oversight

Hillsborough County, FL Did Not Properly Administer Its Community Development Block Grant (CDBG) Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-07-09.

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

OFFICE OF AUDIT
REGION 4
ATLANTA, GA




                  Hillsborough County, FL

     Community Development Block Grant Program




2014-AT-1006                                JULY 9, 2014
                                                        Issue Date: July 9, 2014

                                                        Audit Report Number: 2014-AT-1006




TO:            Gary Causey, Director of Community Planning and Development, Jacksonville
               Field Office, 4HD

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

SUBJECT:       Hillsborough County Did Not Always Properly Administer Its CDBG Program


    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our review of Hillsborough County’s administration of
its Community Development Block Grant 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 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.

   If you have any questions or comments about this report, please do not hesitate to call me at
404-331-3369.
                                         Date of Issuance: July 9, 2014
                                         Hillsborough County Did Not Always Properly Administer Its
                                         CDBG Program




Highlights
Audit Report 2014-AT-1006


 What We Audited and Why                          What We Found

We audited the Community Development            The County failed to properly administer its
Block Grant (CDBG) program administered         CDBG program in accordance with HUD
by Hillsborough County, FL, as part of the      requirements. Specifically, it did not ensure that
activities in our 2013 fiscal year annual       its code enforcement and interim assistance
audit plan. We selected the County for          activities met national objectives and charged
review based on a complaint referral from       allowable expenditures. These conditions
the Office of Inspector General’s Office of     occurred because the County (1) staff was not
Investigation on a public complaint alleging    familiar with CDBG requirements,(2) did not
the County’s misuse of CDBG funds for the       verify the eligibility of target areas, (3) had an
County’s cleanup events. Our audit              interest in ensuring that certain areas were
objective was to determine whether the          federally funded or labeled as Federal low-
County administered its CDBG program in         income areas, (4) had weak management and
accordance with applicable U.S. Department      accounting controls, (5) lacked sufficient levels
of Housing and Urban Development (HUD)          of monitoring reviews, and (6) did not exercise
requirements. Specifically, we wanted to        due care to ensure that expenditures were
determine whether the County’s CDBG             eligible. We found some of the allegations in
program (1) met national objectives and (2)     the complaint to be valid and cited the issues
incurred expenditures that were eligible and    and costs as a finding in the report. As a result
reasonable.                                     of our findings, HUD had no assurance that
                                                approximately $1 million charged was properly
 What We Recommend                              expended.

We recommend that HUD require the
County to (1) support that national
objectives and eligibility requirements were
met or repay HUD $784,469 from non-
Federal funds; (2) repay HUD $231,623
from non-Federal funds for ineligible costs;
(3) develop, implement, and enforce
controls and sufficient levels of monitoring
to ensure that CDBG requirements are met;
and (4) train its staff on CDBG
requirements.
                            TABLE OF CONTENTS

Background and Objective                                                         3

Results of Audit
      Finding 1: The County Did Not Properly Administer Its Code Enforcement     4
                 Activities
      Finding 2: The County Did Not Properly Administer Its Interim Assistance   10
                 Activities

Scope and Methodology                                                            13

Internal Controls                                                                15

Appendixes
A.    Schedule of Questioned Costs                                               17
B.    Auditee Comments and OIG’s Evaluation                                      18
C     Map of the County’s Nine CDBG Low- and Moderate-Income Target Areas        40
D.    Table of Ineligible CDBG Block Groups and Percentages                      41
E.    Pictures of Ineligible CDBG Block Group Areas                              43




                                            2
                      BACKGROUND AND OBJECTIVE

The U.S. Department of Housing and Urban Development (HUD) awards annual Community
Development Block Grants (CDBG) to entitlement counties and cities to develop viable urban
communities by providing decent housing and a suitable living environment and by expanding
economic opportunities, principally for low- and moderate-income persons. A CDBG-funded
activity must meet at least one of three national objectives:

    •   Benefit low- and moderate-income persons,
    •   Aid in the prevention or elimination of slums or blight, or
    •   Meet other community development needs having a particular urgency because existing
        conditions pose a serious and immediate threat to the health or welfare of the community
        and other financial resources are not available.

Hillsborough County, FL, receives annual CDBG program funds from HUD. The County’s
board of commissioners (comprised of seven elected members) is responsible for approving the
County’s operating and capital budgets, which include Federal and State funding sources. The
board of commissioners also develops management policies and provides direction to the county
administrator on programs, including CDBG-funded activities, to improve the County and the
welfare of its residents. The county administrator’s duties include overseeing all County
administrative departments (including the Affordable Housing Services and Code Enforcement
departments).

