OFFICE OF AUDIT
REGION 6
FT. WORTH, TX
City of New Orleans, LA
Recovery Act Homelessness Prevention and
Rapid Re-Housing Program
[Type text]
2013-FW-1008 [Type text] [Type text]
SEPTEMBER 24, 2013
Issue Date: September 24, 2013
Audit Report Number: 2013-FW-1008
TO: Cheryl S. Breaux, Director,
Office of Community Planning and Development, 6HD
//signed//
FROM: Gerald Kirkland
Regional Inspector General for Audit, Ft. Worth Region, 6AGA
SUBJECT: The City of New Orleans, LA, Did Not Have Adequate Financial and
Programmatic Controls To Ensure That It Expended and Reported Funds in
Accordance With Program Requirements
Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General (OIG), final results of our review of the City of New Orleans’ American
Recovery and Reinvestment Act of 2009 Homelessness Prevention and Rapid Re-Housing
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
817-978-9309.
September 24, 2013
The City of New Orleans, LA, Did Not Have
Adequate Financial and Programmatic Controls To
Ensure That It Expended and Reported Funds in
Accordance With Program Requirements
Highlights
Audit Report 2013-FW-1008
What We Audited and Why What We Found
In accordance with our goal to review The City did not have adequate financial and
American Recovery and Reinvestment programmatic controls over its Program to ensure that
Act of 2009 funds, we reviewed the it expended and reported funds in accordance with
City of New Orleans’ Homelessness requirements. Specifically, the City (1) paid Program
Prevention and Rapid Re-Housing costs with administrative funds, (2) exceeded its
Program. Our objective was to administrative budget, (3) charged costs incurred for
determine whether the City had its other grant programs to the Program, (4) did not
adequate financial and programmatic always ensure that its subgrantee supported participant
controls to meet Program requirements. eligibility determinations, (5) did not ensure that its
subgrantee properly tracked and recorded participant
What We Recommend data in HMIS, (6) did not ensure that its subgrantee
maintained approved budget revisions or amended its
contracts to ensure that it did not exceed contract costs,
We recommend that the Director of the
and (7) did not ensure that its or its subgrantee’s
U. S. Department of Housing and Urban financial records reconciled to the expenditures in
Development’s (HUD) New Orleans IDIS. These conditions occurred because the City (1)
Office of Community Planning and did not adequately maintain and track its budget to
Development require the City to (1) ensure that it made payments from the correct cost
repay $134,770; (2) support or repay category and within budgeted amounts, (2)
more than $159,000; (3) review the circumvented controls to pay expenditures from
remaining $192,681 charged to the incorrect cost categories, (3) had no written policy to
administrative cost category for process expenditures until 2 months after the Program
eligibility; (4) correct $28,430 in data ended, and (4) did not always provide adequate
entry errors in the homeless oversight to its subgrantee. As a result, the City
management information system incurred $134,770 in ineligible and $159,987 in
(HMIS); (5) review potential duplicate
unsupported costs. It also allowed $28,430 in data
assistance shown in its HMIS, correct entry errors in the HMIS and potentially paid $465,506
the data as warranted, and repay any in duplicate financial assistance. Thus, the City could
duplicate amounts, thereby putting not provide reasonable assurance that it had access to
$465,506 to better use; and (6) require accurate information about the use of Recovery Act
the City to reconcile its financial funds.
records to its subgrantee and the
Integrated Disbursement and
Information System (IDIS).
TABLE OF CONTENTS
Background and Objective 3
Results of Audit
Finding: The City Did Not Have Adequate Financial and Programmatic
Controls Over Its Program To Ensure That It Expended and Reported
Funds in Accordance With Program Requirements 4
Scope and Methodology 12
Internal Controls 14
Appendixes
A. Schedule of Questioned Costs and Funds To Be Put to Better Use 15
B. Auditee Comments and OIG’s Evaluation 16
2
BACKGROUND AND OBJECTIVE
On February 17, 2009, the President signed the American Recovery and Reinvestment Act of
2009 (Recovery Act), which included $1.5 billion for the Homelessness Prevention and Rapid
Re-Housing Program administered by the U. S. Department of Housing and Urban
Development’s (HUD) Office of Community Planning and Development. Funding for the
program was distributed based on the formula used for the Emergency Shelter Grants program.
