oversight

The Puerto Rico Housing Finance Authority Did Not Always Comply With HOME Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-07-23.

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

OFFICE OF AUDIT
REGION 4
ATLANTA, GA




           Puerto Rico Housing Finance Authority
                       San Juan, PR

         HOME Investment Partnerships Program




2013-AT-1006                                  JULY 23, 2013
                                                        Issue Date: July 23, 2013

                                                        Audit Report Number: 2013-AT-1006




TO:            María Ortíz, Director, Community Planning and Development, San Juan Field
               Office, 4ND

               //signed//
FROM:          Nikita N. Irons, Regional Inspector General for Audit, Atlanta Region, 4AGA

SUBJECT:       The Puerto Rico Housing Finance Authority Did Not Always Comply With
               HOME Requirements

    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our review of the Puerto Rico Housing Finance
Authority’s HOME Investment Partnerships Program.

    HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.

    The Inspector General Act, Title 5 United States Code, section 8L, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.

   If you have any questions or comments about this report, please do not hesitate to call me at
404-331-3369.
                                            July 23, 2013
                                            The Puerto Rico Housing Finance Authority Did Not
                                            Always Comply With HOME Requirements




Highlights
Audit Report 2013-AT-1006


 What We Audited and Why                     What We Found

We audited the Puerto Rico Housing          The Authority did not support $18.4 million in HOME
Finance Authority’s HOME Investment         commitments with a valid grant agreement, did not
Partnerships Program as part of our         disburse $284,292 in HOME funds within HUD-
strategic plan based on the large amount    established timeframes, and could not account for
of HOME funds approved. The                 $89,331 in program funds. In addition, it did not
objectives of the audit were to             report to HUD program income and recaptured funds
determine whether the Authority             in a timely manner and reported other inaccurate
reported accurate and supported             information concerning HOME-funded activities. As a
information in the U.S. Department of       result of these deficiencies, HUD had no assurance that
Housing and Urban Development’s             the Authority met HOME program commitment and
(HUD) Integrated Disbursement and           disbursement requirements.
Information System and disbursed
HOME funds within HUD-established
timeframes.

 What We Recommend

We recommend that HUD require the
Authority to (1) demonstrate that $18.4
million in HOME commitments are
properly supported or deobligate,
reprogram, and put to better use the
unexpended commitments with expired
grant agreements; (2) put to better use
$153,377 in unexpended funds
maintained in its local bank account; (3)
remit to its treasury account $130,915 in
repayment funds; (4) support $89,331 in
unaccounted program income and
recaptured funds; and (5) develop and
implement an internal control plan to
ensure that only supported and accurate
information is reported to HUD.
                            TABLE OF CONTENTS

Background and Objectives                                                   3

Results of Audit
      Finding: The Authority Did Not Always Comply With HOME Requirements   5

Scope and Methodology                                                       10

Internal Controls                                                           12

Follow-up on Prior Audits                                                   14

Appendixes
A.    Schedule of Questioned Costs and Funds To Be Put to Better Use        16
B.    Auditee Comments and OIG’s Evaluation                                 17
C.    List of Program Income and Recaptured Funds Reviewed                  21
D.    List of Activities With Inaccurate Information                        22




                                            2
                          BACKGROUND AND OBJECTIVES

The HOME Investment Partnerships Program is authorized under Title II of the Cranston-
Gonzalez National Affordable Housing Act as amended. The U.S. Department of Housing and
Urban Development (HUD) allocates funds by formula to eligible State and local governments
for the purpose of increasing the supply of decent, safe, sanitary, and affordable housing to low-
and very low-income families. State and local governments that become participating
jurisdictions may use HOME funds to carry out multiyear housing strategies through acquisition,
rehabilitation, new housing construction, and tenant-based rental assistance.