The County’s Affordable Housing Services department administers the CDBG program. The
CDBG funds are allocated to external entities and internal County departments to carry out the
CDBG activities. The County expended more than $13.7 million in CDBG funds for activities
created in program years 2010 through 2012.

We received a complaint referral alleging that CDBG funds were misused for ineligible expenses
during the County’s cleanup events involving code officers from the County’s Code
Enforcement department.

Our audit objective was to determine whether Hillsborough County administered its CDBG
program in accordance with applicable HUD requirements. Specifically, we wanted to
determine whether the County’s CDBG program (1) met national objectives and (2) incurred
expenditures that were eligible and reasonable.




                                               3
                                           RESULTS OF AUDIT


Finding 1: The County Did Not Properly Administer Its Code
Enforcement Activities
The County did not properly administer its code enforcement activities. Specifically, it
mismanaged its CDBG code enforcement activities by (1) failing to support that the CDBG
target areas were in a deteriorated condition, (2) failing to meet the low- and moderate-income
area national objective, (3) misclassifying cleanup event expenditures, and (4) charging
disallowed expenditures. These conditions occurred because the County (1) staff was not
familiar with CDBG requirements, (2) did not verify the eligibility of target areas, (3) had an
interest in ensuring that certain areas were federally funded or labeled as Federal low-income
areas, (4) had weak management and accounting controls, and (5) lacked sufficient levels of
monitoring reviews. As a result, HUD had no assurance that more than $865,000 in CDBG
program costs was appropriately expended.


    The County Did Not Support
    That Target Areas Were in a
    Deteriorated Condition

                   The County created three code enforcement activities and charged $858,738 for
                   code enforcement efforts in nine designated CDBG low- and moderate-income
                   target areas (see appendix C). To be eligible for CDBG funding under the code
                   enforcement activity, code enforcement efforts must be used in deteriorating or
                   deteriorated areas only to pay for salaries and overhead costs directly related to
                   the enforcement of State and local codes. Eligible code enforcement efforts
                   included the inspection of properties for code violations and enforcement of the
                   codes.

                   The County did not support that $645,517 1 was expended in deteriorated areas,
                   and $213,221 was prohibited by HUD regulations.

                       No.     Activity         Activity name              Draw         Unsupported        Ineligible
                               number                                     amount
                        1        3508       Code enforcement              $249,872
                        2        3317       Code enforcement              $315,763           $645,517       $213,221
                        3        3029       Code enforcement              $293,103
                                             Total                        $858,738           $645,517       $213,221


1
 As shown in the table for this finding, we deducted the ineligible expenditures of $213,221 to arrive at the unsupported amount
of $645,517.

                                                               4
            The County did not have documentation to show that the CDBG target areas
            inspected by the code enforcement officers were in a deteriorated or deteriorating
            condition because it never performed and documented such reviews as required
            by 24 CFR (Code of Federal Regulations) 570.202(c). These regulations require
            that CDBG-funded code enforcement activities be used only in deteriorating or
            deteriorated areas, together with public or private improvements, rehabilitation, or
            services to be provided, which may be expected to arrest the decline in the area.
            If such conditions are met, CDBG funds may be used to pay for the salaries and
            overhead costs directly related to the enforcement of State or local codes.

            The condition described above occurred because both the County’s Affordable
            Housing Services and Code Enforcement departments believed that deteriorated
            or deteriorating areas were synonymous with low- and moderate-income areas
            and did not realize that they also needed to determine that the areas were
            deteriorated or deteriorating to qualify for CDBG funds and have documentation
            to support that determination. Also, the County Affordable Housing Services
            department did not have written policies and procedures in place to ensure
            activities met activity eligibility requirements before funding activities with
            CDBG funds.

            As a result, HUD had no assurance that $645,517 in CDBG funds was used for
            eligible code enforcement activities.

The County Did Not Meet the
Low- and Moderate-Income
Area Benefit National Objective
                                   .

            The national objective for code enforcement activities is to benefit low- and
            moderate-income areas. The County did not meet the national objective because
            six of the nine CDBG target areas contained sections that were not in low- and
            moderate-income areas. Regulations at 24 CFR 570.208(a)(1) state that to qualify
            under the low- and moderate-income area benefit national objective, the activity
            must provide benefits available to all of the residents in an area in which at least
            51 percent, or the upper quartile for exception grantees, of the residents in the area
            are low- and moderate-income persons. The County is an exception grantee, and
            its low- and moderate-income area thresholds were 48.21 percent for 2011 and
            48.24 percent for 2012. An activity that serves an area that is not primarily
            residential in character does not qualify under this criterion.

