oversight

HUD's Office of Public and Indian Housing Did Not Announce Additional Funding, Publish Awards, and Justify Score Changes for Its HOPE VI Revitalization Grants

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-06-07.

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

OFFICE OF AUDIT
HEADQUARTERS AUDIT DIVISION
WASHINGTON, DC




               Office of Public and Indian Housing
                         Washington, DC

                 HOPE VI Revitalization Grants




2013-HA-0002                                   JUNE 7, 2013
                                                        Issue Date: June 7, 2013

                                                        Audit Report Number: 2013-HA-0002




TO:            Dominique Blom
               Deputy Assistant Secretary, Office of Public Housing Investments, PI

               //signed//
FROM:          Donna M. Hawkins
               Acting Director, Inspections and Evaluations Division, Washington, DC, GAH


SUBJECT:       HUD’s Office of Public and Indian Housing Did Not Announce Additional
               Funding, Publish Awards, and Justify Score Changes for Its HOPE VI
               Revitalization Grants


    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 selection and award of HUD’s fiscal
year 2010 HOPE VI revitalization grants.

    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
202-402-8284.
                                            June 7, 2013
                                            HUD’s Office of Public and Indian Housing Did Not
                                            Announce Additional Funding, Publish Awards, and
                                            Justify Score Changes for Its HOPE VI Revitalization
                                            Grants


Highlights
Audit Report 2013-HA-0002


 What We Audited and Why                     What We Found

 We audited the selection and award of      The complainant’s allegations had merit. In particular,
 the U.S. Department of Housing and         PIH did not comply with the HUD Reform Act of 1989
 Urban Development’s (HUD) fiscal           in awarding 2011 grant funds under the 2010 NOFA
 year 2010 HOPE VI revitalization           for HOPE VI revitalization grants. Specifically, it
 grants, based on a hotline complaint       awarded fiscal year 2011 funds without announcing the
 alleging that HUD’s Office of Public       availability of funds to the general public. It also did
 and Indian Housing (PIH) (1) selected      not have the application files readily available for
 and awarded fiscal year 2011 HOPE          review within 30 days after the awards were made. In
 VI funds to grantees that applied for      addition, PIH changed the scores of three applications
 fiscal year 2010 grants but did not        and supported the changes with conflicting
 publish a notice of funding availability   justifications.
 (NOFA) for its fiscal year 2011 funds
 and (2) made mistakes in calculating
 points when scoring applications. Our
 objective was to determine whether the
 selection and award of grantees for the
 fiscal year 2010 HOPE VI
 revitalization grants complied with the
 HUD Reform Act of 1989 and PIH
 properly scored its HOPE VI grant
 applications.

 What We Recommend

 We recommend that the Deputy
 Assistant Secretary for Public Housing
 Investments implement controls to
 ensure that increased funding during
 the grant competition follows the
 established NOFA procedures and the
 public is notified. We also recommend
 that PIH implement quality control
 procedures to ensure that applications
 are accurately recorded and supported.
                           TABLE OF CONTENTS

Background and Objective                                                             3

Results of Audit
      Finding 1: PIH Did Not Provide Notice or Make Records Available as Required
      by the HUD Reform Act During Its Fiscal Year 2010 HOPE VI Grant
      Competition                                                                    5
      Finding 2: PIH’s Controls Over Its Grant Award Process Had Weaknesses          9

Scope and Methodology                                                               12

Internal Controls                                                                   13

Appendixes
A.    Auditee Comments and OIG’s Evaluation                                         15




                                           2
                      BACKGROUND AND OBJECTIVE
The HOPE VI program, originally known as the Urban Revitalization Demonstration, was
developed as a result of recommendations by the National Commission on Severely Distressed
Public Housing to eradicate severely distressed public housing. This program is administered by
the Office of Public and Indian Housing (PIH), more specifically by the Office of Public
Housing Investments (OPHI).

The purpose of the HOPE VI revitalization grants is to assist public housing authorities in

   •   Improving the living environment for public housing residents of severely distressed
       public housing projects by demolishing, rehabilitating, reconfiguring, or replacing
       obsolete public housing projects (or portions thereof);

   •   Revitalizing sites (including remaining public housing dwelling units) on which such
       public housing projects are located and contributing to the improvement of the
       surrounding neighborhood;

   •   Providing housing that will avoid or decrease the concentration of very low-income
       families; and

   •   Building sustainable communities.

