oversight

Healthy Homes Needs To Strengthen Its Controls Over Lead Hazard Control Grant Administrative Costs

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-04-18.

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

                                               U.S. DEPARTMENT OF
                               HOUSING AND URBAN DEVELOPMENT
                                        OFFICE OF INSPECTOR GENERAL


                 
                                                    April 18, 2013
                                                                                              MEMORANDUM NO:
                                                                                                   2013-KC-0801



Memorandum
TO:           Jon Gant
              Director, Office of Healthy Homes and Lead Hazard Control, L

              //signed//
FROM:         Ronald Hosking
              Regional Inspector General for Audit, 7AGA

SUBJECT:      Healthy Homes Needs To Strengthen Its Controls Over Lead Hazard Control
              Grant Administrative Costs


                                       INTRODUCTION
 
We conducted a limited scope internal review of the U. S. Department of Housing and Urban
Development’s (HUD) Office of Healthy Homes and Lead Hazard Control to determine whether
Healthy Homes allowed excessive administrative costs to be charged to the Lead-Based Paint
Hazard Control grant program. This review was the result of our audit of the Washington State
Lead Hazard Control grant (2012-SE-1005, August 9, 2012), which found excessive
administrative costs charged to the grant.

                               SCOPE AND METHODOLOGY

We performed our review between October and December 2012. To perform this review, HUD's
office of Healthy Homes in Washington DC provided us with electronic and hard copy
documents for our review. Our review covered the Lead Hazard Control grants awarded from
fiscal years 2009 through 2011. To accomplish our objective, we reviewed applicable laws,
regulations, HUD requirements, and the Lead Hazard Control Notices of Funding Availability
for 2009, 2010, and 2011. We interviewed HUD staff and examined Healthy Homes’ policy
guidance. We randomly selected 10 of the 78 grantees awarded Lead Hazard Control grants in
fiscal years 2009 through 2011. We examined each of the selected grantees’ grant agreements
and the grant terms and conditions. Of the 10 grantees selected, we reviewed the 2 onsite
monitoring reports that Healthy Homes completed. We reviewed the Line of Credit Control

                                        Office of Audit (Region 7/8/10)
                        Gateway Tower II – 5th Floor, 400 State, Kansas City, KS 66101-2406
                                  Phone (913) 551-5870, Fax (913) 551-5877
                         Visit the Office of Inspector General Web site at www.hudoig.gov. 
                                                          
System (LOCCS) draws and supporting documents of the 10 selected grantees for administrative
costs.
 
                                   BACKGROUND

Healthy Homes was established by Congress in 1991 to eliminate lead-based paint hazards in
America’s privately owned and low-income housing. Healthy Homes provides funds to State
and local governments to develop cost-effective ways to reduce lead-based paint hazards.

The Lead-Based Paint Hazard Control grant program assists States, Native American tribes,
cities, counties, parishes, and other local governments in creating wide-ranging programs to
identify and control lead-based paint hazards in eligible privately owned rental or owner-
occupied housing. Lead Hazard Control grants are subject to a 10 percent administrative cost
limit. 

                                   RESULTS OF REVIEW

Healthy Homes did not have an adequate system in place to ensure that grantees did not spend
more than 10 percent of their Lead Hazard Control grant funds on administrative costs. For
example, during the Lead Hazard Control grant negotiations, Healthy Homes did not require
grantees to submit detailed documentation specifying the types of administrative costs to be
charged to the grant. It also did not review LOCCS draws support for administrative cost
eligibility and appropriateness except for one draw selected and reviewed during the annual desk
review. Healthy Homes relied on onsite monitoring reviews to monitor administrative costs
beyond the budget negotiations. However, Healthy Homes was unable to show us the amount or
percentage of grant funds spent to date on administrative costs during our review.

This condition occurred because HUD management thought administrative costs posed little risk
to the Lead Hazard Control grant program. Since both the Lead Hazard Control Notices of
Funding Availability and the grants’ terms and conditions stated the administrative cost limit and
the negotiated budget limited the administrative costs, HUD management believed the grantees
would comply with the administrative cost limit requirement.