            We reviewed the 2000 census data the County used to identify its nine CDBG
            low- and moderate-income target areas and conducted site visits. Six of the nine
            CDBG target areas included census block groups that did not meet the low- and
            moderate-income percentages. In addition, these target areas had large sections
            consisting of mainly government facilities, industrial sites, commercial properties,

                                              5
                   large farm land, vacant land, and moderate to large residential properties. 2
                   Regulations at 24 CFR 570.208(a)(1)(vi) state that when census boundaries do not
                   coincide sufficiently well with the service area of an activity, recipients may
                   conduct a current survey of the residents of the area to determine the percentage
                   of such persons that is low and moderate income. County staff stated that it did
                   not have documentation to show that it had performed a survey for the areas that
                   deviated from the block group boundaries. County staff also stated that the
                   County’s board of commissioners made the final decision on which areas would
                   be designated as CDBG low-and moderate-income areas.

                   We reviewed the County’s board minutes to determine how the target areas were
                   established. According to the board minutes, there was an interest in ensuring
                   that certain areas were federally funded or designated as federally labeled low-
                   income areas for other County financial relief benefits by “averaging in” areas
                   that would not have qualified. Specifically, there was an interest in (1) including
                   designated areas to qualify as “no-impact fee zones” so that developers did not
                   have to pay County impact fees, (2) ensuring that rural areas received Federal
                   funding, and (3) providing additional code enforcement for areas that were not
                   low- and moderate-income areas as a result of citizen complaints.

                   To qualify these areas, many of the CDBG target areas were expanded as much as
                   possible to include sections that would not have otherwise qualified on their own
                   by “averaging in” low- and moderate-income areas with those that were not.
                   According to 24CFR570.208(a)(1)(vi), HUD will generally allow the grantee to
                   determine the service area to be qualified; however, the area can be questioned if
                   the nature of the activity or its location raises serious doubts about the area
                   claimed by the grantee. In this case, the locations were questioned because they
                   were not in low- and moderate-income areas and some were not primarily
                   residential in nature.

                   In January 2013, the County discovered that one target area (Town ‘n Country)
                   was not low-and moderate-income when it was in the process of funding a water
                   and sewer project. This project had been approved in the County’s annual action
                   plan. The County’s written controls did not cite responsibility or accountability
                   for the department to ensure that the activities met national objective requirements
                   before establishing and funding activities with CDBG funds. HUD had also cited
                   the County for a similar issue in 2010 for three other CDBG-funded activities.

                   The condition described above occurred because the current County department
                   administration did not verify whether the target areas were eligible and assumed
                   that the previous administration had correctly identified the low- and moderate-
                   income areas. There was also an interest in ensuring certain areas were federally
                   funded or designated as federally labeled low-income areas when the areas were
                   established during the previous administration. In addition, County staff were not
2
 See appendixes C, D, and E for (1) a map of the nine CDBG target areas, (2) a list of census block groups that were not low-
and moderate-income areas, and (3) pictures taken during the site visits to the areas questioned.
                                                               6
                   familiar with CDBG requirements and did not consider whether the area was
                   primarily residential in character.

                   As a result, approximately $213,221 3 in CDBG funds was not used for its
                   intended purpose of assisting low- and moderate-income areas with additional
                   code enforcement efforts.

    The County Did Not Properly
    Classify Cleanup Expenditures

                   The County charged an additional $6,315 in CDBG expenditures for two cleanup
                   events that were reclassified from the code enforcement to the clearance and
                   demolition activity. The costs were unrelated to work for the code enforcement or
                   the clearance and demolition activities. This condition occurred due to weak
                   management and accounting controls. According to the County, it inadvertently
                   charged $3,915 to CDBG funds when it should have been charged to the County’s
                   ad valorem funds. In addition, it charged the remaining $2,400 to the wrong
                   CDBG activity.

