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. 2 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. 17
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)