Participating jurisdictions are required to commit HOME funds within 24 months and expend
them within 5 years after the last day of the month in which HUD notifies the participating
jurisdiction of HUD’s execution of the HOME agreement. 1 In addition to the HOME program’s
regulatory 5-year disbursement requirement, the National Defense Authorization Act of 1991
(Public Law 101-510, dated November 5, 1990) requires that on September 30 of the fifth year
after the period of availability for obligation of a fixed-appropriation account ends, the account
be canceled and thereafter not be available for obligation or expenditure for any purpose. 2
Participating jurisdictions are required to expend, for eligible costs, HOME funds drawn down
from the treasury account within 15 days. Any unexpended drawdowns must be returned to the
treasury account. HUD also requires that HOME funds in the participating jurisdiction’s local
bank account, including program income and recaptured funds, 3 be disbursed before additional
grant funds are requested.

Participating jurisdictions draw down HOME funds through HUD’s Integrated Disbursement and
Information System. HUD’s information system is also used to monitor and track HOME
commitments, program income, repayments, and recaptured funds, among other things. In
addition, HUD uses the data that the participating jurisdiction provides in HUD’s information
system to report on the performance of the HOME program to Congress and other program
stakeholders.

Effective July 1, 2010, HUD designated the Puerto Rico Housing Finance Authority, a subsidiary
of the Government Development Bank for Puerto Rico, as a participating jurisdiction to manage
the State HOME program. The Authority replaced the Puerto Rico Department of Housing in
this function.

The Authority is the largest participating jurisdiction in Puerto Rico, for which HUD has
approved more than $43 million in HOME funds during the last 3 fiscal years. HUD’s
information system reflected expenditures exceeding $29 million during the 18-month period

1
  For purposes of determining compliance with commitment and disbursement requirements, HUD will consider the
sum of commitments and expenditures from the fiscal year allocation being examined and later allocations.
2
  Fiscal year 2005 HOME funds that were not spent by September 30, 2012, would be subject to recapture by the
United States Treasury.
3
  Program income and recaptured funds may result from the resale and recapture requirements imposed by HUD and
the participating jurisdiction on the participants to ensure affordability during predetermined periods, depending on
the assistance amount provided.

                                                         3
ending December 31, 2012. The Authority’s HOME program office is responsible for
administering HOME funds. Its books and records are maintained in the offices located at 606
Barbosa Avenue, San Juan, PR. We audited the Authority’s HOME program as part of the HUD
Office of Inspector General’s (OIG) strategic plan. The Authority was selected for review based
on the amount of HUD funding provided.

In November 2012, HUD restricted the Authority’s ability to setup new activities and commit
additional funds in HUD’s information system until activities that have been in final draw for
more than 120 days are completed, cancelled, or otherwise taken out of final draw status. These
restrictions to HUD’s information system were still in effect as of June 25, 2013.

The objectives of the audit were to determine whether the Authority reported accurate and
supported information in HUD’s information system and disbursed HOME funds within HUD-
established timeframes.




                                               4
                                 RESULTS OF AUDIT


Finding: The Authority Did Not Always Comply With HOME
Requirements
The Authority did not support $18.4 million in HOME commitments with a valid grant
agreement, did not disburse $284,292 in HOME funds within HUD-established timeframes, and
could not account for $89,331 in program funds. In addition, it did not report to HUD program
income and recaptured funds in a timely manner and reported other inaccurate information
concerning HOME-funded activities. These deficiencies occurred because the Authority
believed that the grant agreements were still valid, did not receive all of the financial data when
the administration of the HOME program was transferred to the Authority, disregarded HUD’s
requirements, and was not fully familiar with HOME requirements. As a result of the
deficiencies, HUD had no assurance that the Authority met HOME program commitment and
disbursement requirements.


 Unsupported Commitments

               HUD’s information system reflected that the Authority committed more than
               $54.7 million in HOME funds (119 activities) between July 1, 2011, and
               December 31, 2012. We examined seven commitments totaling more than $49.9
               million (91 percent) that the Authority entered into HUD’s information system.

               The Authority reported in HUD’s information system that it had committed $18.4
               million in HOME funds associated with two activities, but the grant agreements
               expired on January 10, 2013.

