oversight

US Dept of Housing and Urban Development, Office of Public Housing, San Francisco, CA, Monitored Recovery Act Grants Awarded to Region IX Public Housing Authority Grantees in Accordance with Applicable Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-07-15.

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

                                                                Issue Date
                                                                         July 15, 2011
                                                                Audit Report Number
                                                                             2011-LA-0003




TO:         Donald J. Lavoy, Deputy Assistant Secretary for Field Operations, PQ




FROM:       Tanya E. Schulze, Regional Inspector General for Audit, Region IX, 9DGA

SUBJECT: Office of Public Housing, San Francisco, CA, Monitored Recovery Act Grants
         Awarded to Region IX Public Housing Agency Grantees in Accordance With
         Applicable Requirements

                                   HIGHLIGHTS

 What We Audited and Why

             We audited the monitoring practices that the San Francisco Office of Public
             Housing (SF OPH) used to monitor American Recovery and Reinvestment Act of
             2009 supplemental capital formula and competitive grants awarded to public
             housing agencies in Region IX. The audit was conducted in accordance with a
             mandate to review the U.S. Department of Housing and Urban Development’s
             (HUD) monitoring of Recovery Act funds to determine whether there were
             safeguards to ensure that grantees used funds for their intended purposes.

             Our objective was to determine whether SF OPH (1) used HUD’s risk assessment
             process to select Recovery Act grantees for monitoring, (2) monitored grantees’
             administration of the grant for compliance with Recovery Act requirements, and
             (3) monitored grantees to ensure timely obligation and expenditure of Recovery
             Act funding.
What We Found


           SF OPH in Region IX complied with HUD policies for monitoring Recovery Act
           grantees selected through the risk assessment process. It also monitored grantees’
           administration of the grant for compliance with Recovery Act requirements and
           provided increased transparency and adequate monitoring of Recovery Act
           expenditures. Therefore, our review of SF OPH’s monitoring for the grants tested
           did not identify any deficiencies.

What We Recommend


           This report does not contain recommendations and, therefore, requires no further
           action.

Auditee’s Response


           We provided HUD the draft report on July 11, 2011 and informally discussed the
           report with the Director of SF OPH on July 12, 2011 in place of an exit
           conference. HUD did not provide formal written comments because the report
           contained no recommendations and agreed with our conclusion in the report.




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                           TABLE OF CONTENTS

Background and Objective                                                    4

Results of Audit
      SF OPH Adequately Monitored Its Recovery Act Grant Awards to Public   5
      Housing Agencies in Accordance With Applicable Regulations and
      Requirements


Scope and Methodology                                                       7

Internal Controls                                                           9




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                       BACKGROUND AND OBJECTIVE

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act
of 2009. Division A, Title XII, of the Recovery Act (PL 111-5) appropriated $4 billion for the
Public Housing Capital Fund program to carry out activities of public housing agencies as
authorized under Section 9 of the United States Housing Act of 1937. The Recovery Act
required that $3 billion of these funds be distributed as Public Housing Capital Fund formula
grants and the remainder be distributed through a competitive grant process. For both grant
types, the Recovery Act required the grantee or public housing agencies to obligate 100 percent
of the funds within 1 year of the date on which funds became available to the agency for
obligation and expend 60 percent within 2 years and 100 percent within 3 years of the
availability date.

The Office of Capital Improvements administers the Capital Fund program, which provides
funds annually via a formula to approximately 3,200 public housing agencies across the country.
The Office provides technical assistance to agencies and U.S. Department of Housing and Urban
Development (HUD) field offices relating to development, financing, modernization, and
management improvements of public housing developments. It prepares quarterly reports to
Congress on the status of the obligation and expenditure of Capital Fund grants and implements
the statutory sanctions for agencies that do not comply with the statutory deadlines.

As of March 17, 2011, 37 public housing agencies had received more than $74 million in
Recovery Act Capital Fund formula grants in the San Francisco Office of Public Housing’s (SF
OPH) jurisdiction. In addition, eight of these agencies had applied for and received 14 Recovery
Act Capital Fund competitive grants totaling more than $43 million.

