oversight

Camden County, NJ, Generally Administered Its Community Development Block Grant Recovery Act Funds According to Applicable Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-09-22.

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

                                                              Issue Date
                                                                    September 22, 2011
                                                              Audit Report Number
                                                                    2011-PH-1015




TO:        Annemarie C. Uebbing, Director, Office of Community Planning and
            Development, Newark Field Office, 2FD

           //signed//
FROM:      John P. Buck, Regional Inspector General for Audit, Philadelphia Region,
             3AGA

SUBJECT:   Camden County, NJ, Generally Administered Its Community Development
           Block Grant Recovery Act Funds According to Applicable Requirements


                                 HIGHLIGHTS

 What We Audited and Why

           We audited Camden County, NJ’s administration of its Community Development
           Block Grant funds that it received under the American Recovery and
           Reinvestment Act of 2009. We selected the County for an audit because we
           received two complaints alleging that the County misused Recovery Act funds
           and because of our mandate to audit Recovery Act activities. Our objective was
           to determine whether the County obligated, expended, and reported its Block
           Grant funds provided under the Recovery Act according to the Recovery Act and
           applicable U.S. Department of Housing and Urban Development (HUD)
           requirements.

 What We Found


           The County generally administered its Block Grant Recovery Act funds in
           accordance with the Recovery Act and applicable HUD requirements. However,
           it (1) approved a subrecipient to execute a change order for work which was
           outside the scope of the original contract, (2) could not demonstrate that the
           subrecipient performed a cost analysis for the change order work items, (3) did
           not ensure that a subrecipient fully complied with the Davis-Bacon Act, and (4)
           did not accurately report job creation information on the Federal reporting Web
           site. We found no evidence to substantiate the alleged misuse of Recovery Act
           funds.

What We Recommend


           We recommend that HUD require the County to (1) provide documentation to
           demonstrate that $37,610 expended for work performed under a change order was
           fair and reasonable or reimburse HUD from non-Federal funds for any amount it
           cannot support, (2) require a contractor to pay $1,041 to an employee to whom it
           paid less than the prevailing wage, and (3) report accurate job creation
           information for the reporting period ending September 30, 2011.

           For each recommendation in the body of the report without a management
           decision, please respond and provide status reports in accordance with HUD
           Handbook 2000.06, REV-3. Please furnish us copies of any correspondence or
           directives issued because of the audit.

Auditee’s Response


           We provided a draft audit report to the County on September 12, 2011, and
           discussed it with the County at an exit conference on September 14, 2011. The
           County provided written comments to the draft report on September 16, 2011. It
           agreed with the conclusions and recommendations in the report. The complete
           text of the County’s 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: The County Generally Administered Block Grant Funds in Accordance   6
      With Applicable Requirements

Scope and Methodology                                                              11

Internal Controls                                                                  13

Appendixes
   A. Schedule of Questioned Costs and Funds To Be Put to Better Use               14
   B. Auditee Comments                                                             15




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                             BACKGROUND AND OBJECTIVE

Camden County, NJ, is a Community Development Block Grant entitlement grantee. The U.S.
Department of Housing and Urban Development (HUD) annually awards grants to entitlement
grantees to carry out a wide range of community development activities directed toward
revitalizing neighborhoods, economic development, and providing improved community
facilities and services. The County consists of 37 municipalities, governed by a seven-member
board of chosen freeholders. The County manages its community development programs
through its Community Development Program office located at 512 Lakeland Road, Blackwood,
NJ. The director of the Community Development Program office is Gino Lewis.

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act
of 2009. The purpose of the Recovery Act was to jumpstart the Nation’s ailing economy, with a
primary focus on creating and saving jobs in the near term and investing in infrastructure that
will provide long-term economic benefits. This legislation included a $1 billion appropriation of
community development funds to carry out Block Grant programs as authorized under Title 1 of
the Housing and Community Development Act of 1974.