     The County Did Not Charge
     Allowable Salary Expenditures

                   Within the code enforcement expenditures questioned above, there were salary
                   costs incurred that were disallowed by HUD regulations. Regulations at 24 CFR
                   570.202(c) state that CDBG funds may be used for salaries and related expenses
                   of code enforcement officers, not including the cost of correcting the violations.
                   We found instances in which CDBG-funded code enforcement officers corrected
                   violations or performed work outside the CDBG target areas without adjusting
                   their timesheets accordingly. We also noted inconsistencies in charging CDBG
                   code enforcement time between code enforcement activities and interim
                   assistance activities. This condition occurred because the County did not
                   adequately supervise its code enforcement officers to ensure they did not work
                   outside of the designated low- and moderate-income areas, and staff was not
                   familiar with CDBG requirements. In addition, due to limited resources, the
                   County performed onsite monitoring of external subrecipients and limited its
                   compliance review of inter-County-administered CDBG activities to desk reviews
                   and approval of payment processing.




3
  The calculated total of $213,221 in ineligible costs expended on the code enforcement activity was based on the number of
ineligible block groups within the total number of block group for each CDBG target area reviewed. Refer to appendix D and the
Scope and Methodology section for more details.
                                                              7
Conclusion

             The County mismanaged its code enforcement activities. Specifically, it did not
             properly administer its CDBG code enforcement activities by (1) failing to
             support that the CDBG target areas were in a deteriorated condition, (2) failing to
             meet the low- and moderate-income area national objective, (3) misclassifying
             cleanup event expenditures, and (4) charging disallowed expenditures. These
             conditions occurred because the County (1) staff was not familiar with CDBG
             requirements, (2) did not verify the eligibility of target areas, (3) had an interest in
             ensuring that certain areas were federally funded or labeled as Federal low-
             income areas, (4) had weak management and accounting controls, and (5) lacked
             sufficient levels of monitoring reviews. As a result, HUD had no assurance that
             more than $865,000 in CDBG program costs was appropriately expended.

Recommendations

             We recommend that the Director of the HUD Jacksonville Office of Community
             Planning and Development require the County to

             1A.     Provide documentation to support that the target areas were primarily
                     residential in character and in deteriorated conditions, or repay HUD
                     $645,517 from non-Federal funds.

             1B.     Conduct and document the physical determination of the deteriorated
                     areas (defined by State or local laws), taking into account national
                     objective requirements the County plans to use to support its future CDBG
                     funding of the code enforcement activity.

             1C.     Provide training to County staff involved with the CDBG program on
                     CDBG requirements.

             1D.     Perform a cost analysis to ensure that the funding amount for the code
                     enforcement activity is reasonable, given the actual deteriorated areas
                     determined to be eligible for the activity and the number of code
                     enforcement officers needed to service the deteriorated areas.

             1E.     Repay HUD from non-Federal funds the estimated $213,221 used during
                     our scope period to fund the code enforcement activity to service areas
                     that did not qualify as low- and moderate-income areas.

             1F.     Develop, implement, and enforce written policies and procedures to
                     ensure that CDBG national objectives and activity eligibility requirements
                     are met and funding amounts are reasonable before funding the activity.


                                                8
1G.   Submit to HUD for review and approval the next set of CDBG target areas
      designated and any changes made by the County, along with the
      supporting documentation to ensure eligibility under the low- and
      moderate-income area national objective requirement.

1H.   Repay HUD $3,915 from non-Federal funds for the cleanup event charged
      to the demolition and clearance activity.

1I.   Provide support showing that the $2,400 charged for the cleanup event
      met national objective requirements and reclassify the funds to the correct
      CDBG activity, or repay HUD from non-Federal funds.

1J.   Develop, implement, and enforce management and accounting controls to
      ensure that CDBG-funded activity costs charged to the CDBG program
      are allowable, reasonable, and allocable to the CDBG activity.

1K.   Develop and perform sufficient levels of monitoring reviews and enforce
      compliance on inter-County departments that receive CDBG funding and
      carry out CDBG activities.




                               9
Finding 2: The County Did Not Properly Administer Its Interim
Assistance Activities
The County did not properly administer five interim assistance activities. Specifically, it did not
provide documents to show that $136,552 expended for its interim assistance activities met the
slum or blight area national objective and activity eligibility requirements. In addition, it
charged $14,487 in disallowed expenses to the CDBG program. This condition occurred
because the County was not familiar with the CDBG program requirements and did not exercise
due care to ensure that expenditures were eligible. As a result, HUD had no assurance that
interim assistance costs were appropriately expended.