 Recovery Act awards     All regions       All regions         Region IX            Region IX
 Grant type               Formula          Competitive          Formula             Competitive
 No. of grants              3,121              393                37                   14
 No. of agencies            3,121              209                37                    8
 Amount authorized     $ 2,985,000,000   $   995,000,000   $       74,177,184   $       43,778,276


We reviewed 4 of the 37 formula grants and 2 of the 14 competitive grants that SF OPH
monitored. The review encompassed 39 percent ($28.6 million) of the formula grant awards
funded and 26 percent ($11.2 million) of the competitive grant awards funded.

Objective

Our overall objective was to determine whether SF OPH (1) used HUD’s risk assessment process
to select Recovery Act grantees for monitoring, (2) monitored these grantees’ administration of
the grants for compliance with Recovery Act requirements, and (3) provided increased
transparency and adequate monitoring of expenditures.




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                                RESULTS OF AUDIT

SF OPH Adequately Monitored Its Recovery Act Grant Awards to
Public Housing Agencies in Accordance With Applicable Regulations
and Requirements
SF OPH adequately monitored grantees’ administration of the Recovery Act Capital Fund grants
and the expenditures of formula and competitive Recovery Act grant funds that were awarded to
Region IX grantees. Therefore, it complied with applicable regulations, checklists, and policies
established by HUD. Further, SF OPH monitored 100 percent of its troubled public housing
agencies’ Recovery Act (formula and competitive) grant obligations to ensure that all funds were
obligated by the required deadlines.



 Grantee Monitoring


              SF OPH conducted remote reviews of all 37 (100 percent) of its Recovery Act
              formula and competitive grantees. It also conducted onsite monitoring of selected
              Recovery Act formula and competitive grantees. The reviews were conducted in
              accordance with the Recovery Act (PL 111-5) and applicable HUD monitoring
              strategies. In addition, SF OPH used the appropriate HUD headquarters guidance,
              policies, and checklists in executing its monitoring of public housing agencies.
              Lastly, SF OPH ensured continuous monitoring and quality control by assisting
              HUD in executing field office quick-look reviews and quality control, quality
              assurance reviews.

              SF OPH posted monitoring results using Microsoft SharePoint 2007, together
              with Microsoft InfoPath, which was designed for distributing and filling
              electronic forms. HUD adopted this technology to increase information sharing
              and communication and adapted it to provide increased transparency in Recovery
              Act obligations, expenditures, and monitoring. Monitoring reports were properly
              issued to agencies after reviews were completed and deficiencies were
              satisfactorily addressed.

              All transmittals to the Office of Public and Indian Housing in Washington, DC,
              were properly supported and documented, and SF OPH followed up on
              outstanding issues and promoted transparency and accountability as required by
              the Recovery Act.




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Funds Obligated


             SF OPH monitored its public housing agencies’ Recovery Act (formula and
             competitive) grant obligations to ensure that all funds were obligated by the
             required deadlines. For nontroubled agencies, SF OPH reviewed 25 percent of
             agency obligations. For troubled agencies, it reviewed 100 percent of agency
             obligations. This process included a determination of the validity of the
             obligation, and no exceptions were noted. In addition, SF OPH continued
             monitoring its grantees to ensure that grants were properly administered according
             to the Recovery Act. It paid particular attention to agencies that were identified
             as troubled and high risk.

Funds Expended


             SF OPH monitored each grantee to ensure that it would expend at least 60 percent
             of its competitive grants by the dates established by the Recovery Act. For
             nontroubled public housing agencies, SF OPH reviewed 25 percent of agency
             expenditures. For troubled agencies, it reviewed 100 percent of agency
             obligations in keeping with the need to monitor troubled agencies more closely.
             Again, SF OPH continued monitoring its grantees to ensure that grants were
             properly administered according to the Recovery Act. It paid particular attention
             to agencies that were identified as troubled and high risk.