The U.S. Department of Housing and Urban Development’s (HUD) fiscal year 2010 HOPE VI
grant program was authorized $200 million under the Consolidated Appropriations Act of 2010.
Of the $200 million, PIH set aside $125 million specifically for HOPE VI grants. This $125
million includes $121.5 million in fiscal year 2010 HOPE VI funds and $3.5 million from fiscal
year 2010 technical assistance funds. In 2011, the HOPE VI grant program was authorized $100
million under the Continuing Appropriations Act of 2011. Of the $100 million appropriated for
2011, PIH set aside $27.4 million for HOPE VI grants.

HUD announced the HOPE VI Revitalization Notice of Funding Availability (NOFA) in the
Federal Register on August 25, 2010. Applications were to be submitted by November 22, 2010.
The maximum amount of each HOPE VI grant was $22 million. PIH decided to award the $28
million in fiscal year 2011 funds to applicants of the 2010 competition. With $244,530 also
available in no-year HOPE VI funds, the total funds available for the fiscal year 2010 grant
competition was approximately $153 million. HUD received 36 applications in response to this
NOFA, and 6 of these applications were declared ineligible. Of the 30 applicants eligible for a
HOPE VI grant, 8 were selected for funding and announced on May 23, 2011.

Each HOPE VI grant application was scored based on responses to the following factors:

   •   Rating factor 1: capacity (16 points)
   •   Rating factor 2: need (15 points)
   •   Rating factor 3: leveraging (15 points)

                                                 3
   •   Rating factor 4: resident and community involvement (3 points)
   •   Rating factor 5: community and supportive services (12 points)
   •   Rating factor 6: early childhood education (5 points)
   •   Rating factor 7: relocation (3 points)
   •   Rating factor 8: fair housing and equal opportunity (6 points)
   •   Rating factor 9: mixed-income communities (4 points)
   •   Rating factor 10: soundness of approach (26 points)

The maximum score possible for an application is 105. Applications that meet all threshold
requirements are eligible for scoring and undergo a preliminary rating and ranking. Applications
go for a final review by a panel consisting of senior staff. After the final panel review, a final
score is assigned to each application, and the applications are ranked in score order. The panel
then recommends the most highly rated applications to the Assistant Secretary for Public and
Indian Housing, who presents the recommendation to the HUD Secretary.

The objective of our audit was to determine whether the selection and award of grantees for the
fiscal year 2010 HOPE VI revitalization grants complied with the HUD Reform Act of 1989.
We expanded our objective to determine whether PIH properly scored its HOPE VI grant
applications.




                                                4
                                      RESULTS OF AUDIT


Finding 1: PIH Did Not Provide Notice or Make Records Available as
Required by the HUD Reform Act During Its Fiscal Year 2010 HOPE
VI Grant Competition
PIH did not comply with the HUD Reform Act of 1989 in awarding grants under the 2010
NOFA for HOPE VI revitalization grants. PIH increased the number of grants selected by two
and awarded approximately $28 million in fiscal year 2011 funds to fiscal year 2010 applicants
without notifying the public. It also did not have the application files readily available for
review after the awards were made, and the results of its final funding decisions were not
published in the Federal Register. These conditions occurred because PIH did not (1) want to
hold a competition to award the fiscal year 2011 funds, thus ignoring its normal procedures; (2)
know that grant applications and files should be available for review 30 days after the award
date; and (3) ensure that grantee selections were published. As a result, the public was not
notified of HUD’s intent to increase the funds and the awarding of two additional HOPE VI
grants during its fiscal year 2010 competition. HUD had no assurance that the application files
contained all documentation and other information regarding the basis for its funding decision.


    Fiscal Year 2011 Funding Not
    Published

                 On June 4, 2010, HUD’s Deputy Secretary signed the Notice of HUD’s Fiscal
                 Year (FY) 2010 Notice of Funding Availability (NOFA) Policy Requirements and
                 General Section to HUD’s FY2010 NOFAs for Discretionary Programs. This
                 notice states that additional program NOFAs would be published during fiscal
                 year 2010 and that additional funding opportunities would be made available on
                 www.Grants.gov, with a corresponding Federal Register notice. PIH’s HOPE VI
                 revitalization grants program fiscal year 2010 NOFA, dated August 25, 2010,
                 stated that approximately $124 million in assistance was available to fund five or
                 six grant awards. The maximum award available for each grant was $22 million.
                 The deadline for submitting applications was November 22, 2010.