                              Reported
                         commitment amount                                        Days elapsed since
                Activity     in HUD’s                           Expired grant     expired dates as of
                number information system Agreement date       agreement date       April 30, 2013
                 14751       $9,875,000    July 11, 2012       January 10, 2013        110 days
                 14739       $8,525,000    July 11, 2012       January 10, 2013        110 days

               The grant agreements were in effect for 6 months subject to, among other things,
               the satisfactory approval of the environmental review and HUD’s release of
               HOME funds. However, the environmental review was not completed before the
               grant agreement expired.

               At the conclusion of our fieldwork on April 30, 2013, the Authority had not
               renewed or executed a new grant agreement. Therefore, HUD’s information
               system showed $18.4 million in commitments that was not supported with valid
               agreements contrary to 24 CFR (Code of Federal Regulations) 92.2 and 92.504,

                                                 5
                  which define commitment and participating jurisdiction responsibilities. The
                  Authority believed that the grant agreements had not expired and were still valid.

    HOME Funds Not Disbursed in
    a Timely Manner

                  The Authority withdrew from its treasury account more than $28 million in
                  HOME funds between July 1, 2011, and December 31, 2012. We reviewed 10
                  withdrawals totaling more than $5 million. Our review disclosed that the
                  Authority had expended funds within the HUD-required 15 days and for the
                  requested activities and amounts. However, the Authority failed to disburse
                  $284,292 in HOME funds before additional grant funds were requested from
                  HUD as required by 24 CFR 92.502(c)(3).

                  Contrary to HUD requirements, the Authority did not disburse $140,747 in
                  HOME funds transferred in 2010 from the former State participating jurisdiction
                  and $12,630 associated with program income and recaptured funds received on
                  January 23, 2013. In addition, it did not return to the treasury $130,915 in
                  repayments associated with two terminated activities (numbers 7908 and 13110)
                  despite HUD’s instructions in February 2011. 4

                  The Authority informed us that the transferred HOME funds remained in the local
                  bank account because it had not received the appropriate financial information
                  necessary to determine the source of the funds. In addition, it explained that
                  HUD’s information system had blocked the Authority from committing new
                  HOME funds. Authority officials also acknowledged that they were aware that
                  funds maintained in the local account must be expended before additional
                  drawdowns are made from HUD. Therefore, the Authority disregarded HOME
                  requirements.

    Unaccounted Program Income
    and Recaptured Funds

                  HUD’s information system showed that the Authority had unused program
                  income and recaptured funds totaling $96,422; 5 however, the Authority’s records
                  reflected $7,091. Therefore, $89,331 in program income and recaptured funds
                  was unaccounted for and unsupported. Authority officials could not explain the
                  final disposition of the unaccounted for funds and informed us that HUD’s
                  information system reflected the balances when the State HOME program was

4
  Terminated activities are defined by 24 CFR 92.205(e) as HOME-assisted projects that are terminated before
completion, either voluntarily or otherwise, and constitute ineligible activities. Any HOME funds invested in the
projects must be repaid to the participating jurisdiction’s HOME investment trust fund in accordance with 24 CFR
92.503(b). HOME regulations at 24 CFR 92.503(b) provide that, for terminated activities, funds must be repaid to
the account from which funds were originally disbursed, the participating jurisdiction’s treasury account or its local
account, as applicable.
5
  Balance amount as of March 20, 2013.

                                                           6
                   transferred to them from the former participating jurisdiction. As a result, HUD
                   had no assurance that HOME funds were used in accordance with program
                   requirements.

    Program Income and
    Recaptured Funds Not
    Reported in a Timely Manner

                   Authority records showed that program income and recaptured funds totaling
                   $290,887 were not reported in a timely manner in HUD’s information system.
                   These HOME proceeds were reported to HUD between 44 and 231 days after
                   they were received. An official informed us that the Authority’s accounting and
                   finance department did not inform the HOME program office in a timely manner
                   of the receipt of such funds. The lack of written procedures also contributed to
                   this deficiency. An Authority official explained that new program procedures had
                   been developed to correct the situation. 6 As a result of the deficiency, HUD had
                   no assurance of the accuracy of the amount of program income and recaptured
                   funds that the Authority received and whether the Authority disbursed these funds
                   before additional withdrawals were made in compliance with 24 CFR
                   92.502(c)(3). Appendix C contains a list of the program income and recaptured
                   funds reviewed.

