oversight

The Housing Authority of the City of Elizabeth, Elizabeth, NJ, Had Weaknesses in Its Capital Fund Program's Financial Controls

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-08-04.

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

                                                                 Issue Date
                                                                     October 04, 2011
                                                                 Audit Report Number
                                                                      2012-NY-1001




TO:        Annemarie Uebbing, Director, Office of Community Planning and
                                            Development, Newark, New Jersey, 2FD



FROM:       Edgar Moore, Regional Inspector General for Audit, New York/New Jersey
                                             2AGA

SUBJECT: Bergen County, NJ, Generally Administered Its Homelessness Prevention
         and Rapid Re-Housing Program in Accordance With HUD Regulations

                                HIGHLIGHTS

 What We Audited and Why

             We audited Bergen County’s administration of its Homelessness
             Prevention and Rapid Re-Housing Program (HPRP) grant received under
             the American Recovery and Reinvestment Act of 2009. We selected the
             County based upon a risk assessment that considered the size of the
             County’s HPRP grant, $4.3 million, which was the largest of 23 direct
             HPRP city and county grants administered through the Newark field
             office, and the lack of recent onsite monitoring by the field office of
             similar programs administered by the County. The audit objective was to
             determine whether County officials obligated and expended HPRP funds
             within prescribed timeframes and implemented adequate controls to
             ensure that grants were awarded for eligible activities in accordance with
             HPRP requirements.

 What We Found

             Bergen County officials generally administered the HPRP grant funds in
             accordance with HUD regulations. Specifically, the officials obligated
             and expended funds within required timeframes and generally disbursed
           grant funds for eligible activities and complied with program financial and
           administrative requirements. While some participant files did not contain
           all required documentation and a $500 grant was erroneously awarded,
           County officials had taken action to address these issues.


What We Recommend

           We recommend that the Director of HUD’s Newark Office of Community
           Planning and Development instruct County officials to strengthen the
           County’s administrative controls to ensure that participant case files
           include all required supporting documentation and monitoring reviews of
           subgrantees are conducted regularly.

           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 discussed the results of the review during the audit and at an exit
           conference on September 14, 2011. We received County officials’
           written comments on September 23, 2011, in which they generally agreed
           with the report findings. The complete text of the County’s response,
           along with our evaluation of that response, can be found in appendix B of
           this report.




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                       TABLE OF CONTENTS

Background and Objective                                                          4

Results of Audit

      Finding: County Officials Generally Administered HPRP Funds in Accordance   5
               With HUD Regulations

Scope and Methodology                                                             9

Internal Controls                                                                 11

Appendixes
   A. Audited Comments and OIG’s Evaluation                                       13




                                       3
                  BACKGROUND AND OBJECTIVE

The American Recovery and Reinvestment Act of 2009, Public Law 111-5, enacted on
February 17, 2009, established the Homelessness Prevention and Rapid Re-Housing
Program (HPRP) and funded it with $1.5 billion. HPRP is administered by the U.S.
Department of Housing and Urban Development’s (HUD) Office of Community
Planning and Development. HUD allocated HPRP funding based upon the formula used
for its Emergency Shelter Grant program.

The purpose of HPRP is to provide homelessness prevention assistance to households
that would otherwise become homeless, many due to the economic crisis, and to provide
assistance to rapidly rehouse persons who are homeless as defined by Section 103 of the
McKinney-Vento Homeless Assistance Act (42 U.S.C. (United State Code) 11302).
HPRP provides temporary financial assistance and housing relocation and stabilization
services to individuals and families that are homeless or would be homeless but for this
assistance.

In July 2009, HUD allocated more than $4.3 million in HPRP funds to Bergen County.
County officials allocated the funds to six nonprofit organizations and its Division of
Community Development. HUD’s Integrated Disbursement and Information System
disclosed that as of August 22, 2011, the County had drawn down more than $3.4 million
from its HPRP grant, which represented approximately 79 percent of the total amount of
$4.3 million. County reports to HUD disclosed that as of March 31, 2011, 9 full-time-
equivalent jobs had been created or retained and 950 households (1,908 people) had been
served through the County’s HPRP.