The purpose of the Program was to provide homelessness prevention assistance for households
that would otherwise become homeless and rapid rehousing assistance for persons who were
homeless as defined by Section 103 of the McKinney Vento Homeless Assistance Act.1 The
Program provided temporary financial assistance and housing relocation and stabilization
services to individuals and families who were homeless or would be homeless but for this
assistance. Other eligible Program activities included data collection and evaluation and
administrative services.
On July 31, 2009, HUD entered into a Program grant agreement with the City of New Orleans,
awarding the City more than $7.5 million. HUD allowed the City to distribute funds to
subrecipients, such as local governments or private nonprofit organizations, to carry out Program
activities. As part of the grant agreement, HUD required the City to ensure that each
subrecipient fully complied with Program requirements.
To assist in executing the Program, the City entered into a subgrant agreement with Unity of
Greater New Orleans on November 30, 2009. In turn, Unity selected 10 project sponsors to
carry out Program activities and provide resources to the community. Unity’s project sponsors
included Travelers Aid, Total Community Action, Hope House, Community Service Center,
Alternative Living, Family Services of Greater New Orleans, Episcopal Community Services,
Odyssey House, the Salvation Army, and Southeast Legal Services.
HUD required the City to obligate funds by September 30, 2009, and report demographic
information on homeless people served, as well as the exact dates that they entered and exited
the Program in the Homeless Management Information System (HMIS).2 In turn, the City
required Unity and its project sponsors to enter the Program’s participant data into HMIS. The
Recovery Act required the City to expend 60 percent of Program funds by July 31, 2011, and
100 percent of funds by July 31, 2012. HUD allowed the City to continue drawing down funds,
until October 29, 2012, from its Integrated Disbursement Information System (IDIS)3 to
reimburse expenditures incurred before July 31, 2012.
Our objective was to determine whether the City had adequate financial and programmatic
controls to meet Program requirements.
1
42 U.S.C. (United States Code) 11302
2
HMIS is the primary tool for obtaining data on the use of Program funds awarded and persons served.
3
The IDIS is a nationwide database that provides HUD with current information regarding the program activities
including funding data which is used to monitor grantees. HUD required grantees to use IDIS to drawdown
Program funding and report on grant expenditures.
3
RESULTS OF AUDIT
Finding: The City Did Not Have Adequate Financial and Programmatic
Controls Over Its Program To Ensure That It Expended and Reported
Funds in Accordance With Program Requirements
The City did not have adequate financial and programmatic controls over its Program to ensure
that it expended and reported funds in accordance with Program requirements. Specifically, the
City (1) paid Program costs with administrative funds, (2) charged costs to the Program that were
incurred for its other grant programs, (3) exceeded its maximum 5 percent administrative budget,
(4) did not ensure that Unity made adequately supported participant eligibility determinations,
(5) did not ensure that Unity and its project sponsors adequately tracked and recorded participant
data in the HMIS, (6) did not ensure that Unity maintained documentation supporting approved
budget revisions or amended its contracts to ensure that its project sponsor and contractor costs
did not exceed the contracted amount, and (7) did not ensure that its or Unity’s financial records
reconciled to the expenditures in IDIS. These conditions occurred because the City did not take
the appropriate steps to safeguard funds, as it (1) did not adequately maintain and track its budget
to ensure that it made payments from the correct cost category and within budgeted amounts; (2)
circumvented accounting controls to pay expenditures from incorrect cost categories; (3) did not
have a written policy in place on how to process reimbursement requests for Program
expenditures until September 2012, 2 months after the Program ended; and (4) did not always
provide adequate oversight of Unity. As a result, the City incurred $134,770 in ineligible and
$159,987 in unsupported costs. It also allowed $28,430 in data entry errors in the HMIS.