On July 29, 2009, the County received $690,882 in Block Grant funds under the Recovery Act.
The County planned to use the grant funds on the following 11 activities:

                                    Activity                               Amount obligated
      Winslow Township senior center photovoltaic system1                     $275,000
      Collingswood curb cuts                                                   125,000
      Supplemental funding for County’s peer grouping system                    73,000
      Grant and program administration                                          68,922
      Pine Hill senior center heating, ventilation, and air conditioning        42,460
      replacement
      Chesilhurst removal of barriers                                            41,500
      Food Bank of South Jersey                                                  20,000
      Brooklawn senior center window replacement                                 15,000
      Audubon senior center elevator installation                                10,588
      AIDS Coalition of Southern New Jersey employment training                  10,000
      Barrington senior center window replacement                                 9,412
      Total                                                                    $690,882

The Recovery Act imposed additional reporting requirements and more stringent obligation and
expenditure requirements on the grant recipients beyond those applicable to the ongoing Block
Grant program grants. Transparency and accountability were critical priorities in the funding
and implementation of the Recovery Act.



1
    A photovoltaic system is a solar panel system.




                                                     4
Our objective was to determine whether the County obligated, expended, and reported its Block
Grant funds provided under the Recovery Act according to the Recovery Act and applicable
HUD requirements.




                                              5
                                RESULTS OF AUDIT

Finding: The County Generally Administered Block Grant Funds in
Accordance With Applicable Requirements
The County generally obligated, expended, and reported its Block Grant funds in accordance
with the Recovery Act and applicable HUD requirements. However, it (1) approved a
subrecipient to execute a change order for work which was outside the scope of the original
contract, (2) could not demonstrate that the subrecipient performed a cost analysis for the change
order work items, (3) did not ensure that a subrecipient fully complied with the Davis-Bacon
Act, and (4) did not report accurate job creation information on the Federal reporting Web site.
These conditions occurred because the County did not fully understand HUD procurement and
job reporting requirements and it overlooked the wage rate discrepancy. As a result, it could not
demonstrate that its expenditure of $37,610 for materials and services was fair and reasonable, a
contractor’s employee was underpaid $1,041, and job creation information that it reported on the
Federal reporting Web site was understated.


 The County Submitted an
 Amended Action Plan as
 Required


               In June 2009, the County submitted a substantial amendment to its fiscal year
               2008 annual action plan as required. The annual action plan outlined the activities
               the County would undertake using the Block Grant funds it received. The
               substantial amendment to the fiscal year 2008 annual action plan was required to
               record the activities the County planned to undertake using its Block Grant
               Recovery Act funds. All of the activities that the County included in its amended
               action plan were eligible to be funded with its Recovery Act grant, including curb
               cuts and solar panel activities. The curb cut activity consisted of the removal of
               barriers at intersections along Haddon Avenue in the Borough of Collingswood to
               allow for handicap access and encourage disabled persons to participate in local
               community events, which would improve their quality of life. The solar panel
               activity included the installation of solar panels, which would use the sun’s
               natural energy to provide heat and hot water for the senior center located in
               Winslow Township. The following pictures show some of the work completed by
               the County with its Recovery Act funds.




                                                6
           Before (left) and after (right) pictures illustrate the installation of curb cuts along Haddon Avenue
           in Collingswood (completed).




           Before (left) and after (right) pictures illustrate the installation of a solar panel system at the
           Winslow Township senior center (completed).


The County Complied With
Obligation and Expenditure
Deadlines

           The Recovery Act required the County to obligate 100 percent of its grant by
           September 30, 2011, and expend 100 percent of these funds by September 30,
           2012. As of July 2011, the County had obligated and expended 100 percent of its
           grant. The County maintained documentation submitted by its subrecipients, such
           as contractor invoices, to support its expenditures. The documentation adequately
           supported the payments.

The County Generally
Complied With Procurement
Requirements

           The County generally complied with HUD procurement regulations and guidance.
           We reviewed two contracts, valued at $344,718, for the curb cut and senior center
           solar panel system activities. The County entered into subrecipient agreements



                                                     7
           with its municipalities for these activities. During our review of the two
           contracts, we found that the subrecipients

                  Complied with HUD guidance for implementing the “buy American”
                  requirement of the Recovery Act in HUD Office of Community Planning
                  and Development Notice CPD-09-05.

                  Received an adequate number of bids to ensure that it awarded contracts
                  competitively as required by 24 CFR (Code of Federal Regulations) 85.36.
                  The subrecipients advertised and competitively awarded the contracts and
                  had sufficient documentation to support the procurement.