Bergen County was established in 1683 and has the largest population among New Jersey
counties. The County is governed by the county executive and a seven-member board of
freeholders. In addition to HPRP, the Department of Planning and Economic
Development, Division of Community Development, administers other HUD programs,
such as the Community Development Block Grant and Emergency Shelter Grant
programs.

The audit objective was to determine whether County officials obligated and expended
HPRP funds within prescribed timeframes and implemented adequate controls to ensure
that grants were awarded for eligible activities in accoradance with HPRP requirements.




                                            4
                                              RESULTS OF AUDIT


Finding: County Officials Generally Administered HPRP Funds in
         Accordance With HUD Regulations
Bergen County officials generally administered HPRP grant funds in accordance with
HUD regulations. Specifically, the officials obligated and expended funds within
required timeframes, generally disbursed grant funds for eligible activities, and complied
with program financial and administrative requirements. While some participant files did
not contain all required documentation and a $500 grant was erroneously awarded,
County officials had taken action to address these issues.



    Funds Were Obligated and
    Disbursed in a Timely Manner


                    County officials complied with HPRP obligation and expenditure
                    requirements. Federal Register Notice FR-5307-N-01 required that grantees
                    obligate HPRP funds by September 30, 2009. County officials obligated all
                    of the more than $4.3 million it was awarded before this deadline through the
                    following contracts:

                        Subgrantee or              Contract
                             agency                amount                       Purpose
                      Center for Food             $ 118,893      Provide utility payments and security
                      Action                                     deposits to individuals and families
                                                                 who are homeless or at risk of
                                                                 becoming homeless
                      Northeast NJ Legal            210,000      Provide legal counseling to
                      Services                                   individuals and families who are
                                                                 homeless or at risk of becoming
                                                                 homeless
                      Bergen County                 422,000      Provide credit counseling to
                      Community Action                           individuals and families who are
                      Partnership, Inc.                          homeless or at risk of becoming
                                                                 homeless
                      Shelter Our Sisters             1,1481     Provide financial assistance and
                                                                 housing relocation and stabilization
1
    The contract was for $57,310 but was canceled after $1,148 was incurred for administrative costs to
     screen 18 applicants after it was determined that required HPRP documentation could not be provided for
     safety concerns by the applicants who were victims of domestic abuse.


                                                      5
                                                    assistance to individuals and families
                                                    who are victims of domestic violence
               Care Plus, Inc.           851,270    Provide case management and
                                                    housing search services to
                                                    individuals and families who are
                                                    homeless or at risk of becoming
                                                    homeless
               Housing Authority       2,655,577    Provide rental assistance, security
               of Bergen County                     and utility deposits, utility payments,
                                                    and housing search and moving costs
                                                    to the homeless and those at risk of
                                                    becoming homeless
               Division of                          Oversee and monitor overall
               Community              75,000        performance of the County’s HPRP
               Development                          grant

             The Recovery Act requires grantees to expend 60 percent of their HPRP
             funds within 2 years of the date that funds become available to the grantee
             for obligation and 100 percent of the funds within 3 years of this date.
             HUD’s Integrated Disbursement and Information System disclosed that as of
             April 29, 2011, County officials had drawn down more than $2.7 million in
             HPRP grants, which represents approximately 64 percent of the $4.3 million
             awarded. In addition, County officials stated that they expected to expend
             all of the funds within the required timeframe.

Funds Were Generally
Disbursed for Eligible Activities


             County officials generally disbursed funds for eligible costs for the grant
             awards reviewed. Federal Register Notice FR-5307-N-01 and HUD’s
             HPRP Eligibility Determination and Documentation Guidance detailed the
             participants and types of costs eligible for the grants. For instance,
             Federal Register Notice FR-5307-N-01 Part IV.D.2. provides requirements
             for eligible program participants, such as that a household’s total income
             must be at or below 50 percent of the area average median income (Part
             IV.D.2.2) and that the household be either homeless or at risk of losing its
             housing and meet both of the following circumstances: (1) no appropriate
             subsequent housing options have been identified; and (2) the household
             lacks the financial resources and support networks needed to obtain
             immediate housing or remain in its existing housing (Part IV.D.2.3).