Further, the City potentially paid $465,506 in duplicate financial assistance. Thus, it could not
provide reasonable assurance to HUD and the public that it had access to accurate information
about the use of Recovery Act funds.
The City Charged Ineligible
Administrative Fees
A review of 10 expenditure files, containing support for 10 disbursements totaling
more than $198,000 from the administrative funds, determined that for 7
disbursements, the City (1) paid Program costs with administrative funds, (2)
charged costs to the Program that were incurred for different grant programs, and
(3) exceeded its maximum 5 percent administrative fee threshold. Specifically,
In four instances, the City paid a total of $100,416 for ineligible costs4 related
to Program costs that were unallowable charges to the administrative cost
category. These charges included Unity’s and project sponsors’ staff salaries,
4
According to Federal regulations these costs were not allowed to be charged to the administrative cost category.
Since the charges were to the administrative costs category, we evaluated them to determine their eligibility as
administrative costs. We did not evaluate their eligibility as a Program cost.
4
utility arrearages, participant rental assistance, and data collection activities.
Federal Register 5307-N-01, section IV, part A, prohibited the City from
using its administrative funds to pay these costs.
The City paid the New Orleans Music Hall of Fame and Luther Speight for
costs not related to the Program but related to two of its other grant programs.5
Federal Register 5307-N-01, section IV, part A, and section V, part F, held the
City responsible for ensuring that it administered its Program funds in
accordance with the requirements and charged only eligible Program activity
costs. Of the $9,248 erroneously charged to the Program, the City repaid
$8,692 on April 29, 2013, leaving $556 in ineligible costs.
The City paid costs that caused it to exceed its 5 percent administrative budget
threshold limited by Federal Register 5307-N-01, section IV, part A.
Specifically, instead of charging $378,908 (5 percent) to its administrative
cost category, it charged $390,687 (5.15 percent). The $11,779 overage was
ineligible. With the $8,692 repayment previously discussed, the City reduced
its ineligible overage to $3,087.
Participant Files Lacked
Support for Eligibility
A review of 23 participant files with disbursements totaling $293,432 determined
that for 14 participants, the City did not ensure that Unity fully supported its
eligibility determinations, thereby incurring almost $45,000 in unsupported and
ineligible costs as shown in table 1. Some files contained multiple deficiencies.
5
The City charged the costs to its State of Louisiana Homeless Prevention and Rapid Re-Housing Program and
Community Development Block Grants.
5
Table 1:
Number of files Ineligible Unsupported
Deficiency with deficiencies costs costs
Lacked annual habitability inspection6 12 $29,451 0
Assistance received before approval into the 1,260 0
Program7 3
Assistance paid in excess of monthly lease 219 0
amount8 1
Assistance paid for more than 18 months10 1 49511 0
Inadequate income documentation12 1 0 $ 2,250
No documentation supporting area median 0 11,990
income requirement13 1
Totals $30,711 $14,240
In addition, although it did not affect eligibility, Unity’s participant files did not
always contain documentation required by its policies14 as shown in table 2.
Table 2:
Number of files with
Deficiency deficiencies
Inadequate utility documentation 12
Inadequate exit documentation 11
Inadequate identification information 4
Inadequate homeless verification letter 1
Lack of rent reasonableness documentation 4
Lack of lead-based paint inspection 1
Lack of income documentation or staff affidavits at 1
recertification
HMIS Contained Duplicate
Payments and Did Not
Reconcile to Unity’s Records
A review of the HMIS, the primary data collection tool for the Program,
determined that amounts paid for participants contained potential duplicate
payments and did not reconcile to Unity’s financial records. Specifically, of
1,322 participants listed in the HMIS, with financial assistance totaling more than
$4.3 million, the HMIS listed potential duplicate assistance for 447 participants
(34 percent) totaling $493,936. Review of the payment history for six participants
6
Federal Register 5307-N-01, section VII, part C
7
HUD’s Eligibility Determination and Documentation Guidance, Section 5-Documentation Standards
8
Federal Register 5307-N-01, section IV, part A
9
Amount included in $29,451 above
10
Federal Register 5307-N-01, section IV, part A
11
Amount included in $29,451 above
12
HUD’s Eligibility Determination and Documentation Guidance, Section 5-Documentation Standards
13
Federal Register 5307-N-01, section IV, part D
14
Unity’s Guide to Paperwork, Procedures, and Policies
6
with potential duplicate assistance totaling $28,430 showed that Unity made data
entry errors, but no duplicate payments occurred.15 According to Unity, it
believed that all of the potential duplicate payments were data entry errors.