    Repayments Incorrectly
    Reported

                   The Authority did not properly report in HUD’s information system $136,454 in
                   repayment proceeds received in December 2010 and May 2012 associated with
                   terminated activities (numbers 7908 and 13110). It incorrectly reported to HUD
                   that the proceeds were related to program income and recaptured funds. The
                   incorrect classification resulted in an overstatement of the activities’ expenditures
                   in HUD’s information system. Authority officials agreed that the proceeds were
                   repayments but could not explain why these funds were improperly reported as
                   program income and recaptured funds.

    Other Inaccurate Reporting

                   HUD’s information system contained additional inaccurate information
                   concerning the Authority’s HOME-funded activities. Of the seven activities
                   reviewed, we found inaccurate information in four activities, including (1)
                   incorrect activity address or description, (2) understated commitment amount, (3)
                   inaccurate initial funding date, and (4) that the environmental review had been
                   completed when it had not. Appendix D contains a list of the activities with
                   inaccurate information reported in HUD’s information system.
6
    The Authority’s executive director approved the new procedures on February 11, 2013.

                                                          7
Other Deficiencies

            The Authority did not comply with additional HUD requirements when
            committing HOME funds.

            Undated signatures and agreement - The Authority did not implement adequate
            controls by not requiring that the signatures of all parties be dated in the seven
            written agreements reviewed to show the execution date, as required by HUD at
            section VII of HOME Notice 07-06. An Authority official indicated that he was
            not familiar with the HUD requirement that parties date their signatures. Further,
            the Authority allowed a reservation of funds agreement in the amount of $5.8
            million to be signed without being dated. The Authority could not explain why
            the written agreement was not dated.

            Missing agreement provisions - The Authority did not ensure that the seven grant
            agreements reviewed included the following provisions required by HUD at 24
            CFR 92.504(c)(3) for rental projects:

               •     Describing in sufficient detail a schedule for completing the tasks to be
                     performed by the developer to provide a sound basis for the participating
                     jurisdiction to effectively monitor performance under the agreement,

               •     Establishing procedures for rent increases, and

               •     Specifying that the developer may not request disbursement of funds
                     under the agreement until the funds are needed for payment of eligible
                     costs and that the amount of each request must be limited to the amount
                     needed.

            Inaccurate agreement term - The Authority also did not always establish the
            duration of the grant agreements for rental activities in accordance with HOME
            requirements at 24 CFR 92.504(c)(3)(ix). In five agreements with HOME
            commitments totaling more than $41 million, the duration of the grant agreement
            was for a period that ranged between 16 and 30 months instead of being based on
            the affordability period of 20 years.

             Activity number     Amount      Agreement term Affordability period
                  14065        $12,127,741     30 months          20 years
                  14066          5,569,270     30 months          20 years
                  14751          9,875,000     18 months          20 years
                  14739          8,525,000     18 months          20 years
                  14750          5,800,000     16 months          20 years
                   Total       $41,897,011




                                              8
Conclusion

             The Authority did not always comply with HOME requirements. Reporting
             inaccurate data and not disbursing HOME funds within HUD-established
             timeframes undermined the integrity of HUD’s information system and HUD’s
             efforts to monitor the Authority’s compliance with program requirements. The
             Authority must take prompt corrective actions to ensure the accuracy of data
             entered into HUD’s information system, that HOME commitments are properly
             supported, and that all program funds are disbursed in accordance with HUD
             requirements.

Recommendations

             We recommend that the Director of the San Juan Office of Community Planning
             and Development require the Authority to

             1A.    Demonstrate that $18,400,000 in HOME commitments is supported with
                    complete and valid grant agreements or deobligate, reprogram, and put to
                    better use the unexpended commitments with expired grant agreements.

             1B.    Put to better use $153,377 associated with unexpended funds maintained
                    in its local account.

             1C.    Remit to its treasury account and put to better use repayment funds
                    totaling $130,915 in accordance with HUD requirements.

             1D.    Submit all supporting documentation showing the eligibility and propriety
                    of $89,331 in unaccounted for program income and recaptured funds or
                    reimburse the HOME program from non-Federal funds.