             One County subgrantee erroneously approved an applicant whose income
             exceeded 50 percent of the area average median income and disbursed
             $500 for utility assistance on the applicant’s behalf. County and
             subgrantee officials acknowledged the ineligible payment and took action


                                          6
           during the review to recover the amount. In July 2011, the $500 was
           recaptured and reimbursed to the County’s HPRP funds.


The County Generally
Complied With Administrative
and Financial Requirements

           County officials generally complied with HPRP administrative and financial
           requirements. The subgrantee contracts reviewed, to carry out HPRP
           activities were awarded in compliance with regulations at 24 CFR (Code of
           Federal Regulations) 85.36. County officials issued a public notice and
           advertised in local newspapers to achieve an open and competitive
           competition for subgrantees. County officials evaluated the 10 applications
           received based on a reasonable set of criteria such as the organizations’
           experience with homeless clients and rapid rehousing and homeless
           prevention activities, collaboration with other agencies, and homeless
           management information systems.

           Regulations at 24 CFR 85.40(a), Monitoring and Reporting Program
           Performance, require HPRP grantees to monitor grant- and subgrant-
           supported activities to ensure compliance with applicable Federal
           requirements. County officials stated that subgrantees would be monitored
           onsite annually. They worked closely with the subgrantees to develop an
           effective program that incorporated integrated case management, provided
           guidance, and oversaw the implementation of the program. Subgrantees
           were required to submit their participant data to the integrated Homeless
           Management Information System and cooperate with each other while
           serving the participants. County officials delivered initial training sessions to
           the subgrantees and provided continual guidance to them through emails,
           phone calls, and mandatory meetings at the County office to periodically
           discuss program administration and any changes in program requirements.
           County officials also conducted onsite monitoring reviews of the six
           subgrantees in April 2011, provided them a written report and a specific
           timeframe within which to respond to any monitoring findings, and
           scheduled a follow-up review. However, while County officials said that
           they had planned to perform onsite reviews annually, these initial onsite
           monitoring reviews were conducted 18 months after the subgrantees were
           awarded the contracts. County officials explained that the delay was due to
           the late startup of the program and agreed to conduct monitoring reviews
           more frequently, preferably every 6 months.

           While one subgrantee had reportedly conducted habitability and lead-based
           paint inspections and rent reasonableness analysis, the supporting
           documentation was not included in the two participant files reviewed.
           County officials had also identified this deficiency during the April 2011



                                          7
             monitoring review and stated that the subgrantee was taking corrective
             action.

             The Recovery Act requires grantees to submit quarterly reports on how
             HPRP funds were spent. Federal Register Notice FR-5307-N-01 Part VI.C
             instructs HPRP grantees to submit initial, quarterly, and annual performance
             reports to HUD. The County reported the use of the funds as required.
             County officials reviewed monthly financial reports and all reimbursement
             requests and supporting documentation submitted by the subgrantees.


Conclusion

             County officials complied with HPRP obligation and expenditure
             requirements, established an effective program, and generally administered
             the HPRP grant funds reviewed in accordance with HUD regulations.
             County officials had taken action to address minor exceptions noted.
             Consequently, County officials provided HUD assurance that the County’s
             HPRP funds were being expended for eligible items.

Recommendations

             We recommend that the Director of HUD’s Newark Office of Community
             Planning and Development instruct County officials to strengthen
             administrative procedures to ensure that

             A.   Monitoring reviews of subgrantees are conducted in accordance with
                  County policy.

             B.   Participant case files include all required supporting documentation,
                  including habitability and lead-based paint inspections and rent
                  reasonableness analysis.