However, since Unity’s project sponsors also entered data into the HMIS and
Unity did not have access to its project sponsors’ financial records, it could not
provide certainty that the remaining $465,506 did not represent duplicate
payments.
In addition, an analysis of Unity’s financial records as compared to the HMIS
determined that Unity’s total financial assistance expenditures of more than $5
million exceeded the amount of financial assistance reported in the HMIS of more
than $4.3 million, a $679,100 discrepancy. Unity could not provide an
explanation regarding the discrepancy.
Project Sponsors and Contractors
Exceeded Contract Amounts
A review of Unity’s financial records compared to project sponsor and contractor
agreements determined that the amount of funding paid to three project sponsors
and one contractor16 exceeded the agreement amounts by $145,747 as shown in
table 3.
Table 3:
Unity general ledger Contract
Entity Contracted amount payments overage
Hope House $ 576,537 $ 643,520 $ 66,983
The Salvation Army 674,471 725,878 51,407
Southeast Legal Services 155,178 172,238 17,060
VIA Link 118,500 128,797 10,297
Total $1,524,686 $1,670,433 $145,747
Any revisions to the project sponsors’ or contractors’ budgets or agreements
required written approval from the City. However, neither Unity nor the City
could provide written documentation approving the contract overages.
15
These six participants were assisted by Unity during the Program. We reviewed these participants because they
were within our participant eligibility sample. Thus, we had all landlord and Unity transaction data needed to
trace all of the payments for duplicates. We did not review participants who were assisted by other project
sponsors.
16
Hope House, The Salvation Army, and Southeast Legal Services were project sponsors. VIA Link was a
contractor.
7
Financial Records Did Not
Reconcile to IDIS Expenditures
An analysis of the City’s internal budget and cost control statements17 compared
to IDIS expenditures determined that the budgets and expenditures did not
reconcile, generating misclassified funds as shown in table 4.
Table 4:
City budgeted IDIS expended
Cost category amount amount Difference
Housing relocation and stabilization $ 1,829,315 $ 1,993,417 $ 164,102
Financial Assistance 5,142,600 5,092,902 (49,698)
Unity administrative costs 265,235 261,235 (4,000)
City administrative costs18 113,673 129,451 15,778
Data collection and evaluation 227,345 101,163 (126,182)
Total $7,578,168 $7,578,168
Federal Register 5307-N-01, section V, part F, required the City to ensure that it
administered Program funds in accordance with Program requirements and other
applicable laws. When asked, the City asserted that the data did not reconcile
because the City needed to move funding from the data collection cost category to
other categories to serve more clients who were in need. However, the City could
not provide documentation supporting this assertion or that it had an authorized
budget revision. Also, reducing the data collection cost category to $101,163
caused the City to misclassify funds. For example, as previously discussed, the
City paid unallowable data collection costs with administrative funds.
In addition, IDIS expenditures did not reconcile to Unity’s expenditures reflected
in its cost control statement. A comparison of the IDIS expenditures to Unity’s
expenditures showed that none of the expended amounts reconciled as shown in
table 5.
Table 5:
IDIS expended Unity expended
Cost category amount amount Difference
Housing relocation and stabilization $1,993,417 $1,961,414 $ 32,003
Financial assistance 5,092,902 5,013,946 78,956
Unity administrative costs 261,235 227,345 33,890
Data collection and evaluation 101,163 257,791 (156,628)
Total $7,448,717 $7,460,496 ($11,779)
17
Cost control statements are documents the City used to track Program budgets and costs.
