oversight

Oregon Housing and Community Services Generally Complied With Neighborhood Stabilization Program 2 Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-03-28.

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

                                                              Issue Date
                                                                      March 28, 2011
                                                               
                                                              Audit Report Number
                                                                        2011-SE-1004




TO:        Douglas P. Carlson, Director, Office of Community Planning
             and Development, 0ED

           //signed//
FROM:      Ronald J. Hosking, Regional Inspector General for Audit, 0AGA


SUBJECT: Oregon Housing and Community Services Generally Complied With
           Neighborhood Stabilization Program 2 Requirements


                                  HIGHLIGHTS

 What We Audited and Why

            We audited Oregon Housing and Community Services (OHCS) to determine
            whether it ensured that properties funded with its Neighborhood Stabilization
            Program 2 (NSP 2) grant were eligible, obtained adequate supporting
            documentation for NSP expenditures, procured goods and services properly, and
            ensured that program income was properly used. We selected OHCS because it
            was the only entity awarded NSP 2 funds in the U.S. Department of Housing and
            Urban Development’s (HUD) Region X (Alaska, Idaho, Oregon, and
            Washington).


 What We Found


            OHCS ensured that the NSP 2 properties were eligible, generally had adequate
            supporting documentation for its NSP 2 expenditures, and generally procured
            goods and services properly. As of the date of our review, no program income
            had been generated with NSP 2 funds.
Recommendations


           This report contains no recommendations, and no further action is necessary with
           respect to this report.

Auditee’s Response


           We provided a draft report to OHCS officials on March 21, 2011. They chose not
           to have an exit conference or provide a written response.




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                         TABLE OF CONTENTS

Background and Objective                                4

Results of Audit                                        5
      OHCS Generally Complied With NSP 2 Requirements

Scope and Methodology                                   6

Internal Controls                                       7




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                      BACKGROUND AND OBJECTIVE

Oregon Housing and Community Services

Oregon Housing and Community Services (OHCS) is the State of Oregon’s housing finance
agency and works to create and preserve opportunities for quality, affordable housing for low-
and moderate-income families. Governed by a seven-member council, OHCS promotes
affordable housing through grants and tax credits, the construction or rehabilitation of
multifamily developments, and the financing of single-family homes. Additionally, OHCS
manages Federal and State funds for antipoverty, homelessness, energy assistance, and
community service programs.
Neighborhood Stabilization Program

The Housing and Economic Recovery Act of 2008 (HERA) appropriated $4 billion to stabilize
communities through the purchase and redevelopment of foreclosed-upon and abandoned
residential properties. Commonly called the Neighborhood Stabilization Program (NSP), these
funds, unless otherwise stated by HERA, are considered to be Community Development Block
Grant funds under the Housing and Community Development Act of 1974.
The American Recovery and Reinvestment Act of 2009 (ARRA) extended NSP and provided, on
a competitive basis, an additional $2 billion. This extension is commonly known as NSP 2, and
its funding can be used to
   A. Establish financing mechanisms for purchase and redevelopment of foreclosed-upon
      homes and residential properties,
   B. Purchase and rehabilitate homes and residential properties abandoned or foreclosed upon,
   C. Establish and operate land banks for homes and residential properties that have been
      foreclosed upon,
   D. Demolish blighted structures, and
   E. Redevelop demolished or vacant properties as housing.

The U.S. Department of Housing and Urban Development (HUD) awarded OHCS, the lead
member of a consortium including Clackamas County, Washington County, the City of Bend,
the City of Medford, and the City of Salem, more than $6.8 million to carry out NSP 2 activities.
OHCS planned to assist 130 housing units with these funds.

Our objective was to determine whether OHCS

      Ensured that the properties were eligible,
      Obtained adequate supporting documentation,
      Procured goods and services properly, and
      Ensured that program income was properly used. 




                                                4
                                RESULTS OF AUDIT

OHCS Generally Complied With NSP 2 Requirements
OHCS made NSP 2 fund disbursements for 40 properties. We reviewed the files containing the
supporting documentation for all 40 of these properties to determine whether OHCS (1) ensured that
the properties were eligible, (2) obtained adequate supporting documentation for NSP 2
expenditures, (3) procured goods and services properly, and (4) used program income properly.

Our review determined that

(1) The files for each property purchased with NSP 2 funds contained documentation showing that
    the property had been foreclosed upon and was eligible for purchase with NSP2 funds.

(2) There was adequate support for all NSP 2-funded expenditures. The purchase of each property
    was fully documented, and there was documentation showing that the discount requirement was
    met.

(3) The files generally contained adequate documentation of procurements.

(4) As of the end of our review, NSP 2 funds had generated no program income.


We communicated two immaterial items to OHCS by management letter.




 Recommendations

               This report contains no recommendations, and no further action is necessary with
               respect to this report.




                                                5
                         SCOPE AND METHODOLOGY

Our audit period covered April 2010 through January 2011. We performed our fieldwork in
February 2011 at OHCS’s office located at 725 Summer Street, NE., Salem, OR, and at the City
of Bend’s office at 710 Northwest Wall Street, Bend, OR.
To accomplish our objective, we interviewed staff and reviewed the financial information and
individual NSP 2-funded project files at OHCS and the City of Bend.
Sample Selection
We reviewed OHCS’s records for all 40 projects for which NSP 2 funds were paid during the
audit period. This number includes 32 projects administered by the City of Bend, seven by
Washington County, and one by OHCS.
We reviewed the files of all 32 projects of the City of Bend for which NSP 2 funds were paid.
We did not visit Washington County because we conducted an onsite review of its operations
during our recently completed audit of OHCS’s NSP 1 activity.
We used HUD’s Line of Credit Control System and Disaster Recovery Grant Reporting system
for background information only and did not rely on the data to base our conclusions. We relied
on computer-processed data maintained by OHCS for tracking program activities. Based on our
assessment and testing of these data, we concluded that the data were sufficiently reliable for our
objective.
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.




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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 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
               objectives:

                     OHCS’s policies implemented to reasonably ensure that consortium
                      members and developers follow NSP 2 rules.
                     OHCS’s policies implemented to reasonably ensure that NSP 2 funds are
                      used in accordance with ARRA and HUD guidance.

               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.

 Significant Deficiency


               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 on the effectiveness of the internal
               control structure as a whole. Accordingly, we do not express an opinion on the
               effectiveness of OHCS’ internal control.



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