As a result, Healthy Homes lacked assurance that grantees did not charge excessive
administrative costs to their Lead Hazard Control grants. The lack of monitoring could create an
opportunity for excessive or inappropriate administrative costs to be charged to the grants.

Healthy Homes’ management agreed to strengthen the controls over Lead Hazard Control
administrative costs.




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                                  RECOMMENDATIONS

We recommend that the Director of Healthy Homes strengthen the controls over Lead Hazard
Control administrative costs. We recommend that Healthy Homes

       1A. Require grantees to submit, during the Lead Hazard Control grant negotiations,
           detailed documentation specifying the types of administrative costs to be charged to
           the grant.

       1B. Review administrative costs and other costs charged to the grants for eligibility and
           appropriateness during the onsite monitoring.

       1C. Sample and review LOCCS draws support for administrative cost eligibility and
           appropriateness.




                                               3
                                             APPENDIX A

                   AUDITEE COMMENTS AND OIG’S EVALUATION
 

Ref to OIG Evaluation                  Auditee Comments



 
                                U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                                 WASHINGTON, DC 20410-3000

               OFFICE OF HEALTHY HOMES AND
               LEAD HAZARD CONTROL
                
 
               MEMORANDUM FOR:                             Ronald J. Hosking, Regional Inspector
 
                                                           General for Audit, 7AGA
 
               FROM:                                       Jon L. Gant, Director, Office of Healthy
                                                           Homes and Lead Hazard Control, L

               SUBJECT:                                    Response to Draft Audit
                                                           Recommendation Memorandum on
	                                                          Strengthening Oversight of Grantee
                                                           Administrative Costs

 

                       Please accept the attached documents as documentation from the
               Office of Healthy Homes and Lead Hazard Control’s (OHHLHC) as response
Comment 1      to the Office of Inspector General’s (OIG) February 5, 2013, draft audit
               memorandum on strengthening oversight of grantee administrative costs. The
               OHHLHC is implementing the new procedures to ensure grantees understand
 
               and are within the requirements of administrative costs. If you have any
               questions, please feel free to contact Michelle Miller at 202-402-5769 or
               michelle.m.miller@hud.gov.
	
 
               Attachments
 
 
 
 
                                             www.hud.gov        espanol.hud.gov
                



                                                    4
         
 
 
 
 
                         U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                      WASHINGTON, DC 20410-3000
        OFFICE OF HEALTHY HOMES AND
        LEAD HAZARD CONTROL

         
 
                                       MEMORANDUM
 
 
        Date: April 1, 2013

        To:     OHHLHC Government Technical Representatives (GTR) and Grant
                Officers (GO)

        From: Michelle Miller, Programs Division Director
              Nadine Heath, Grant Services Division Director
              Peter Ashley, Policy and Standards Division Director

        Subject:         GTR and Grant Officer instructions for Verification of
                         Administrative Costs


        Based on recommendations from the Office of the Inspector General and their
        recent review of our grant program, we have developed the following
        procedures for Verification of Administrative Costs. The procedures include
        three key areas including verification of Administrative Costs during grant
        negotiations, grant monitoring visits, and prior to approval of requests for
        LOCCs reimbursements.

        Verification of Administrative Costs During Grant Negotiations

        During grant negotiations, the OHHLHC Grant Officer will request a
        complete and detailed breakdown of the administrative costs from the
        awardee. This should include both administrative costs from the prime
        recipient as well as any sub-recipients.

        The Grant Officer will review and determine that the costs are eligible and that
        the awardee does not exceed the 10% Administrative Cost limit.

        The Grant Officer will require the awardees to submit the information to detail
        the administrative cost in the following table:

         


                                         5
 
                                                                  Total     Total
                                     Total Dollar                Dollar    Dollar
     Name/Title      Description     Amount                     Amount Amount
                                  %
      or Grant         of the        Classified as              Classified   of
                                 FTE
      Activity        Activity       Administrative             as Direct Overall
                                     Cost                       Program Federal
                                                                  Cost     Budget




      TOTAL
    Administrative
       Cost

    During negotiations, a revised Part 3 Form will be completed to include the
    approved amount of the Federal award that will be charged toward the
    Administrative Costs.

