oversight

The Municipality of San Juan Generally Complied With Homelessness Prevention and Rapid Re-Housing Program Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-10-24.

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

                                                               Issue Date
                                                                      October 24, 2011
                                                               Audit Report Number
                                                                        2012-AT-1001




TO:        José R. Rivera, Director, Community Planning and Development, San Juan
            Field Office, 4ND


           //signed//
FROM:      James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA

SUBJECT:   The Municipality of San Juan, PR, Generally Complied With Homelessness
            Prevention and Rapid Re-Housing Program Requirements


                                 HIGHLIGHTS

 What We Audited and Why

           We audited the Municipality of San Juan Homelessness Prevention and Rapid Re-
           Housing Program. The audit was in accordance with our audit plan to review
           funds provided under the American Recovery and Reinvestment Act of 2009. We
           selected the Municipality based on the large amount of Program funds approved.
           Our objective was to determine whether the Municipality ensured that its Program
           complied with Recovery Act and U. S. Department of Housing and Urban
           Development (HUD) program expenditure and reporting requirements.

 What We Found

           The Municipality generally administered its Program in accordance with HUD
           requirements. However, it did not correctly report the number of jobs created or
           retained with Program funds. As a result, the public was not provided with
           complete and accurate information about the jobs funded by the Recovery Act.
What We Recommend


           We recommend that the Director of the San Juan Office of Community Planning
           and Development require the Municipality to review and correct any inaccurate
           information reported on the Federal reporting Web site and develop and
           implement procedures to ensure complete and accurate reporting in accordance
           with Section 1512 of the Recovery Act.

           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 discussed the finding with HUD and the Municipality during the audit and at
           the exit conference on October 7, 2011. The Municipality provided its written
           comments to the draft report on October 10, 2011. In its response, the
           Municipality generally agreed with the findings.

           The complete text of the auditee’s response, along with our evaluation of that
           response, can be found in appendix A of this report. Attachments to the
           Municipality’s comments were not included in the report but are available for
           review upon request.




                                            2
                             TABLE OF CONTENTS

Background and Objective                                                           4

Results of Audit
      Finding:     The Municipality Did Not Fully Comply With Program Reporting    5
                   Requirements

Scope and Methodology                                                              7

Internal Controls                                                                  9

Appendixes
   A. Auditee Comments and OIG’s Evaluation                                       11




                                            3
                      BACKGROUND AND OBJECTIVE

The American Recovery and Reinvestment Act of 2009 established the Homelessness Prevention
and Rapid Re-Housing Program, which is regulated by the U.S. Department of Housing and
Urban Development (HUD) and administered by HUD’s Office of Community Planning and
Development. The purpose of the Program is to provide homelessness prevention assistance to
households that would otherwise become homeless, many due to the economic crisis, and rapid
rehousing assistance to persons who are homeless as defined by Section 103 of the McKinney-
Vento Homeless Assistance Act (42 U.S.C. (United States Code) 11302). The Program provides
temporary financial assistance and housing relocation and stabilization services to individuals
and families who are homeless or would be homeless but for this assistance. The eligible
program activities target two populations facing housing instability:

          Individuals and families that are currently housed but are at risk of becoming
          homeless.

          Individuals and families that are experiencing homelessness (residing in emergency
          or transitional shelters or on the street).

On July 24, 2009, HUD entered into a grant agreement with the Municipality of San Juan to
distribute more than $4.2 million in Program funds. The Municipality is the second largest
recipient of Program funds in Puerto Rico. The Municipality’s accounting records reflected
expenditures exceeding $2.6 million, as of March 31, 2011, for the following activities:

                             Funding categories             Expenditures
                    Homelessness prevention                    $2,017,171
                    Rapid rehousing                               466,021
                    Data collection and evaluation                132,690
                    Administration                                 46,121
                    Total                                      $2,662,003

The Municipality’s Housing and Family departments are responsible for administering the
Program. Its books and records are maintained at the San Juan Integra Building, 1205 Ponce de
Leon Avenue, and at the Municipal Tower, 160 Chardon Avenue, in San Juan, PR, among other
sites. We reviewed the Municipality’s program in accordance with our goal to review funds
provided under the Recovery Act. Our objective was to determine whether the Municipality
ensured that its Program complied with Recovery Act and HUD program expenditure and
reporting requirements.




                                               4
                                RESULTS OF AUDIT

Finding: The Municipality Did Not Fully Comply With Program
Reporting Requirements
The Municipality generally administered its Program in accordance with HUD requirements.
However, it did not report accurate information on Program accomplishments. This condition
occurred because the Municipality lacked controls and procedures to ensure that Program
accomplishments were reported accurately and completely. As a result, the public was not
provided accurate and complete information on the Municipality’s accomplishments.


 Inaccurate Job Information


              The Municipality did not correctly estimate the total number of jobs that were
              funded in accordance with Office of Management and Budget (OMB)
              Memorandum M-10-8. According to the OMB guidance, the estimate of jobs
              created or retained by the Recovery Act should be expressed as full-time
              equivalents. The hours worked in funded jobs are divided by the number of hours
              representing a full work schedule for the kind of job being estimated.