                 At the end of the grant competition and after the November 22, 2010, deadline for
                 submitting applications had expired, PIH increased the number of grants that
                 would be selected from six to eight and the available funding from $125 1 million
                 to $153 million, which included $28 million from the HOPE VI fiscal year 2011
                 fund.

1
 The PIH Budget Office confirmed that the actual amount of fiscal year 2010 HOPE VI funds available for grants
was $125,041, 220. This amount included approximately $121.5 million in fiscal year 2010 HOPE VI funds and
$3.5 million in fiscal year 2010 technical assistance funds. The PIH Budget Office informed OPIH that only $27.9
million would be available in fiscal year 2011 HOPE VI funds.
                                                        5
                    During a discussion of the HOPE VI rollout and confirmation of funds transfer on
                    May 16, 2011, the Acting Director of the Budget Administration Division posed
                    the following question to the Director of the Urban Revitalization Division:

                             Has the NOFA been modified to say that we intend to award the FY2011
                             funds through the FY2010 NOFA?

                    On May 17, 2011, in response to the Acting Director of Budget Administration’s
                    question, the Director of the Urban Revitalization Division asserted to the General
                    Deputy Secretary and Advisor to the Assistant Secretary of Public and Indian
                    Housing:

                             I see that none of us got back to [Acting Director of Budget
                             Administration] yesterday. I can follow-up with [Associate General
                             Counsel for Legislation and Regulation] who attended the meeting on
                             April 22nd when we first discussed how the $100 million would be divided
                             up between Choice and HOPE VI and whether we wanted to fund 2010
                             application with 2011 funds.

                    Because time was critical regarding whether PIH needed to notify the public of
                    the availability and use of the HOPE VI 2011funds during the fiscal year 2010
                    HOPE VI competition, the Advisor to the Assistant Secretary for Public and
                    Indian Housing contacted the Associate General Counsel for Legislation and
                    Regulation on May 18, 2011. The Associate General Counsel for Legislation and
                    Regulation responded:

                             … if a[n] earlier decision is needed, please note that if OCFO [Office of
                             the Chief Financial Officer] is ok with the plan, then it should be ok.

                    Although there were many discussions regarding whether PIH could award fiscal
                    year 2011 HOPE VI grant funds before announcing that these funds were
                    available, PIH did not issue an amendment to the NOFA notifying the public of
                    the increase in funding and the number of grants to be awarded. The Director of
                    the Urban Revita1ization Division contended that due to the amount of staff time
                    required and the small amount of funding available ($25 million), PIH did not
                    want to hold a competition. However, according to section 102(a) of the HUD
                    Reform Act of 1989, 2 before HUD may solicit an applicant for assistance, it must
                    publish a notice in the Federal Register describing the application procedures.
                    Also, not less than 30 days before the submission deadline, HUD must publish
                    selection criteria in the Federal Register. Instead, PIH selected the two additional
                    applicants without competition, and the HUD Secretary made the following
                    public announcement in a May 23, 2011, press release:


2
    Title 42, chapter 4, U.S.C. (United States Code) 3545
                                                            6
                    The eight housing authorities announced today were selected from
                    among 36 public housing authorities that applied for FY [fiscal
                    year] 2010 HOPE VI Revitalization funding. Six of the grantees
                    will be funded from FY 2010 HOPE VI appropriations and two
                    awards will come from FY 2011 funding.

             This was the only notice provided to the public that HOPE VI funds were
             available for fiscal year 2011 and more grants would be awarded. Further, the
             notice was clearly issued after the funds had been awarded and did not provide
             other public housing authorities the opportunity to apply for the additional grants
             and funding. Consequently, PIH appeared to have violated the basic intent of the
             HUD Reform Act. The Act was intended to ensure full public knowledge of the
             rules used to competitively award assistance under any program or discretionary
             funds administered by the HUD Secretary.

Application Files Not Available
for Review

             OPHI did not establish adequate administrative controls to properly maintain
             application files. On July 25, 2011, more than 60 days after the awards were
             announced, we requested the application files for review and were told that the
             files were not ready for review. According to OPHI staff members, they needed
             time to assemble the files because they were going through a complete record-
             keeping and filing process. The HUD Reform Act states that applications and
             other documents should be available for review no less than 30 days following the
             date on which the award is made. Since the grant awards were announced on
             May 23, 2011, the complete grant files should have been available for review by
             July 25, 2011. OPHI staff members indicated that they were unaware of this
             requirement.