Conclusion


             SF OPH complied with HUD monitoring directives and administered its Recovery
             Act grants in accordance with Recovery Act requirements. Generally, it
             implemented systems for tracking, accounting for, and monitoring selected
             grantee administration of the Recovery Act grants according to HUD policies.
             For the grants reviewed, SF OPH adequately and sufficiently monitored the
             Recovery Act funds that were awarded to and expended by its grantees, provided
             increased transparency by posting the results of the monitoring, and ensured
             continual monitoring. Our review did not identify any deficiencies.


Recommendations


             Based on the results of this audit, the audit report contains no recommendations,
             and no further action is necessary with respect to our report.



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                        SCOPE AND METHODOLOGY

As part of our annual plan, our overall objective was to determine whether SF OPH monitored
grantees for compliance with Recovery Act requirements and provided adequate monitoring of
expenditures. Audit work was performed at the SF OPH office and remotely when electronic
records were available. The review did not evaluate the risk assessment process established and
implemented by HUD because it was outside the scope of this review. Our audit covered the
period January 2009 through March 2011 and was extended when necessary to meet our
objective.

To accomplish our audit objective, we

   •   Interviewed SF OPH management and staff regarding monitoring procedures;
   •   Reviewed instructions and policies developed by HUD;
   •   Reviewed applicable laws, regulations, guidance, and notices;
   •   Reviewed and evaluated documentation available in the InfoPath SharePoint System to
       determined whether the system was reliable and the data within it were secure and
       provided SF OPH with an accurate, efficient, complete, and transparent method of
       monitoring Recovery Act funds;
   •   Reviewed grant amounts awarded to the region’s housing authorities and judgmentally
       selected six for review. Four of the six were formula grants, and the remaining two were
       competitive grants. The review encompassed 39 percent of the formula grant awards
       funded and 26 percent of the competitive grant awards funded. The grant amounts were
       as follows:

                                                 Authorized     Cumulative          Cumulative
            Agency              Grant number    amount as of   obligation as of   expenditure as of
                                                 03/17/2011      03/17/2011          03/17/2011
                                         Formula grants
  San Francisco Housing
                                   CA39S00150109 $ 17,876,716 $     17,876,716 $         12,027,297
  Authority
  Housing Authority of the City
                                   NV39S00250109       6,662,134      6,662,134           6,583,193
  of Las Vegas
  County of Contra Costa
                                   CA39S01150109       2,877,246      2,877,246           2,877,246
  Housing Authority
  Housing Authority of the
                                   CA30S04450109       1,267,022      1,267,022           1,246,147
  County of Yolo
               Subtotal formula sample            $ 28,683,118 $    28,683,118 $        22,733,833
                                          Competitive grants
  City of Sacramento Housing
                                  CA00500010609T      10,000,000    10,000,000             385,960
  Authority
  Housing Authority of the
                                  CA05200000209E       1,235,000      1,235,000              43,928
  County of Marin
             Subtotal competitive sample          $ 11,235,000 $    11,235,000 $            429,888
                    Total sample                  $ 39,918,118 $    39,918,118 $         23,163,721



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   •   For those grants selected, obtained checklists and initiation, environmental compliance,
       procurement, and grant administration documents, including information that would aid
       the auditors in ensuring that the grant reviews were transparent, accurate, and timely.

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(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




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                              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 plans, 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 over Recovery Act program management.
           •   Controls over compliance with Recovery Act monitoring policies and regulations.
           •   Controls over Recovery Act information systems.

       We assessed the relevant controls identified above.

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

       We evaluated internal controls related to the audit objective in accordance with generally
       accepted government auditing standards. No weaknesses were identified relative to the
       controls identified above. Our evaluation of internal controls was not designed to provide
       assurance regarding the effectiveness of the internal control structure as a whole.
       Accordingly, we do not express an opinion on the effectiveness of SF OPH’s internal
       control.




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