18
Although the City did not have budget cost control statement documentation supporting the amount, the City
indicated that it reserved $113,673 for its Program administrative costs.
8
The City Did Not Take the
Appropriate Steps To
Safeguard Funds
The City did not take the appropriate steps to safeguard funds. Specifically, it did
not have a written policy in place for processing expenditures until September
2012, 2 months after the Program ended. This contributed to its inability to
consistently pay expenditures from the correct cost category and within budgeted
amounts. According to the City, it began to run out of funding in its cost
categories. Thus, it began paying expenditures from whatever category had funds
remaining. In doing this, the City disregarded appropriate accounting procedures
and violated Program requirements.
In addition, although the City monitored and communicated with Unity and its
project sponsors during the Program, its oversight was sometimes lacking as (1)
Unity was not always aware of the Program requirements, and (2) Unity and its
project sponsors disregarded requirements. Further, according to the City, it had
several meetings with Unity to reconcile its accounting records and believed that,
when reconciling the funds, Unity’s accounting records should be used and not its
cost control statements. However, Unity contradicted the City’s assertion, stating
that (1) in its accounting records it did not categorize Program expenditures in
line with the four Program cost categories used by the City, and (2) its final cost
control statement reflected the final expenditure amounts and should be used in
determining expended funds by category.
When we informed the City of the potential duplicate assistance payments in
HMIS, it stated that it did not have access to the HMIS during the Program and it
was difficult to obtain HMIS information from Unity. Without access to the data,
the City could not have provided adequate oversight to ensure that Unity and its
project sponsors adequately tracked and recorded participant data in the HMIS.
Conclusion
Because the City did not take the appropriate steps to safeguard Program funds, it
(1) paid Program costs with administrative funds; (2) charged costs to the
Program that were incurred for the City’s other grants; (3) exceeded its maximum
5 percent administrative budget; (4) did not ensure that Unity made eligibility
determinations that were adequately supported; (5) did not ensure that Unity and
its project sponsors adequately tracked and recorded participant data in the HMIS,
which resulted in either duplicate payments made on behalf of these participants
or material inaccuracies reported to HUD; (6) did not ensure that Unity
maintained documentation supporting approved budget revisions or amended its
contracts to ensure that its project sponsor and contractor costs did not exceed the
contracted amount; and (7) did not ensure that its or Unity’s financial records
reconciled to the City’s expenditures in IDIS.
9
As a result, the City incurred $134,770 in ineligible and $159,987 in unsupported
costs. It also allowed $28,430 in data entry errors in the HMIS and potentially
made $465,506 in duplicate financial assistance payments reflected in its HMIS
for 441 participants. Thus, the City could not provide reasonable assurance to
HUD and the public that it had accurate information about the use of Recovery
Act funds. Since the City’s Program ended July 31, 2012, we did not recommend
corrective actions for its internal controls.
Recommendations
We recommend that the Director of HUD’s New Orleans Office of Community
Planning and Development require the City to
1A. Repay to HUD for its transmission to the U.S. Treasury $100,416 for
ineligible costs charged to the administrative cost category.
1B. Repay to HUD for its transmission to the U.S. Treasury $556 for ineligible
costs that the City erroneously paid from Program funds that were chargeable
to the City’s subgrant from the State of Louisiana’s Program.
1C. Repay to HUD for its transmission to the U.S. Treasury $3,087 for ineligible
costs that the City incurred as a result of its exceeding the maximum 5 percent
administrative budget.
1D. Perform a detailed review of the remaining $192,68119 charged to the
administrative cost category in IDIS to ensure that these costs were chargeable
to this category and repay to HUD for its transmission to the U.S. Treasury
any unallowable or unsupported costs.
1E. Repay to HUD for its transmission to the U.S. Treasury $30,711 for ineligible
costs paid on behalf of 14 Program participants.