              For the reporting period ending March 31, 2011, the Municipality reported 8.65
              jobs created associated with its Program activities. However, the reported job
              information was based on incomplete and inaccurate information. The
              Municipality failed to include partially funded jobs in its estimate and incorrectly
              included in its calculations the hours worked related to prior quarters. As a result,
              the reported number of jobs was understated, and the public did not have access to
              accurate and complete information on the estimated number of jobs funded with
              Recovery Act funds granted to the Municipality. This error was the result of a
              lack of established procedures for reporting.


 Conclusion


              The Municipality generally established adequate controls for the Program and
              used funds for eligible activities. However, it lacked procedures and controls to
              ensure that reported Program accomplishments were accurate and complete. As a
              result, the public was not provided accurate and complete information on Program
              accomplishments. Management must ensure that it complies with HUD and
              Recovery Act requirements.




                                                5
Recommendations



          We recommend that the Director of HUD’s San Juan Office of Community
          Planning and Development

          1A. Require the Municipality to review all Program job information on the
              Federal reporting Web site and correct inaccurate information.

          1B. Require the Municipality to develop and implement procedures to ensure the
              accuracy and completeness of the job information reported in accordance
              with Section 1512 of the Recovery Act and OMB guidelines in
              Memorandum M-10-8.




                                         6
                            SCOPE AND METHODOLOGY

The objective of the audit was to determine whether the Municipality had adequate controls and
procedures to administer the Program in accordance with requirements and spent Program funds
for eligible activities.

To accomplish our audit objective, we

           Reviewed applicable HUD laws, regulations, and other HUD program requirements;

           Reviewed the Municipality’s controls, policies, and procedures as they related to our
           objective;

           Reviewed the Municipality’s organizational chart;

           Interviewed HUD, Municipality, and contractor officials;

           Reviewed monitoring, internal review, and independent public accountant reports;

           Reviewed the Municipality’s files and records, including activity files and accounting
           records;

           Traced information reported in HUD’s information system to the Municipality’s
           records, including accounting records and executed agreements; and

           Reviewed OMB guidance for reporting program accomplishments and assessed the
           accuracy of reporting by the Municipality.

The Municipality’s records reflected that it expended more than $2.48 million for homelessness
prevention and rapid rehousing efforts on behalf of 466 participants between July 1, 2009, and
March 31, 2011. We randomly selected and reviewed 25 participants’ files with assistance
totaling more than $158,000. We reviewed the 25 participants’ files and the related supporting
documents to determine whether disbursements made in relation to such participants were
eligible and properly supported. The random selection methodology was chosen because a
review of a 100 percent of the case files was unfeasible.

The Municipality’s records reflected that it expended more than $46,000 for administrative costs
between July 1, 2009, and March 31, 2011. We reviewed disbursements totaling $40,000 based
on the dollar amount of transactions. We reviewed the expenditures and the related supporting
documents to determine whether the payments met Recovery Act and HUD requirements,
including allowability and allocability of the costs.

The progress report for the period ending March 31, 2011, reflected that 8.65 jobs were created
or retained related to the Municipality’s homelessness prevention and rapid rehousing activities


                                                7
undertaken. We reviewed the reported job information to determine whether the Municipality
reported accurate and supported information on program accomplishments.

To achieve our audit objective, we relied in part on computer-processed data contained in the
Municipality’s database and HUD’s information system. Although we did not perform a detailed
assessment of the reliability of the data, we performed a minimal level of testing and found the
data to be adequate for our purposes. The results of the audit apply only to the items selected
and cannot be projected to the universe or population.

The audit generally covered the period July 1, 2009, through March 31, 2011, and we extended
the period as needed to accomplish our objective. We conducted our fieldwork from May
through August 2011 at the Municipality’s offices in San Juan, PR.

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.




                                               8
                              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, while
                      considering cost effectiveness and efficiency.

                      Compliance with applicable laws and regulations - Policies and procedures
                      that management has implemented to reasonably ensure that resource use is
                      consistent with laws and regulations.

                      Safeguarding of assets and resources - Policies and procedures that
                      management has implemented to reasonably prevent or promptly detect
                      unauthorized acquisition, use, or disposition of assets and resources.

                      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 effectiveness or efficiency of operations, (2) misstatements in

                                                 9
            financial or performance information, or (3) violations of laws and regulations on a
            timely basis.

Significant Deficiency

            Based on our review, we believe that the following item is a significant deficiency:

                   The Municipality did not have adequate procedures for ensuring the
                   accuracy and completeness of reporting Program accomplishments on the
                   Federal reporting Web site (see finding).




                                             10
                                            APPENDIXES

Appendix A

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                                Auditee Comments

            October 10, 2011

            Mr. James D. McKay
            Regional Inspector General for Audit
            U.S. Department of Housing
            and Urban Development
            Region 4 - Office of Inspector General
            Office of Audit, Box 42
            Richard B. Russell Federal Building
            75 Spring Street, SW, Room 350
            Atlanta, GA, 30303-3388

            Subject:   Comments to Draft Audit Report
                       The Municipality of San Juan, PR, Generally Complied With Homelessness
                       Prevention and Rapid Re-Housing Program Requirements

            This is in response to your letter dated September 21, 2011, and received by the City on September 30, 2011
            and related to the above subject.            We reviewed the draft and have prepared the following
            comments addressing the issues in which the Municipality understands it is in compliance with the
            applicable regulations.