             1E.    Correct any inaccurate information in HUD’s information system,
                    including the repayments improperly reported as program income and
                    recaptured funds and other inaccurate reporting.

             1F.    Develop and implement controls and procedures to ensure that (1) only
                    commitments with valid agreements are reported to HUD; (2) HOME
                    funds are disbursed within HUD-required timeframes; (3) program
                    income, repayments, and recaptured funds are properly reported; (4)
                    accurate information on HOME-funded activities is reported in HUD’s
                    information system, and (5) grant agreements are properly signed and
                    dated and contain the HUD-required provisions and term.




                                             9
                             SCOPE AND METHODOLOGY

The objectives of the audit were to determine whether the Authority reported accurate and
supported information in HUD’s information system and disbursed HOME funds within HUD-
established timeframes.

To accomplish our objectives, we

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

             •   Interviewed HUD and Authority officials;

             •   Obtained an understanding of and reviewed the Authority’s controls and
                 procedures 7 as they related to our objectives;

             •   Reviewed monitoring, independent public accountant, and HUD’s information
                 system reports;

             •   Reviewed the Authority’s files and records, including grant agreements and bank
                 statements; and

             •   Traced information reported in HUD’s information system to the Authority’s
                 records, including grant agreements, program income and recaptured funds
                 receipts, and disbursements records.

HUD’s information system reflected that the Authority committed more than $54.7 million in
HOME funds between July 1, 2011, and December 31, 2012, associated with 119 activities. We
selected for review activities with a commitment amount greater than $1 million. The sample
resulted in seven activities with commitments totaling more than $49.9 million (91 percent). We
reviewed these activities to determine whether the information that the Authority reported to
HUD, including commitments, was accurate and supported.

The Authority’s records showed that between July 1, 2011, and February 28, 2013, it received
program income, repayments, and recaptured funds in the amount of $377,341 (12 receipts). We
reviewed all of the receipts to determine whether funds were properly reported in HUD’s
information system. An additional repayment totaling $50,000, received by the Authority on
December 14, 2010, was reviewed based on the nature of the transaction. 8




7
  Our review of the Authority’s controls and procedures was limited to information obtained by Authority personnel
through interviews conducted. At the conclusion of our fieldwork on April 30, 2013, the Authority had not provided
us with written procedures for the administration of its HOME program.
8
  This was recorded as an account payable to HUD in the Authority’s accounting records.

                                                       10
HUD’s information system reflected that the Authority drew down from its treasury account
more than $28.5 million (594 withdrawals) in HOME funds between July 1, 2011, and December
31, 2012. We selected for review three withdrawals greater than $1 million, totaling more than
$3.58 million. We also selected four withdrawals of 2005 HOME funds totaling $328,170 made
in September 2012 and greater than $50,000. We selected for review withdrawals greater than
$350,000 made in July 2012, which resulted in three additional disbursements totaling more than
$1.75 million. A total of 10 withdrawals totaling more than $5.6 million (nearly 20 percent)
were reviewed to determine whether the Authority expended HOME funds within HUD-
established timeframes. We also reviewed unused HOME funds maintained in the Authority’s
local account to determine whether the Authority expended funds before additional grant funds
were requested.

To achieve our audit objectives, we relied in part on computer-processed data contained in the
Authority’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 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, 2011, through December 31, 2012, and we
extended the period as needed to accomplish our objectives.

We conducted our fieldwork from February through April 2013 at the Authority’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 objectives.




                                                11
                              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:

               •   Relevance and reliability of information - Policies and procedures that
                   officials of the audited entity have implemented to provide themselves with
                   reasonable assurance that operational and financial information that they use
                   for decision making and reporting externally is relevant, reliable, and fairly
                   disclosed in reports.

               •   Compliance with applicable laws, regulations, contracts, and grant agreements
                   - Policies and procedures that the audited entity has implemented to provide
                   reasonable assurance that program implementation complies with provisions
                   of laws, regulations, contracts, and grant agreements.

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

               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.