    The Authorizing Official and the Fiscal staff person will need to certify these
    costs during negotiations as well as once per grant year. The Grant Officer
    will certify that the costs are eligible and verified.

    Verification of Administrative Costs During Monitoring Visits

    During on-site monitoring visits, the OHHLHC Monitoring Team will request
    and review the grantees internal budget controls and accounting system. The
    Monitoring Team will ensure that the grantees properly track and monitor
    administrative costs including but not limited to salary, fringe, travel, training,
    etc. The Monitoring Team will also review and monitor the federal dollars
    provided to sub-recipients as well as the procedures the prime recipient uses to
    monitor the sub-recipient costs.

    The Authorizing Official and the Fiscal staff person will need to certify that
    the Administrative Costs do not exceed the 10% Administrative Cost limit on
    the revised Part 3 Form.

    Verification of Administrative Costs with LOCCs Request for
    Reimbursement

    The LOCCS Policy Guidance has been updated and will include verification
    of Administrative Costs with each LOCCs request. The revised policy
    guidance is attached as a reference and replaces PGI 2011-01 Revised Line of
    Credit Control Systems (LOCCS) Reimbursement.  




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    PART 3 - FINANCIAL REPORTING

    HUD Office of Healthy Homes and Lead Hazard Control Grant Programs

    Grant Agreement Number:
    Grant Organization:
    Report Period:                                                             Year 20______
          BUDGET           NEGOTIATED         APPROVED CUMULATIVE AVAILABLE
        CATEGORIES*          BUDGET             LOCCS      LOCCS   BALANCE
                                             DRAWDOWNS DRAWDOWNS
                                             THIS PERIOD* TO DATE*
    1. Personnel (Direct
    Labor)
    2. Fringe Benefits
    3. Travel
    4. Equipment
    5. Supplies and
    Materials
    6. Consultants
    7. Contracts / Sub-
    Grantees
    7a.Lead Hazard
    Control
    7b.Relocation
    7c.Training
    7d.
    7e.
    7f.
    7g.
    7h.
    7i.
    Subtotal Item 7
    8. Other Direct
    Costs
    9. Indirect Costs
    10. TOTALS*



    * Administrative costs included in totals expended are not to exceed 10-percent.


     


                                         7
    PART 3 - FINANCIAL REPORTING                                                pg. 2

    HUD Office of Healthy Homes and Lead Hazard Control Grant Programs

    Grant Agreement Number:
    Grant Organization:
    Report Period:                                                          Year 20______


    Administrative Cost Summary
        Budget Categories       Negotiated        Approved       Cumulative      Available
                                 Budget            LOCCS          LOCCS          Balance
                                                 Drawdowns      Drawdowns to
                                                 this period        Date
    Personnel
    Fringe Benefits
    Travel
    Equipment
    Supplies and Materials
    Contracts/Sub-
    Grantees
    Training
    Total Administrative
    Cost

    Match Commitment Summary
         Source of Match Funds         Eligible Activities Completed with   Amount of Match
                                                the Match Funds              Provided this
                                                                               Quarter




        Total Match Commitment         Total Match Provided       Cumulative Match Provided
                                           this Quarter



    I certify that all expenditures reported (or payment requested) are for appropriate
    purposes and in accordance with the provisions of the application and award
    documents.
    ______________________________________________
              (Name of Individual Completing this Form)
     
    ________________________________________                                    _________
              (Signature of Individual Completing this Form)                     (Date)


                                         8
 


                     U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                  WASHINGTON, DC 20410-3000

    OFFICE OF HEALTHY HOMES AND
    LEAD HAZARD CONTROL


    POLICY GUIDANCE NUMBER: PGI 2013 - 02                     DATE: April 1, 2013
                                     Revised Line of Credit Control System
    SUBJECT:
                                     (LOCCS) Reimbursement Procedures
    STATUS:                          Current
    APPLICABILITY:                   All OHHLHC grant programs
                                     24 CFR 84, 24 CFR 85, OMB Circulars A-21,
    RELATED GUIDANCE:
                                     A-87, and A-122
    COMMENTS:                        This PGI will replace PGI 2011-01.
     