1F. Provide support regarding the income eligibility of two participants or repay
the $14,240 paid on behalf of the participants to HUD for its transmission to
the U.S. Treasury.
1G. Correct HMIS data entry errors totaling $28,430 for the six participants
reviewed so that the HMIS payments will accurately reflect the amounts paid
in the financial records.
19
$390,687 (total administrative costs) - $198,006 (total administrative costs reviewed) = $192,681 (remaining
administrative costs)
10
1H. Review potential duplicate assistance identified in HMIS associated with 441
Program participants, correct the HMIS data based on actual financial records,
or repay to HUD for its transmission to the U.S. Treasury any amounts paid
that were duplicate payments, thereby potentially putting $465,506 to better
use.
1I. Support that it either (1) provided written approval to undertake actions that
allowed the project sponsors and contractors to exceed contract amounts or (2)
maintained documentation evidencing authorized revisions to the project
sponsor and contractor budgets or repay $145,747 to HUD for its transmission
to the U.S. Treasury for Program funds paid to three project sponsors and one
contractor that exceeded the contract amounts.
1J. Require the City to reconcile its financial records with those of Unity and
IDIS. These records include but are not limited the City’s and Unity’s
budgets and Unity’s expenditures.
11
SCOPE AND METHODOLOGY
We conducted our audit at the City’s and Unity’s offices as well as the HUD Office of Inspector
General’s (OIG) office in New Orleans, LA, between April and August 2013.
To accomplish our objective, we
Reviewed relevant laws, regulations, and program guidance.
Reviewed City and Unity organizational charts and written policies for the Program.
Reviewed the City’s Recovery Act-related obligations and expenditures.
Reviewed the grant agreement between HUD and the City including the substantial
amendment, contract agreements between the City and Unity, and contract agreements
between Unity and its project sponsors or contractors.
Reviewed Program participant files.
Reviewed the City’s Program budgets as compared to the expenditures in IDIS and
Unity’s budgets.
Reviewed the City’s total IDIS expenditures per cost category as compared to Unity’s.
Interviewed appropriate HUD, City, and subgrantee staff members.
Analyzed the participant and disbursement data in the HMIS.
The City had 60 Program disbursements totaling more than $7.5 million. It made 55
disbursements totaling $390,687 from the administrative cost category. Using a nonstatistical
sample, we selected 10 of the 55 disbursements totaling more than $198,000 in order to review at
least 50 percent of the administrative funds. We reviewed the disbursements to determine
eligibility and whether the City disbursed the funds in accordance with Program requirements.
Through file reviews, we assessed the reliability of computer processed data regarding
disbursements and determined that the disbursement data were generally reliable.
Of the 1,322 Program participants reflected in the City’s HMIS, 37 did not receive funding
assistance. The remaining 1,285 participants, our revised universe of participants, received more
than $4.3 million in Program financial assistance. Using a nonstatitical sample, we selected 23
participants whose assistance totaled $289,432 and who appeared to have received more than 18
months of assistance and potential duplicate rental payments. We reviewed the files for the
participants to determine whether they met Program eligibility requirements and whether
eligibility determinations were adequately supported. We assessed the reliability of computer
processed data regarding the participant data. Through the file reviews we determined that the
participant data were not reliable because of discrepancies identified related to the amount of
Program assistance paid in the HMIS as compared to the supporting documentation.
12
Our audit scope covered July 31, 2009, through September 30, 2012. We expanded the scope as
necessary to accomplish our audit 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.
13
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:
Financial controls intended to ensure that Program expenditures comply with
HUD regulations, procedures, and instructions.
Programmatic controls intended to ensure that participants meet Program
eligibility requirements.
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
Based on our review, we believe that the following item is a significant deficiency:
The City did not have adequate financial and programmatic controls over its
Program to ensure that funds were expended and reported in accordance with
Program requirements (finding).
14
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Ineligible 1/ Unsupported 2/ Funds to be put
number to better use 3/
1A $100,416
1B 556
1C 3,087
1E 30,711
1F $14,240
1H $465,506
1I 145,747
Totals $134,770 $159,987 $465,506
1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
that the auditor believes are not allowable by law; contract; or Federal, State, or local
policies or regulations.