 The County Did Not Support
 That Activities Met the Slum or
 Blight Area National Objective


               The County created five interim assistance activities for five neighborhood
               cleanup events with total draws of $151,039. Regulations at 24 CFR 570.201(f)
               state that CDBG funds may be used to provide interim assistance when (1) an area
               is exhibiting objectively determinable signs of physical deterioration where the
               recipient has determined that immediate action is necessary to arrest the
               deterioration and that a permanent improvement will be carried out as soon as
               practicable, or (2) there is a need to alleviate emergency conditions threatening
               the public health and safety in areas where the chief executive officer of the
               recipient determines that such a condition exists and requires immediate
               resolution. If either of these specific detailed criteria is met, the interim assistance
               activity may be used to fund special debris removal activities, such as
               neighborhood cleanup campaigns.

               We reviewed the draws for these five cleanup events and determined that the
               County did not support that $136,552 in expenditures met the slum or blight area
               national objective and interim assistance requirements, and $14,487 was
               prohibited by HUD regulations.

                No.   Activity         Activity name           Draw        Unsupported     Ineligible
                      number                                  amount
                 1      3385     Orient Park                    $49,235         $45,012         $ 4,223
                 2      3433     Ruskin                           $4,458         $4,458              $-
                 3      3434     USF Tropical Storm Debby       $10,264              $-        $10,264
                 4      3501     Palm River                    $ 84,723         $84,723              $-
                 5      3521     USF – Paint the Town            $ 2,359         $2,359              $-
                                      Total                   $151,039         $136,552        $14,487




                                                 10
                   The County indicated that the national objective of the interim assistance
                   activities was to address the prevention or elimination of slums or blight in an
                   area. However, it did not have the documents to support that four of the interim
                   assistance activities (3385, 3433, 3501, and 3521) met the national objective in
                   accordance with regulations at 24 CFR 570.208(b)(1). Specifically, the County
                   did not provide documents to show that areas met the definition of a slum,
                   blighted, deteriorated, or deteriorating area under State or local law and other
                   delineated area requirements. In addition, it could not support that the activities
                   met the interim assistance activity requirements. The County believed that the
                   low- and moderate-income area was synonymous with the slum or blight area and
                   that any work occurring within the CDBG target area would be allowable. This
                   condition occurred because the County was not familiar with CDBG program
                   requirements 4. As a result, HUD had no assurance that the activities met the slum
                   or blight area national objective and activity eligibility requirements.

    The County Did Not Charge
    Allowable Salary Expenditures

                   The County used CDBG funds to pay for code enforcement officers and
                   management staff that participated in the cleanup events. We interviewed code
                   enforcement management staff members, who disclosed that for one of the five
                   cleanup events (activity 3434), they evaluated damages after a tropical storm hit
                   the County. They stated that they did not spend the entire time evaluating
                   damages or working in the CDBG target area. Regulations at 24 CFR
                   570.207(a)(2) state that regular responsibilities of local government are not
                   eligible. The County’s management indicated that damage assessment was part of
                   the Code Enforcement department’s regular job responsibilities. Therefore, the
                   salaries and associated costs of $10,264 are local government expenditures that
                   are prohibited by HUD regulations.

                   The County charged salaries for management staff for participating in a cleanup
                   event (activity 3385). We interviewed the management staff members, who
                   stated that they did not participate in or spend time at the entire event.
                   Regulations at 2 CFR Part 225, appendix A(C)(3), state that a cost is allocable if
                   the goods or services involved are assignable to the cost objective. Since salary
                   costs of $4,223 for staff were not allocable to the event, we considered the costs
                   to be questionable.




4
  We recommend that the County train its staff in recommendation 1C and implement written controls to ensure national
objective and activity eligibility requirements are met prior to funding an activity in recommendation 1F.

                                                             11
                  The conditions described above occurred because the County did not exercise due
                  care in ensuring that expenditures were allowable 5. As a result, it charged
                  unallowable expenditures of $14,487 to the CDBG program.


    Recommendations

                  We recommend that the Director of the HUD Jacksonville Office of Community
                  Planning and Development require the County to

                  2A.      Provide documents to show that activities 3385, 3434, 3501, and 3521 met
                           the slum or blight area national objective and activity requirements,
                           reclassify these activities to the correct national objective and activity type
                           if it can be supported, or reimburse HUD $136,552 from non-Federal
                           funds.

                  2B.      Reimburse HUD $14,487 from non-Federal funds for the ineligible costs.




5
 We recommend that the County develop, implement, and enforce management and accounting controls to ensure allowable
costs are charged to the CDBG program in recommendation 1J.