The County Did Not Identify an
Improper Change Order


           The County approved Winslow Township to execute a change order for work
           which was outside the scope of the original contract. The Township issued a
           change order totaling $37,610 on the contract for the solar panel system at the
           senior center. The change order included the following work items: install a
           fence to surround the solar panels, replace a hot water boiler, and install variable
           speed circulator pumps. The replacement of the hot water boiler and installation
           of the variable speed circulator pumps, valued at $27,380, were outside the scope
           of the original contract. Change orders should not be made to materially expand
           the scope of a project as it was originally described in the bid specifications. The
           subrecipient agreement required the Township to administer and implement the
           project in accordance with all applicable Federal and State laws and regulations.
           New Jersey public contract administration code requires change orders to be used
           to address unforeseen circumstances that were not apparent at the time the
           specifications were written and the contract was awarded. Since these work items
           were outside the scope of the original contract, the Township should have
           executed a new procurement action. Federal small purchase procedures require
           price or rate quotations from an adequate number of qualified sources for
           purchases of less than $100,000. New Jersey local public contract law requires
           sealed bidding procedures to be used for purchases of more than $25,000.

           In addition, the Township did not perform a cost analysis for the work items
           included in the change order. Regulations at 24 CFR 85.36(f)(1) require a cost
           analysis when adequate price competition is lacking, including change orders.
           This condition occurred because the County misinterpreted HUD procurement
           requirements and the use of change orders. Because the Township improperly
           contracted for services and failed to perform a cost analysis on the change order,
           there was no assurance that it received a fair and reasonable price for the work
           performed. As a result, the expenditure of $37,610 was unsupported.




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    The County Generally Ensured
    Compliance With Davis-Bacon
    Act Requirements

                 The Recovery Act required that all laborers and mechanics be paid the prevailing
                 wage rates in accordance with the Davis-Bacon Act. HUD Handbook 1344.1,
                 REV-1, required the County to perform wage interviews and review the
                 contractor’s weekly payrolls. The County complied with these requirements.
                 However, it did not ensure that a subrecipient fully complied with the Davis-
                 Bacon Act. A backhoe operator working on the curb cut activity was not paid the
                 minimum Davis-Bacon wage rate. The operator was underpaid $1,041 over the
                 12-week period during which he worked on this activity. The County overlooked
                 this discrepancy.


    The County Did Not Report
    Accurate Job Creation
    Information


                 The County did not accurately report the number of jobs created or retained as a
                 result of its Recovery Act activities.2 Guidance issued in Office of Management
                 and Budget (OMB) Memorandum 10-08, dated December 18, 2009, defines jobs
                 created or retained as jobs funded during the quarter by the Recovery Act
                 expressed as full-time equivalents. The memorandum also provides guidance on
                 how to calculate full-time equivalents. Full-time equivalents were to be estimated
                 by dividing the total number of hours worked and funded by the Recovery Act
                 within the reporting period by the quarterly hours in a full-time schedule.

                 For the reporting period October 1 through December 31, 2010, the County
                 reported no jobs created or retained, although it expended $185,961 during that
                 period. The County reported zero jobs created because it was unsure of how to
                 report job creation information. It acknowledged that some job creation should
                 have been reported. The County also reported no jobs created or retained during
                 the period January to June 2011, although it had expended all of its grant funds as
                 of July 2011. The County needs to report accurate job creation information for
                 the reporting period ending September 30, 2011. This would be the last reporting
                 period for the County because it expended the remaining balance of its grant
                 funds during the quarter. OMB Memorandum 10-34, dated September 24, 2010,
                 does not allow recipients to make changes to the number of jobs in prior reports.




2
 Grant recipients are required to report spending and performance data, including estimates of the number of jobs
created and retained, on the Federal reporting Web site, www.recovery.gov.