            The audit identifies the following conditions:

                       Condition 1:     In 2 of the 25 files reviewed, the Municipality failed to obtain proper
                       documentation to show that the participant would become homeless without Program
                       assistance; and
                       Condition 2: The Municipality did not correctly estimate the total number of jobs that were
                       funded in accordance with Office of Management and Budget (OMB) Memorandum M-10-8


            Comments to Condition #1

            Regarding Condition #1, during the exit conference we presented documentation evidencing the
            eligibility of the participants and how the staff took all the required actions to evidence the housing
            status (as required by HUD'S Eligibility Determination and Documentation Guidance, August 2011).




                                                                                                                      1




                                                        11
            According to HUD's guidance, the housing situation for households occupied by an Applicant without
            Paying Rent, including housing shared with friends or family must be documented as follows:



                          HUD guidelines/required action                   Documentation Maintained by the Municipality

             Acceptable Type of Documentation (Self                  Forms-SHPR-2 & 2A (See Attachment 1)
             Certification)


             Obtain signed and dated original self-declaration       Form was signed and dated by applicant (See
             from applicant                                          Attachment 1)



             HPRP worker must document attempt to obtain third       Various attempts were made to obtain the third party
             party documentation and sign self-declaration form      documentation evidenced in file.


             HPRP worker must sign self-declaration form             Form was signed and dated by case worker (See
                                                                     Attachment 1)


             Include self-declaration in participant file.           Form was included in two separate files (pre-
                                                                     application and application)


            Copies of the documentation used by the Municipality were provided to the auditors during the exit
            conference.


Comment 1   As additional documentation, SJ-HPRP-20 forms were presented for both cases (see Attachment 2). In
            this self certification the participant certifies its housing status. With this letter we are including the
            Instructions to be followed by the Staff to complete the form (see Attachment 3). The adoption of the
            memorandum included in appendix 3 will avoid the recurrence of the situation. The Memorandum was
            distributed to all the employees of the HPRP program.


            With this documentation the Municipality demonstrates that the $13,608 funds were used for eligible
            purposes of the HPRP program. Based on this information we request that the OIG recognize that the
            corrective action has been taken and that no additional action be required.

            Comments to Condition #2

            As discussed by Mr. Michael Rivera during the exit conference, the ARRA requirement for Job
Comment 2   Creation/Retention reporting has changed in multiple occasions since the approval of the Act. Due to
            this variable instruction and requirements the Municipality did not report the jobs retained (current
            employees not at risk of losing their jobs) in the way required by the OMB Circular. We were informed
            of the discrepancies in mid June 2011, and we immediately took action to correct the reports. Copies of
            the reports were provided to the auditors in the second week of July 2011 (A copy of the report and the
                                                                                                                            2




                                                        12
supporting documentation is included in Attachment 4). In addition, during our September 2011
reporting period we submitted the reports with the correct Jobs Creation/Retention Information. We
understand that we took the required corrective action of recommendation 10 and we request that the
OIG recognizes the action in the final report.

Regarding recommendation 1E, the report recommends the Municipality "to develop and implement
procedures to ensure the accuracy and completeness of the job information reported in accordance
with Section 1512 of the Recovery Act and OMB guidelines in Memorandum M-l0-8". To address
recommendation 1E, we prepared and implemented a job reporting procedure that complied with the
requirements of the ACT. The procedure was used for the preparation of the reports submitted by the
Municipality in July and September 2011. The procedure is included for your review and comment in
Attachment 5.

Taking into consideration the documentation presented, we understand that we took the necessary and
adequate corrective actions to address the deficiencies identified by the OIG. Based on this information
we request that the OIG recognizes that the corrective actions have been taken and that no additional
action be required.

The above comments represent our initial evaluation of the report. If you need additional information
please contact Mr. Hector Tamayo, Director, San Juan Housing Department, at 787-347-4000.

Cordially,


Lourdes M. Rovira
Executive Director

Enclosures




                                                                                                       3




                                     13
                         OIG Evaluation of Auditee Comments

Comment 1   The Municipality obtained signed self-declarations from two participants and
            provided explanations of efforts made to obtain third party verification of the
            information provided. In addition, it prepared written procedures to ensure the
            housing status of participants is properly documented. As a result we removed
            the related finding language from the report.

Comment 2   The Municipality stated that it has taken corrective action to properly report the
            jobs created or retained using Program funds and that it has developed and
            implemented written procedures to properly report accomplishments in the
            Federal reporting Web site.

            We acknowledge the Municipality’s efforts to improve its controls and procedures
            associated with the Program. HUD needs to verify the accuracy of job information
            reported with appropriate source documentation and confirm that the new
            procedures are in place.




                                             14