2/ 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.
3/ 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, it represents potential duplicate assistance identified in HMIS associated with
441 Program participants that if verified and corrected could put $465,506 to better use.
15
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
FACILITIES, INFRASTRUCTURE AND COMMUNITY DEVELOPMENT
CITY OF NEW ORLEANS
MITCHELL J. LANDRIEU CEDRIC S. GRANT
MAYOR DEPUTY MAYOR
September 13, 2013
Gerald R. Kirkland
Regional Inspector General for Audit- Region 6
U.S. Department of Housing and Urban Development
Office of Inspector General
819 Taylor Street, Suite 13A09
Fort Worth, TX 76102
RE: 2013 City of New Orleans Audit of LA Recovery Act Homelessness Prevention and
Rapid Re-Housing Program
Dear Mr. Kirkland:
The City of New Orleans (the City) is in receipt of your discussion draft audit report of the
Louisiana Recovery Act Homelessness Prevention and Rapid Re-Housing Program dated
August 29, 2013 conducted by the U.S. Department of Housing and Urban Development,
Office of Inspector General beginning on April 8, 2013.
Enclosed please find the City's response to the findings and recommendation as noted:
Misclassification of Expenditures
Comment 1 The City requests that the finding be revised to reflect the costs described in number one (1)
related to Unity's and project sponsors' staff salaries, utility arrearages, participant, rental
assistance, and data collection activities be noted as eligible programmatic costs. There were no
funds charged that were ineligible, instead costs were misclassified as administrative costs and
therefore paid out of the incorrect reporting category. The City will request that HUD allows an
adjustment be made to the HPRP program budget for a reclassification of Administrative and
Program costs in lieu of the repayment request. Providing the reclassification is granted, the
Comment 1 City would fall within the maximum 5 percent administrative fee threshold. Thereby, the
finding number (3) repayment request would not be applicable. The City is requesting that all
findings related to the administrative fee threshold being exceed be removed.
Comment 2 Issues with Unity's Recordkeeping
Due to the volume and nature of information that must be reviewed that City is not able to
provide a response at this time. However, the City is working with Unity and HUD to resolve
the aforementioned finding. Should the finding be deemed unresolvable, the City will seek
repayment of funds from Unity to return to the U.S. Treasury.
16
Comment 3 Unreconciled Data in HMIS
The City has requested from both HUD and Unity access to HMIS, however this request has
been denied. In addition to access being denied, it was also difficult for the City to obtain
HMIS information from Unity and Unity's Project Sponsors. Without access to HMIS the City
does not have the capacity to review or reconcile the participant data and financial records that
are recorded within for Unity and its project sponsors. The City will work with Unity to ensure
they are conducting this review of their HMIS system to correct the financial records for the
program participants sampled. The City will also ensure that Unity and their project sponsors
compare financial records with the HMIS data. These corrections are expected to be made by
October 1, 2013.
Project Sponsors and Contractors Contract Amendments
Comment 4 The City previously provided the amended contracts for the selected sample to support budget
revisions. The documents have been included (see Attachment I) for review.
The City of New Orleans would like to thank you for all the support provided throughout the
audit process, moreover we note our continued sense of urgency to work with and beside HUD
on all matters. If further information is required concerning the above corrective actions,
please feel free to contact Natasha F. Muse, Director of Administrative Support at
(504) 658-4208 or nfmuse@nola.gov.
