
            overview on May 4, 2009 and Program Guidelines Training on September 15, 2009, November 9,
            2009, December 4, 2009, December 17, 2009 and February 5, 2010 with non-profit subrecipients.
            The purpose of this training was to discuss the importance of client eligibility and the process and
            controls for determining eligibility.

Comment 3   With regard to the disallowed amount of $155, due to a lack of eligibility documentation, as
            mentioned in the Draft Audit, further research showed that the documentation for the client is
            housed a site separate from that visited by the auditor and can be provided.

Comment 4   The City had and continues to work with our HPRP subrecipients in similar programs and regularly
            monitors their intake and eligibility procedures and documentation as it relates to HUD compliance.
            Due to personnel changes at the subrecipient agencies, there may have been an incident whereby a
            document was omitted from the file or overlooked, but to characterize all of the sub recipients as
            being non compliant is somewhat unfair. However, in an effort to enhance subrecipient review of
            client eligibility, we are now in the process of meeting with all subrecipients to review eligibility
            procedures and documentation requirements and we will further enhance our review of these
            procedures and documentation as we continue with the program.




                            Community Development Department ● (409) 880 -3100 ● Fax (409) 880-3133

                                         801 Main ● Beaumont, Texas 77701




                                                    15
            Draft Audit Comment:

            The City Did Not Develop Policies and Procedures For Its Homeless Program.

            Response:

Comment 5   The nature of federal programs dictate that Participating Jurisdictions must adhere to regulations,
            requirements, statues and applicable laws, in order to implement viable Entitlement Programs.
            Because the HPRP was a new program, different from the ESG Program, and because of the time
            constraints associated with expending American Recovery Reinvestment Act ( ARRA ) funds
            expeditiously, the City utilized the established requirements and applicable regulations as outlined
            in the HPRP “Eligibility Determination and Documentation Guidance” ( Published March 19, 2009
            and Revised March 17,2010 ). The said guidance involves the overall eligibility documentation,
            income and housing status determination and documentation. Moreover, the aforementioned
            guidance states that "HUD encourages grantees to use this document as a guide to ensure
            appropriate and sufficient information is collected and documented in the participant case files to
            document program compliance". Please further note that "grantees or sub grantees choosing to use
            additional risk factors or local determinants must develop policies to ensure they are applying
            these factors consistently to all applicants", according to the HPRP Eligibility Determination and
            Documentation Guidance ( Revised March 17, 2010 ).

            In an effort to address this issue, the City will formally adopt the HUD guidelines and resubmit
            them to their HPRP subrecipients.

            In conclusion, your review has proven to be of value to us. It has always been the intent of the City
            to properly and “rapidly” enact the HPRP along with the other nine (9) new disaster recovery and
            economic recovery programs that have been undertaken above and beyond our typical CDBG and
            HOME programs. Although we are in disagreement about some of the issues raised in the Draft
            Audit, we do feel that we have complied with the HPRP policies and procedures set forth by HUD
            in an expeditious and timely manner, as called for by HUD. As mentioned, based on the Draft
            Audit, we are in the process of enhancing our processes and controls to better ensure compliance
            with program requirements.

            Thank you for your consideration of our comments and we hope that you will consider our
            suggested revisions and changes and enhancements to our procedures. Please feel free to contact
            me or Johnny Beatty, Grants Manager at (409) 880-3100 if you have any further questions or need
            any additional information.




                              Community Development Department ● (409) 880-3100 ● Fax (409) 880-3133

                                           801 Main ● Beaumont, Texas 77701




                                                     16
Sincerely,
Christopher Boone,
Community Development Director



Cc: Johnny Beatty, Grants Manager




        Community Development Department ● (409) 880-3100 ● Fax (409) 880-3133

                               801 Main ● Beaumont, Texas 77701




                                         17
                         OIG Evaluation of Auditee Comments

Comment 1   We modified the table in the report to include a column for a date that HUD signed
            the agreement with the City and removed the column related to the number of
            months. We modified the entire section of the finding based upon information
            provided by HUD. The City’s response did not discuss how the City was
            prohibited from meeting the deadline or that the deadline was unrealistic. Rather,
            the City’s response argued that it should be exempt from the requirement because
            (1) the Dodd-Frank Wall Street Reform and Consumer Protection Act was not
            enacted until July, 2010; (2) HUD did not list a repercussion for not meeting the
            obligation deadline; and (3) the issue was not raised in audits of other entities.
            Based upon the information provided, the City could have gotten the grant
            agreements signed by September 30, 2009.

Comment 2   The comment regarding “timely Homeless Program training” was based upon
            discussions with subrecipients. The City did not provide support for this training
            that would attendees and agenda.

Comment 3   The City will need to provide the support to HUD to address and clear the
            recommendation.

Comment 4   We appreciate the City’s efforts to address the recommendations.

Comment 5   While the City now cites the correct Program guidance, it did reference the CDBG
            guidance during the audit. The incorporation of this guidance as policy would be
            an improvement.




                                             18