Awards Not Published

             PIH’s HOPE VI grant program funds were awarded in June 2011. However, the
             funding decisions were not published in the Federal Register as required by the
             HUD Reform Act. On February 6, 2012, almost 8 months after the grants had
             been awarded, the Director of the Urban Revitalization Division confirmed that
             the awards had not been published but HUD’s Grants Management Center staff
             was working on publicizing the funding decisions in the Federal Register.

Conclusion

             PIH adversely impacted the intent of the HUD Reform Act by increasing the
             funding and the number of grants to be awarded at the end of the grant
             competition without notifying the public. PIH did not want to hold a competition
             to award the fiscal year 2011 funds; thus, it ignored its normal NOFA competition
                                              7
          procedures. HUD did not allow potential applicants the opportunity to submit
          applications in response to these new requirements. PIH should have issued a
          technical correction to the fiscal year 2010 HOPE VI NOFA, indicating that
          additional funding was available, and published selection criteria for the awarding
          of the fiscal year 2011 funds. The Reform Act provides requirements for fair and
          open competition.

          After our review, PIH published a notification in the Federal Register announcing
          its fiscal year 2010 HOPE VI grant selections and that fiscal year 2011 funds were
          used to fund the fiscal year 2010 HOPE VI revitalization grants program
          competition.

          The Deputy Assistant Secretary for Public Housing Investment has taken action to
          implement recommendation 1A. Therefore, we plan to close recommendation 1A
          upon issuance of the report.

Recommendations

          We recommend that the Deputy Assistant Secretary for Public Housing
          Investments

          1A      Announce the grantee selections (funding decision) for the fiscal year
                  2010 HOPE VI revitalization grants program competition in the Federal
                  Register and notify the public that fiscal year 2011 funds were used to
                  fund the fiscal year 2010 awards.

          1B      Establish policy and procedures to ensure that increased funding during
                  the grant competition follows the established NOFA procedures and the
                  public is notified.

          1C      Develop and implement procedures to ensure that complete grant files are
                  maintained and contain all documentation to support the basis for funding
                  HOPE VI awards within 30 days as required by the HUD Reform Act.

          1D      Establish procedures to ensure that the grantee selection results are
                  published in the Federal Register in a timely manner.




                                            8
Finding 2: PIH’s Controls Over Its Grant Award Process Had
Weaknesses
PIH’s controls over its grant award process had weaknesses. Specifically, PIH’s final review panel
did not provide sufficient detailed justification in the final scoring document to support the change
in score. This condition occurred because PIH’s quality control process for reviewing and
processing applications was not clearly or fully defined. As a result, HUD did not have adequate
assurance that the application scoring was accurate or that an adequate audit trail existed to support
its determination for funding.



    No Established Quality Control
    Process


                 According to PIH’s Application Review Procedures for the fiscal year 2010
                 HOPE VI revitalization competition, after an application meets all the funding
                 requirements under the NOFA, the application is then reviewed during the
                 individual rating review (preliminary rating). The grant administrator and the
                 HOPE VI director selected grant managers and team leaders to rate each eligible
                 grant application and assign a primary score for each rating factor. During the
                 individual rating review, one reviewer and one reader were assigned to rate each
                 application. Additional reviews performed during this time were the community
                 and supportive services and design reviews, which were completed by specialized
                 staff. 3 The top applicants from the individual rating review were referred to the
                 final review panel for a second review by the senior staff. If the panel had
                 questions about the primary scores, it could either review the application again
                 and revisit or revise scores or have the reviewer clarify scoring as necessary.
                 However, any changes to the primary scores had to be justified and documented
                 in a document entitled “Panel Notes.” Information from the Panel Notes was then
                 transferred into the scoring document (strengths and weaknesses (S&W) form),
                 justifying the score.