                                                 12
Significant Deficiency

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

            •   The Authority did not develop and implement controls and procedures to
                ensure that (1) only commitments with valid agreements were reported to
                HUD; (2) HOME funds were disbursed within HUD-required timeframes; (3)
                program income, repayments, and recaptured funds were properly reported to
                HUD; (4) accurate information of HOME-funded activities was reported in
                HUD’s information system; and (5) grant agreements were properly signed
                and dated and contained the HUD-required provisions and term (see finding).




                                             13
                       FOLLOW-UP ON PRIOR AUDITS

 Puerto Rico Department of
 Housing State HOME
 Investment Partnerships
 Program - Audit Report
 2010-AT-1006

HUD OIG issued an audit report on June 11, 2010, on the Puerto Rico Department of Housing’s
administration of the State HOME program. The objectives included determining whether the
Department (1) reimbursed HOME funds on terminated activities; (2) expended HOME funds
within HUD-established timeframes; (3) administered program income, repayments, and
recaptured funds in accordance with HOME requirements; and (4) reported accurate and
supported HOME commitments in HUD’s information system.

Among the deficiencies found, the Department did not (1) reimburse the HOME program more
than $2 million for three activities that were terminated, (2) reprogram and put to better use more
than $1.84 million in unexpended HOME funds assigned to one of the terminated activities, (3)
disburse more than $1.43 million in 2002 HOME funds within HUD-required deadlines, (4)
return to HUD more than $275,000 in repayments, (5) monitor the accuracy of commitments and
other information entered into HUD’s information system by reporting to HUD more than $6.4
million in HOME commitments without executing written agreements, and (6) deposit into its
bank account more than $137,000 in HOME receipts.

OIG recommended, among other things, that HUD

           •   Require the Department to reimburse its HOME treasury account from non-
               Federal funds $3,435,679 for disbursements associated with terminated activities
               that did not meet HOME objectives ($2,003,356) and unexpended 2002 HOME
               funds ($1,432,323).

           •   Require the Department to put to better use $2,356,095 associated with (1)
               unexpended funds for a terminated activity ($1,843,682), (2) an activity reported
               as committed but for which no agreement was executed ($292,434), (3) receipts
               collected but not deposited into its local account ($137,684), and (4) repayment
               funds not remitted to HUD ($82,295).

           •   Require the Department to correct in HUD’s information system any inaccurate
               information, including funding amount, activity status, and fund type
               classification.

           •   Require the Department to establish and implement adequate controls and
               procedures for its HOME program to ensure that (1) accurate commitment and
               activity information is reported in HUD’s information system; (2) ineligible funds

                                                14
              are reimbursed to the HOME program in a timely manner; (3) terminated
              activities are canceled in HUD’s information system in a timely manner,
              including the timely deobligation of funds; (4) HOME funds are disbursed for
              eligible activities within HUD’s established timeframes; (5) program income and
              repayments are properly tracked and administered to a level that ensures
              compliance with HUD regulations; and (6) funds in the local account are used
              before additional grant funds are requested.

Twenty of the twenty-one recommendations included in the report were open as of May 31,
2013. The final action date of each recommendation was overdue by more than 580 days.
Effective July 1, 2010, HUD designated the Authority as a participating jurisdiction to manage
the State HOME program. The Authority replaced the Puerto Rico Department of Housing in
this function and is working with HUD on the resolution of the outstanding recommendations.




                                               15
                                    APPENDIXES

Appendix A

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


                Recommendation                                Funds to be put
                        number         Unsupported 1/         to better use 2/
                     1A                                          $18,400,000
                     1B                                              153,377
                     1C                                              130,915
                     1D                        $89,331           __________
                    Total                      $89,331           $18,684,292


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 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 Authority implements recommendations 1A, 1B, and 1C, funds will be
     available for eligible activities consistent with HOME requirements.




                                             16
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         17
Comment 2




Comment 3




Comment 3




            18
Comment 3




            19
                                  OIG Evaluation of Auditee Comments

                  The Authority agreed with the recommendations included in the audit report.

Comment 1         The Authority stated that it will deobligate, reprogram, and put to better use the
                  unexpended commitments with expired grant agreements when restrictions to
                  setup new activities and commit additional funds in HUD’s information system
                  are lifted.