                                                          12
                         SCOPE AND METHODOLOGY

We performed our review from July 2013 through November 2013 at the County’s Affordable
Housing Services office, located at 1208 Tech Boulevard, Suite 300, Tampa, FL, and other sites
as necessary. Our review covered the period October 1, 2010, through May 31, 2013, and was
expanded as needed to achieve our objective.

To accomplish our objective, we

   •   Reviewed applicable laws and regulations;

   •   Reviewed applicable County policies and procedures;

   •   Reviewed HUD monitoring reports and independent public accountant audit reports;

   •   Reviewed the County’s and subrecipients’ financial records, program activity files, and
       other supporting documentation;

   •   Interviewed HUD officials, County staff, subrecipients, and beneficiaries; and

   •   Performed onsite visits to the program target areas, demolition sites, street improvements,
       and a multifamily building.

We determined that as of May 30, 2013, the County had drawn down more than $13.7 million in
program funds for activities created in program years 2010 through 2012. These draws were
classified under 31 categories of eligibility. Due to time and resource constraints, we did not
perform a 100 percent selection or a representative selection using statistical or nonstatistical
sampling. Instead, we selected 5 of the 31 categories to review based on high dollar amount or
potential relationship to the complaint. These five categories were

       (1) Clearance and demolition,
       (2) Interim assistance,
       (3) Code enforcement,
       (4) Street improvements, and
       (5) Rehabilitation of multifamily units.

We did not review all activities within each of these five categories. We reviewed 13 of the 15
activities with expenditures of more than $2.7 million for meeting a national objective and cost
allowability. This selection represented 20 percent of the total draws for meeting a national
objective and 20 percent of the total draws for cost allowability. We selected these activities
based on high dollar amount or potential relationship to the complaint or through random
selection. In addition, for the interim assistance category, we extended our scope to capture all

                                                  13
cleanup events that were related to the complaint. This expansion resulted in the review of an
additional activity and additional costs totaling $25,244.

The results of this audit apply only to the items reviewed and cannot be projected to the universe
of activities.

For the code enforcement category, the County relied on its nine CDBG target areas to meet the
CDBG low- and moderate-income area national objective requirement. The County used the
2000 census data to develop its nine CDBG target areas. The 2000 census data provide the low-
and modearte-income percentage by block group level. Block groups are statistical divisions
within a census tract, and each block group generally represents between 600 to 3,000 people.
Based on the County’s review of the 2000 census data and final decision and approval from its
board of commissioners in December 2003, the County created the CDBG target area map with
the nine CDBG target areas. The County uses the CDBG target map as a primary tool to qualify
its CDBG-funded activities in meeting the CDBG low- and moderate-income area national
objective requirement. The County has a low- and moderate-income area threshold of 48.21
percent to meet or exceed to qualify an area as a low- and moderate-income area. In addition,
the area must be primarily residential in character.

We identified 90 full block groups and 4 partial block groups within the 9 CDBG target areas
based on the CDBG target map. We found that 26 of the block groups located within 8 CDBG
target areas did not meet the minimum required low- and moderate-income percentage based on
the 2000 census data. We performed site visits to confirm the types of properties in the 26 block
group areas. We questioned 21 block groups located within 6 of the CDBG target areas because
they were not primarily residential in character or the areas consisted mainly of moderate to large
high-end residential properties. To calculate the cost expended for the ineligible areas, we
divided the number of ineligible block groups by the total number of block groups within each
CDBG target area. The percentage of each ineligible target area was multipled by 1/9,
representing its portion from the total of the nine CDBG target areas. Finally, the total
percentage was multipled by the total CDBG funds expended for the code enforcement activity
for our scope period under review ($858,738). This resulted in estimated questioned costs of
$213,221 for the code enforcement activity.

We assessed the reliability of the data reflected in the County’s program target area maps. We
performed limited testing of zip codes and census tracts and block groups reflected in the maps
and found the maps to be complete, accurate, and reliable. Therefore, we relied on the County’s
maps to materially support our audit findings, conclusions, and recommendations.

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(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                                14
                              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:

               •   Controls over program operations.
               •   Controls over relevance and reliability of information.
               •   Controls over compliance 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:

               •   The County failed to ensure national objective requirements were met and
                   expenditures were eligible as cited in its failure to properly administer its
                   CDBG-funded code enforcement activities in accordance with HUD
                   requirements (finding 1).