Sincerely,
Cedric S. Grant
Deputy Mayor
Facilities, Infrastructure and Community Development
CSG/mdw
cc: Cheryl S. Breaux
Tracey Carney
Brian Lawlor
Anthony Faciane
Stacy Hom-Koch
Natasha F. Muse
Mia D. Wallace
1340 POYDRAS STREET SUITE 10001 NEW ORLEANS., LOUISIANA 70112
PHONE 504-658-8450 I FAX. 504-658-4238
17
OIG Evaluation of Auditee Comments
Comment 1 The City requested that the finding concerning staff salaries, utility arrearages,
participant rental assistance, and data collection costs that were charged to the
administrative cost category and considered ineligible be revised and noted as
eligible programmatic costs. The City asserted that the costs were not ineligible
but misclassified and charged to the incorrect cost category. The City also
asserted that it planned to request that HUD allow an adjustment be made to the
City’s Program budget to reclassify the administrative and Program costs in lieu
of repaying the funds. The City stated that this reclassification would also amend
the administrative costs total so that it would not exceed the 5 percent budget
threshold and the repayment would not be needed. The City asked that we
remove all findings related to the administrative costs threshold.
We disagree that the costs should be considered eligible. FR-5307-N-01
specifically stated that administrative costs do not include the costs of issuing
financial assistance, housing relocation and stabilization services, or data
collection activities, such as staff salaries and other operating costs; these costs
should be included under the three other eligible activity categories. However,
these costs were charged to and paid from the administrative cost category despite
being an unallowable practice under the Program; and therefore must be repaid.
In addition, during the audit, we only evaluated the costs to determine whether
they were eligible administrative costs. Thus, once determined unallowable
administrative costs, we did not perform additional evaluations to determine their
eligibility under another cost category. Based on the City’s request, we revised
the report to include additional clarification.
Further, FR-5307-N-01 states that no more than 5 percent of the total program
grant may be spent on administrative costs. Although the City asserted that it
would request and obtain approval from HUD to reclassify the funds in order to
alleviate its administrative cost category overage, it did not provide a copy of the
written request to HUD, or HUD’s written approval, to support that the
administrative total should be reduced below 5 percent. In addition, the City’s
Program ended July 31, 2012, and HUD closed this Recovery Act grant as of May
15, 2013.
Therefore, we did not revise our conclusions, the questioned costs, or
recommendations 1A and 1C.
Comment 2 The City explained that due to the volume and nature of information that must be
reviewed, it was unable to provide a response regarding Unity’s recordkeeping.
However, the City asserted that it was working with Unity and HUD to resolve
the aforementioned finding. The City stated that it would seek repayment of
funds from Unity to return to the U.S. Treasury for any unresolved findings. We
appreciate the City’s efforts in addressing the errors identified. The City should
18
work with HUD to resolve recommendations 1G and 1H pertaining to the
reported conditions.
Comment 3 The City asserted that its request for access to HMIS had been denied and that
without access to HMIS, the City did not have the capacity to review or reconcile
the participant data and financial records that were recorded in HMIS for Unity
and its project sponsors. However, the City proposed to work with Unity to
ensure that it conducts reviews of its and the project sponsors’ HMIS data in order
to correct the financial records for the Program participants by October 1, 2013.
We appreciate the City’s efforts in addressing the reported conditions.
Comment 4 The City asserted that it previously provided the amended contracts to support
budget revisions and provided the documents as an attachment to its comments.
Due to its size, we did not include this documentation in the final report. While
we agree that the City previously provided the applicable contracts in question,
the documents did not support the overages paid to the project sponsors and
contractor.
The City also provided documentation of budget revisions for the four project
sponsors discussed in the draft report. Based upon our review of the budget
revisions, we agree that the documentation related to project sponsor Total
Community Action was sufficient to support the City’s approval for the additional
amounts paid under that contract. However, the budget revisions provided for the
other three project sponsors did not support that the City approved the additional
amounts paid under the contracts. Thus, we only amended the final report to
remove the questioned costs for Total Community Action’s, which resulted in a
reduction of the questioned costs from $151,519 to $145,747 in table 3 and
recommendation 1I. The City should work with HUD to resolve the remaining
questioned costs in recommendation 1I.
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The City of New Orleans, LA, Did Not Have Adequate Financial and Programmatic Controls To Ensure That It Expended and Reported Funds in Accordance With Program Requirements
Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-09-24.
Below is a raw (and likely hideous) rendition of the original report. (PDF)