                  The Authority should be cognizant that the $18.4 million in unsupported
                  commitments could affect its compliance with the July 31, 2013, deadline to
                  commit HOME funds. HUD’s HOME Deadline Compliance Status Report dated
                  May 31, 2013, showed a commitment shortfall of nearly $10 million that are
                  subject to a potential HUD recapture. 9

Comment 2         The Authority stated that the report did not indicate to which period the unused
                  program income and recaptured funds balance corresponded to. In addition, the
                  Authority stated that the $89,331 in unaccounted funds pertains to an un-
                  reconciled balance carried forward from the Puerto Rico Department of Housing
                  and that it is pursuing PRDH to get the supporting documentation.

                  The unused fund balance of $96,422 pertains to the period ending March 20,
                  2013. This information was added to the report.

Comment 3         The Authority stated that it will develop and implement controls and procedures
                  to ensure that (1) only commitments with valid agreements are reported to HUD;
                  (2) HOME funds are disbursed within HUD-required timeframes; (3) program
                  income, repayments, and recaptured funds are properly reported; (4) accurate
                  information on HOME-funded activities is reported in HUD’s information
                  system; and (5) grant agreements are properly signed and dated and contain the
                  HUD-required provisions and term.

                  The Authority will need to submit evidence to HUD that the controls and
                  procedures are designed to provide reasonable assurance that the HOME program
                  will be administered in accordance with HUD requirements.




9
  The deadline compliance reports assist participating jurisdictions and HUD in monitoring compliance with the 24
months commitment and the 5 years expenditure requirements of the HOME program regulations. These monthly
status reports, issued by HUD Headquarters, identify, among other things, the amount required to be committed by
each participating jurisdiction as well as the progress made committing through the date of the report as reported in
HUD’s information system.

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Appendix C

                 LIST OF PROGRAM INCOME
             AND RECAPTURED FUNDS REVIEWED

                                            Reported date   Days elapsed
                                              in HUD’s      from receipt
      Receipt                                information     to reported
      number     Amount    Receipt date         system          dates
      5098234    $29,902    July 6, 2012    Feb. 22, 2013        231
      5098236     36,642    July 6, 2012    Feb. 22, 2013        231
      5098237     32,275    July 6, 2012    Feb. 22, 2013        231
      5078820      7,660   Jan. 11, 2012    June 27, 2012        168
      5098239     80,250   Sept. 21, 2012   Feb. 22, 2013        154
      5078859     22,412   Mar. 28, 2012    June 27, 2012         91
      5098245     26,938   Dec. 18, 2012    Feb. 22, 2013         66
      5078878     27,939    May 4, 2012     June 27, 2012         54
      5099345     26,869   Jan. 23, 2013     Mar. 8, 2013         44
       Total    $290,887




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Appendix D

                        LIST OF ACTIVITIES
                  WITH INACCURATE INFORMATION

                                                Environmental
          Incorrect                              assessment
           activity    Understated Inaccurate    incorrectly
 Activity address or   commitment     initial    reported as
 number description      amount    funding date   completed                  Comments
                                                                The number of HOME-assisted units
                                                                was overstated by 56, activity
                                                                address was incorrect, and
                                                                committed amount was understated
 14750        X            X            X                       by $2,320. In addition, the
                                                                commitment of funds was entered
                                                                into HUD’s information system 361
                                                                days after the reservation of funds
                                                                agreement was executed.
                                                                HUD’s information system showed
                                                                inaccurate information related to the
                                                                activity address and status of the
                                                                environmental assessment. As of
 14739        X                                      X
                                                                February 2013, HUD’s information
                                                                system showed that the
                                                                environmental assessment had been
                                                                completed when it had not.
                                                                HUD’s information system showed
                                                                inaccurate information on the
 14061        X                                                 number of units assisted with
                                                                HOME funds, resulting in an
                                                                overstatement of 53 units.
                                                                As of February 2013, HUD’s
                                                                information system showed that the
 14751                                               X
                                                                environmental assessment had been
                                                                completed when it had not.




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