                                                 15
•   The County failed to ensure national objective requirements were met and
    expenditures were eligible as cited in its failure properly administer its CDBG-
    funded interim assistance activities in accordance with HUD requirements
    (finding 2).




                                 16
                                   APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

                     Recommendation          Ineligible        Unsupported
                         number                  1/                2/
                           1A                                     $645,517
                           1E                     $213,221
                           1H                        3,915
                           1I                                          2,400
                           2A                                        136,552
                           2B                        14,487        ________

                           Total                  $ 231,623        $ 784,469


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.




                                             17
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         18
Comment 2




            19
Comment 3




Comment 3




Comment 3




            20
Comment 3




Comment 4




Comment 5




            21
Comment 6




Comment 4




            22
Comment 7




Comment 8




Comment 9




Comment 8




            23
Comment 10




             24
Comment 11




Comment 11




             25
26
Comment 12




Comment 13




Comment 14




             27
Comment 14




Comment 15




             28
29
Comment 16




Comment 16




             30
Comment 17




Comment 17




             31
32
                            OIG Evaluation of Auditee Comments

Comment 1 –The audit was initiated as part of the Office of Inspector General’s (OIG) annual
audit plan and based on a complaint. Therefore, we reviewed the CDBG program in general as
part of OIG’s annual audit plan as well as specific areas related to the complaint. In addition, our
audit objective was stated in the audit notification letter and discussed with County officials
during the audit.

Comment 2 – The County disagreed with our methodology in calculating the ineligible CDBG
costs.

An estimate for the cost of each ineligible census tract block group was used to determine the
ineligible costs because the County was not able to provide the exact time and cost spent by each
CDBG-funded code officer for each case citation handled or work performed in the CDBG target
areas. Basing the ineligible cost by block group is a reasonable representation of the amount of
the costs that the CDBG-funded code enforcement activity incurred within each ineligible block
group area.

Comment 3 – The County stated that neither HUD nor OIG defines “deterioration” or provides
guidance as to what the County must document and, therefore, requested that we revise the
finding.

It is not OIG’s responsibility to define “deterioration.” Regulations at 24 CFR 570.208(b)(1)(i)
provide that the grantee (County) must delineate the deteriorated or deteriorating area as defined
under either State or local law. This means that the County may choose to use the definition of
deteriorated or deteriorating under the State or local law to meet the national objective
requirement. While onsite, we asked County staff for documentation to support that all nine
CDBG target areas, which the CDBG-funded code enforcement officers serviced, were in
deteriorated or deteriorating condition. County staff stated that such a determination was never
made and such documentation was not available because the staff assumed that deteriorated or
deteriorating areas were synonymous with low- and moderate-income areas as stated in the
report. Therefore, the County did not support that code enforcement activity service areas were
in deteriorated condition as required, resulting in unsupported costs of $645,517 (the County
incorrectly referred to the questioned cost in recommendation 1A; it should be $645,517 and not
$213,211 as cited by the County).

The County provided the code enforcement inspection information to support allocation of code
enforcement costs, not as justification that an area was deteriorated. If the County has the
determination documentation or alternative after-the-fact documentation to support that all nine
CDBG target areas, which the CDBG-funded code enforcement officers serviced, were in
deteriorated or deteriorating condition, the County will have further opportunity to provide the
documentation to address recommendation 1A in the report to HUD’s staff, which will work
with the County and our office to resolve the recommendation.




                                                33
Comment 4 – The County stated that OIG contended that its target areas, which were regularly
reported in its annual actions and consolidated plans, were improper and OIG’s contention
conflicted with HUD’s longstanding approval of the target areas.

The County’s CDBG target areas are not prequalified or approved by HUD. HUD reviews and
approves the general activities that may be conducted by the grantee but does not necessarily
review all of the CDBG activities or the corresponding supporting documentation used to qualify
the CDBG activities, including the designated CDBG target areas in the annual action plan or
comprehensive plan that have met all eligibility requirements.

Therefore, HUD did not provide longstanding approval of the County’s target areas. We
acknowledged during the exit conference that grantees are allowed to average in low- and
moderate-income areas with those that are not if it can support the actual service area benefitting
from the activity. Additionally, the area serviced must be primarily residential in character as
required in 24 CFR 570.208(a)(1). The questioned areas (1) did not meet the low-and moderate-
income threshold percentage, (2) were not the actual service areas benefitting from the activity,
and (3) were not primarily residential in character and thus not in compliance with Federal
regulations.