                                           8
                    SCOPE AND METHODOLOGY

We performed the audit fieldwork from May through July 2011 at the County’s office
located at One Hackensack Plaza, Hackensack, NJ. The audit generally covered the
period July 1, 2009, to March 31, 2011, and was extended as necessary.

To accomplish our audit objectives, we

       Reviewed relevant HUD HPRP regulations and guidance, particularly Federal
       Register Notice FR-5307-N-01 and HUD’s HPRP Eligibility Determination and
       Documentation Guidance.

       Obtained an understanding of the County’s administrative and financial
       management controls and procedures.

       Interviewed HUD field office and County HPRP officials.

       Reviewed the County’s independent public accountant audit reports and its
       subgrantee monitoring review reports.

       Reviewed the HPRP contracts between HUD and the County and between the
       County and its subgrantees and the related procurement procedures.

       Reviewed performance reports the County submitted to FederalReporting.gov and
       HUD’s E-Snap reporting system.

       Reviewed reports from HUD systems, such as the Integrated Disbursement and
       Information System and Line of Credit Control System, to document the reported
       obligation and expenditure of HPRP funds. Assessment of the reliability of the
       data in these systems was limited to the data sampled, which were reconciled to
       the County’s records.

       Verified that the County obligated its HPRP funds as required.

       Selected a nonstatistical sample of the 10 drawdowns totaling more than
       $179,000, which represented the highest administrative costs and employee
       compensation expenses, to determine whether the funds were disbursed for
       eligible activities and adequately supported. The sample represented 17 percent
       of the total disbursement of $1.1 million for administration. The sample was not
       statistically selected and cannot be projected to the universe.

       Selected a random nonstatistical sample of 15 participant case files out of 369
       HPRP participants—10 of the 299 served by the Bergen County Housing
       Authority and 5 of the 70 served by the Center for Food Action—to test whether



                                           9
           HPRP grant funds were awarded to eligible participants and for eligible costs.2
           The sample was not statistically selected and cannot be projected to the universe.
           However, since there was one monetary error in the 15 files reviewed and our
           assessment of County controls was strong, we did not deem it necessary to expand
           the review.

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




2
    Since the drawdowns for Northeast NJ Legal Services, Bergen County Community Action Partnership,
    and Care Plus, Inc., were for administrative and salary costs, which were sampled separately, we
    specifically selected the participants served by these entities. However, if the sampled participants were
    also served by any or all of these three entities, we reviewed the documentation from those entities as
    well.


                                                        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:

                      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.

                      Validity and reliability of data – Policies and procedures that
                      management has implemented to reasonably ensure that valid and
                      reliable data are obtained, maintained, and fairly disclosed in reports.

               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 the effectiveness or efficiency of



                                            11
            operations, (2) misstatements in financial or performance information, or (3)
            violations of laws and regulations on a timely basis.


Significant Deficiency

            We evaluated internal controls related to the audit objective(s) in
            accordance with generally accepted government auditing standards. Our
            evaluation of internal controls was not designed to provide assurance on
            the effectiveness of the internal control structure as a whole. Accordingly,
            we do not express an opinion on the effectiveness of Bergen County’s
            internal control.




                                         12
Appendix A

     AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation    Auditee Comments




Comment 1


Comment 2


Comment 3




                        13
Ref to OIG Evaluation    Auditee Comments




                        14
Ref to OIG Evaluation    Auditee Comments




                        15
Ref to OIG Evaluation    Auditee Comments




Comment 4




                        16
                    OIG Evaluation of Auditee Comments
Comment 1     Bergen County officials’ planned action is responsive to the
              recommendation.

Comment 2 The lack of documentation to support inspection and analysis was
          discussed during the audit with County officials, who had taken action to
          ensure subrecipient compliance with documentation requirements.

Comment 3 Documentation for the repayment was provided and so noted in the report.

Comment 4 The report noted that County officials implemented an integrated case
          management approach and provided the subrecipients with initial training
          and subsequent guidance as the program was administered.




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