                 Our review of the application files disclosed that the final scoring document for
                 three applicants, which was used to support a change in score for these applicants,
                 contained contradictory language. Two applicants’ scores were reduced, although
                 the justifications, which included the exact information from the preliminary
                 rating, indicated that the applications should receive the full three points for the
                 rating factor. The justifications then included a sentence detailing why the
                 applicants’ scores were reduced. The first applicant’s justification was revised to

3
  Specialized staff included HOPE VI architects, who performed the design review, and HOPE VI community and
supportive services managers, who performed the community and supportive services review for specific rating
factors on the applications.
                                                      9
include the sentence, “Two points have been awarded because the units depicted
are generic and do not reflect the local architectural tradition.” The second
applicant’s justification was revised to include the sentence, “However, there is a
weakness which is the isolation of the existing site and also of the proposed site
located next to the RR row. According, one point was deducted.”

According to the Deputy Assistant Secretary, the contradictory language on the
final scoring document of the first applicant justifying the reduction in score was
attributed to a “technical glitch.” PIH stated that the grant administrator
incorrectly recorded the Panel Notes into the final scoring document without
deleting the justification from the preliminary rating. Essentially, the error was
due to a copy and paste malfunction. PIH’s position was that the panel correctly
reduced the score and adequately justified the reduction.

The third applicant’s score was increased by one point during the panel review.
The justification provided for the increase in score of the third applicant stated,
“… [team members] have experience listed, but isn’t specific to the types of
redevelopment projects they worked on. However, those firms had previously
worked with both CAD [Capital Area Developments, Inc.] and RHA [Housing
Authority of the City of Raleigh]. As a result, the applicant scores 4 points.” The
NOFA required that the applicant provide a detailed reporting of the
qualifications of the developers. In addition, PIH’s Application Review
Procedures states, “Personal knowledge of a particular PHA [public housing
agency], site or development team member cannot be taken into consideration.”
The applicant did not include the detailed qualifications; however, the applicant’s
score was increased based on the panel members’ familiarity with the
development team members. Also, on this application for a different rating
factor, the applicant did not include a budget, which was specifically required by
the NOFA to receive a full two points for this rating factor. Although the panel
acknowledged that a budget was missing from the application, it increased the
applicant’s score for that rating factor from one to two points.

The HOPE VI Director stated that this was the first time PIH had used two
separate scoring documents justifying the score changes; in past competitions,
there was no final scoring document prepared after the panel review. Instead, the
panel recorded the differences in score from the preliminary score in the Panel
Notes. However, the Application Review Procedures states, “Reviewers will use
their S&W [scoring document] and incorporate any revisions from Reader, Policy
Committee, or Panel reviews, as needed, in order to produce the final S&W. As
needed, the Reviewers may use their S&W for discussion purposes for the Panel,
which will serve as the basis for the final score and final S&W.”

The Deputy Assistant Secretary for Public and Indian Housing stated that the
panel served as the quality control mechanism to ensure that the scoring and
procedures follow established criteria and the NOFA. However, PIH did not have
a documented quality control mechanism to ensure that the final scoring
                                 10
             document contained an accurate reporting of the decisions and justifications made
             during the panel review. The Deputy Assistant Secretary acknowledged that the
             panel’s reasoning for the point reduction should have been more detailed. After
             our discussion, the Deputy Assistant Secretary suggested and provided an
             alternate recommendation: “Review, and revise the competition procedures
             manual to improve instructions regarding the documents to support the basis for
             funding competition.”

             Because a quality control review was not completed before the final scoring
             document was submitted for recommendation, the final document contained
             contradictory statements; specifically, the justification provided for the change of
             score indicated that the applicant’s scores should have been higher or lower than
             those recorded. The error in the conflicting justifications occurred because PIH
             did not establish an adequate quality control process, assuring that the panel’s
             intention was recorded and justified correctly in the final scoring document.
             Although the HOPE VI Application Review Procedures does not require a
             quality control review after the panel review, the HOPE VI Division should have
             documented that such a review occurred before submitting the applications with
             final scores for grant (award) recommendation.

Conclusion

             HUD had no assurance, based on the final scoring document, that the justification
             provided for the applicant’s score changes was accurate because there was no
             documented quality control review process in place. PIH needs to enhance and
             document its quality control procedures for the grant award review process.
             Improved quality control would help to reduce the possibility of awarding a grant to
             an ineligible applicant or an applicant’s being deemed eligible or ineligible due to
             contradictory information provided in the final scoring document.

Recommendations

             We recommend that the Deputy Assistant Secretary for Public Housing Investments

             2A     Implement a quality control policy to ensure that the information on the
                    final scoring document reflects the information recorded in the final
                    review panel notes; also ensure that the quality control process is validated
                    prior to submitting the grant award recommendations to the Deputy
                    Assistant Secretary.