    The Office of Healthy Homes and Lead Hazard Control (OHHLHC) is issuing
    this updated policy guidance to ensure that all grant reimbursements are for
    eligible costs and are made in compliance with all applicable requirements.

    Specifically, this updated policy guidance addresses the new requirements for
    detailing Administrative Costs included in each LOCCS request to ensure
    grantees are not exceeding the 10% Administrative Cost limit on the total
    Federal award amount.

    The Government Technical Representative (GTR) assigned to the grant is
    responsible for the review and approval of grantee requests for payment
    through the Line of Credit Control System (LOCCS). The GTR approves or
    rejects grantee payment requests within five business (5) days of the request
    for reimbursement and receiving all required supporting documentation.

    Grantees shall submit the following documentation, including, but not limited
    to:
        1. Revised Part 3 Financial Reporting Form (attached);
        2. VRS Request Voucher for Grant Payment, Form HUD 27053
           (attached);
        3. Supporting documentation for all costs on VRS requests exceeding
           $100,000;
        4. Submit detailed documentation outlining and describing Administrative
           Costs associated with this request; and
        5. Any other documentation requested by the GTR to provide support and
           justification for the request. 




                                     9
       1. The Grantee makes the reimbursement request using the VRS
          telephone system and emails and/or faxes copies of original documents
          required in support of request to the grantee’s assigned GTR within 5
          days.
              a. Complete documentation in support of requests exceeding
                  $100,000 will be required for all Direct Program Costs and
                  Administrative Costs, including personnel and fringe benefits.
                  A description of direct costs is provided in the Notice of
                  Funding Availability (NOFA) under which the award was
                  made.
              b. For requests less than $100,000, the Part 3 Financial Reporting
                  Form and the VRS Request Voucher for Grant Payment Form-
                  HUD 27053 are required, unless other additional provisions are
                  required in the grant agreement. OHHLHC will not approve
                  LOCCS requests without supporting documentation.
              c. For requests less than 100,000, complete documentation in
                  support of the Administrative Costs associated with the request
                  are required.
              d. LOCCS requests must be submitted at least 10 days prior to the
                  end of the quarter in order to be counted towards quarterly
                  benchmark goals;
       2. Within five business (5) days of receipt by fax and/or email of all
          supporting documentation, the GTR will review in accordance with the
          above requirements, and will verify eligibility of reimbursements
          being requested.
              a. If additional documentation is required, the GTR notifies the
                  grantee by email. The GTR will review resubmitted
                  documentation within two business days.
       3. The GTR approves or rejects the Request Voucher for Grant Payment
          in the LOCCS based on review of submitted documentation. Grantees
          are notified by phone and/or email for rejected voucher(s) and
          instructions for resubmitting the revised voucher(s).
       4. Funds are dispersed to the grantee account typically within three
          business days of approval.
       5. Failure to comply with this requirement will result in OHHLHC
          holding approval of requests until originals are submitted.

    OHHLHC will not approve grantee LOCCS requests without acceptable
    supporting documentation.

    The GTR, in compliance with the Department’s grant monitoring process,
    may at any time, but not less than once per year, require that all supporting
    documentation for any requests for reimbursement be submitted to the GTR
    regardless of the amount of reimbursement being requested. 




                                   10
    Grantees must ensure that all documentation associated with LOCCS payment
    requests are retained according to appropriate record retention requirements.
    Records related to the grant program must be made available for inspection by
 
    HUD or its designee as stipulated in the grant agreement.
 
    Grantees must retain originals and provide email and/or fax copies to the GTR.
     

 

 

 

 

 

                                                                                      




                                   11
                         OIG Evaluation of Auditee Comments

Comment 1   We believe the proposed changes will address the administrative cost monitoring
            weaknesses identified during our review. A management decision has been
            reached and will be recorded in the departmental resolution tracking system upon
            issuance of the report.
                                                                                                




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