                                                         9
Conclusion


             The County generally administered its Block Grant Recovery Act funds in
             accordance with the Recovery Act and applicable HUD requirements. The
             conditions identified by the audit occurred because the County did not fully
             understand HUD procurement and job reporting requirements and it overlooked
             the wage rate discrepancy. As a result, it could not demonstrate that its
             expenditure of $37,610 for materials and services was fair and reasonable, a
             contractor’s employee was underpaid $1,041, and job creation information that it
             reported on the Federal reporting Web site was understated. To resolve the issues
             identified by the audit, the County needs to (1) demonstrate that $37,610
             expended for work performed under a change order was fair and reasonable, (2)
             require a contractor to pay $1,041 to the employee to whom it paid less than the
             prevailing wage, and (3) report accurate job creation information for the reporting
             period ending September 30, 2011.

Recommendations



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

             1A.    Provide documentation to demonstrate that $37,610 expended for work
                    performed under a change order was fair and reasonable or reimburse its
                    program from non-Federal funds for any amount that it cannot support.

             1B.    Require the contractor that performed the curb cuts to pay $1,041 to the
                    employee to whom it paid less than the prevailing wage.

             1C.    Report accurate job creation information for the reporting period ending
                    September 30, 2011.

             1D.    Provide training to its subrecipients on the proper use of contract change
                    orders.

             We also recommend that the Newark Office of Community Planning and
             Development

             1E.    Provide technical assistance to the County regarding the proper use of
                    contract change orders and reporting accurate job creation information on
                    the Federal reporting Web site.




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                         SCOPE AND METHODOLOGY

We conducted the audit from May through September 2011 at the County’s office located at 512
Lakeland Road, Blackwood, NJ, and at our office located in Philadelphia, PA. The audit covered
the period February 2009 through May 2011 but was expanded when necessary to include other
periods.

To achieve our audit objective, we

       Obtained relevant background information.

       Reviewed the Recovery Act, OMB implementation guidance, and applicable HUD
       regulations and guidance.

       Reviewed minutes from the meetings of the County’s board of chosen freeholders.

       Reviewed the County’s policies and procedures related to procurement, monitoring, and
       reporting of grant funds, expenditures, and disbursements.

       Reviewed the County’s fiscal year 2009 audited financial statements.

       Interviewed relevant County staff and officials from HUD’s Newark Office of
       Community Planning and Development.

       Reviewed relevant subrecipient agreements, monitoring and reporting records, and
       financial records.

       Selected the Winslow Township senior center solar panel system and Collingswood curb
       cut activities for review from the list of 11 activities the County included in its substantial
       amendment to its fiscal year 2008 annual action plan because the total amount of funds
       budgeted to those activities ($400,000) represented 57 percent of the $690,882 grant.

       Reviewed both contracts, valued at $344,718, for the senior center solar panel system (1
       contract, $251,510) and curb cut activities (1 contract, $93,208).

       Reviewed $333,262 in expenditures (48 percent of the grant amount) as of July 2011 for
       the curb cut and senior center solar panel system activities. The payments were
       supported by 27 invoices and other supporting documentation.

       Reviewed the County’s 2010 and 2011 quarterly reports on the Federal reporting Web
       site.




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       Physically verified that the installation of the solar panel system, the replacement of the
       boiler, and the installation of the variable speed pumps at the senior center were
       completed and that curb cuts were completed.

       Reviewed all 24 payrolls associated with the 2 contracts valued at $344,718 for the curb
       cut (11 payrolls) and senior center solar panel system (13 payrolls) activities to determine
       whether the County ensured that its subrecipients complied with Davis-Bacon Act
       requirements.
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.




                                                12
                              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:

                    Policies and procedures that the County implemented to ensure that activities
                    met established program objectives and requirements.

                    Policies and procedures that the County implemented to ensure that resource
                    use was consistent with applicable laws and regulations.
               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. 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 the County’s internal control.




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                                   APPENDIXES


Appendix A

              SCHEDULE OF QUESTIONED COSTS
             AND FUNDS TO BE PUT TO BETTER USE

              Recommendation                           Funds to be put
                                   Unsupported 1/
              number                                   to better use 2/
                     1A               $37,610
                     1B                                    $1,041


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.

2/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     that are specifically identified. In this instance, if the County implements our
     recommendation, it will ensure that an employee is paid the minimum Davis-Bacon wage
     rate and meet a primary objective of the Recovery Act.




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Appendix B

             AUDITEE COMMENTS




                    15