             2B     Review and revise the competition procedures manual to improve
                    instructions supporting the basis for funding awards.




                                              11
                         SCOPE AND METHODOLOGY

We performed the audit based on a hotline complaint. The complaint alleged that PIH,
specifically OPHI, selected and awarded fiscal year 2011 HOPE VI funds to grantees who
applied for fiscal year 2010 grants but did not publish a NOFA for its fiscal year 2011 funds.
The complainant also alleged that OPHI made mistakes in calculating points when scoring
applications, which resulted in excluding eligible public housing authorities, while others that
were not as competitive or capable were awarded funds.

The audit period covered June 2010 through June 2011. We performed the audit from June 2011
through February 2012 at HUD headquarters in Washington, DC.

To accomplish our objective, we

       •   Reviewed applicable HUD regulations, including the fiscal year 2010 NOFA relating
           to the administration of the HOPE VI grant program.
       •   Conducted interviews with HOPE VI employees to determine their roles and
           responsibilities during the fiscal year 2010 application review process.
       •   Obtained an understanding of the HOPE VI grant program.
       •   Examined 20 of the 36 applications submitted for the HOPE VI grant program under
           the 2010 NOFA.

PIH received 36 applications under the fiscal year 2010 NOFA. From this universe, 30
applications made it to the rating and ranking phase of the application process. Six applications
did not make it to the rating and raking phase because they did not meet the threshold
requirement. From the 36 submitted applications, we selected 20 for review: 8 applications that
were funded, 11 that were not funded, and 1 that did not meet the threshold requirement.

For this audit, we did not perform an assessment of computer-processed data because the
application and selection process is manual, and no computer-processed data were used to arrive
at our conclusions.

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.




                                                12
                              INTERNAL CONTROLS

Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

   •   Effectiveness and efficiency of operations,
   •   Reliability of financial reporting, and
   •   Compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.


 Relevant Internal Controls

               We determined that the following internal controls were relevant to our audit
               objective:

               •      Effectiveness and efficiency of operations – Policies and procedures that
                      management has implemented to reasonably ensure that a program meets its
                      objectives.
               •      Compliance with applicable laws and regulations – Policies and procedures
                      that management has in place to ensure that resource use is consistent with
                      laws and regulations.

               We assessed the relevant controls identified above.

               A deficiency in internal control exists when the design or operation of a control does
               not allow management or employees, in the normal course of performing their
               assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
               impairments to effectiveness or efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws and regulations on a
               timely basis.

 Significant Deficiencies

               Based on our review, we believe that the following items are significant deficiencies:

               •      PIH did not have adequate controls to ensure that its grant competition
                      complied with the HUD Reform Act (finding1).

                                                 13
•   PIH did not establish a quality control process for reviewing and processing
    applications (finding 2).




                             14
                        APPENDIXES

Appendix A

        AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation      Auditee Comments




                            15
Ref to OIG Evaluation   Auditee Comments




                         16
Ref to OIG Evaluation   Auditee Comments




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         18
Ref to OIG Evaluation   Auditee Comments




                         19
Ref to OIG Evaluation   Auditee Comments




                         20
                         OIG Evaluation of Auditee Comments

Comment 1   We agree with the Office of Public and Indian Housing’s proposed action to
            develop and implement procedures to ensure that grant files are available and that
            all documentation and other information to support the decision is available
            within 30 days of the award announcements. We also agree with the proposed
            action to develop and implement procedures to ensure that the notification of the
            funding decisions occurs in a timely manner, and at least quarterly.

            Subsequent to our review, PIH took corrective action by publishing a notification
            in the Federal Register on March 20, 2012 announcing that fiscal year 2011 funds
            were used to fund the fiscal year 2010 HOPE VI Revitalization Grants Program
            competition and its fiscal year 2010 HOPE VI grant selections.

Comment 2   Although the Office of Public Housing Investments does not expect future
            funding for the HOPE VI Revitalization Grants Program, we are encouraged by
            its agreement to implement the cited recommendation for its Choice
            Neighborhoods program. During the audit resolution process, the Office of
            Public Housing Investments should provide the revisions made to the Choice
            Neighborhoods competition procedures to support the implementation of
            recommendation 2B.




                                            21