Comment 5 – The difference in citing six CDBG target areas as a finding on page 5 versus eight
target areas on page 14 was due to our site visits as stated in the Scope and Methodology section
of the report on page 14.

Comment 6 – This statement does not contend that the County’s low- and moderate-income data
used to establish the CDBG target areas were complete, accurate, or reliable. The
acknowledgement that the CDBG target area map was complete, accurate, and reliable was
based on the County’s CDBG target area map’s having the labeling of the census tract and block
group numbers consistent with the census tract and block group numbers used by the census.
The County’s calculation did not include the low- and moderate-income percentage data for
some of the block group areas shown on the CDBG target area map. Also, the County’s
calculation included some incomplete low- and moderate-income percentage data because it used
percentages that covered an entire block group area when the map showed the service area to be
only a small fraction of the block group area.

Comment 7 – The County stated that it clearly stated in its amended action plan that it was
adopting the target areas for the purpose of establishing service areas for area benefit activities
and this had not changed in more than 10 years. This information was also reported to HUD so it
is unreasonable for OIG to now claim that these delineations were improper.

It is the responsibility of the County to perform its due diligence in ensuring that activities
funded by the CDBG program meet all requirements and have documentation to support
eligibility. In designating the service area for a particular activity, the County should take into
account (1) the nature of the activity, (2) the location of the activity, (3) accessibility (for
example, geographic barriers, user fees, hours service is available), and (4) comparable facilities
or services. Regulations require that the entire population in the service area be considered in
determining whether such service provided benefits low- and moderate-income individuals.
                                                34
In the case of the code enforcement activity for the County, this activity was not dependent on
multiple block groups to provide the code enforcement service. The code enforcement activity
services individual real estate properties, and, therefore, the actual area benefit was generally
independent from one block group area to another. The County generally had most of its CDBG
target areas covering an entire block group area and, therefore, should have qualified the code
enforcement activity according to each individual block group service area as required under 24
CFR 570.208(a)(1)(v). The County also had a few service areas that did not cover an entire
block group area in which the County should have conducted an independent survey, as stated
under 24 CFR 208(a)(1)(vi), if the County chose to deviate from the boundary areas.

Comment 8 – We acknowledged during the exit conference that grantees are allowed to average
in low- and moderate-income areas with those that are not if it can support the actual service area
benefitting from the activity. Additionally, the areas must be primarily residential in character as
required by 24 CFR 570.208(a)(1). The questioned areas (1) did not meet the low-and moderate-
income threshold percentage, (2) were not the actual service areas benefitting from the activity,
and (3) were not primarily residential in nature and, thus, not in compliance with Federal
regulations. Therefore, approximately $213,221 in CDBG funds was not used for its intended
purpose of assisting low- and moderate-income areas with additional code enforcement efforts.

Comment 9 – The HUD Integrated Disbursement and Information System is a tool for grantees
to use in qualifying low- and moderate-income area national objective-based activities. The
County must properly identify the actual area benefiting from the activity. If the County entered
incomplete or inaccurate information, the system would base the result on the incomplete or
inaccurate information entered by the County. The County did not include all of the census
block groups and also included full census block group areas when the entire areas were not
being serviced. The system cannot determine whether the areas designated are primarily
residential in character, which is also a part of the County’s responsibilities in properly
identifying the service area. It is the responsibility of the County to perform its due diligence in
ensuring that activities funded by the CDBG program meet all requirements and have
documentation to support the eligibility.

Comment 10 –The County stated that HUD generally allows the grantee to determine the
service area and the burden is on OIG to provide “serious doubts” showing that the County’s
code enforcement activities did not benefit low- and moderate-income persons.

The County may determine its own service areas, but if it chooses to deviate from the census
boundaries, the County may conduct an independent survey to support the low- and moderate-
income percentage for that deviated area. Essentially, the County must provide support for those
areas substantially deviating from the area, and an acceptable form of support would be a survey.
The County did not have support for its deviation. The code enforcement activity service area is
questioned because the block group areas did not meet the low- and moderate-income percentage
threshold required as evidenced by (1) the County’s CDBG target area map, (2) the HUD
decennial census data, and (3) the site visits with pictures showing that some of the areas were
not primarily residential in character. See appendixes C, D, and E in the audit report.

                                                 35
Comment 11 – The County stated that its target areas met the minimum low- and moderate-
income thresholds and the activities served the intended populations. In addition, its’ target areas
were based on census data and planning advice from the local planning agency. The County
excluded certain areas designated for private redevelopment, and this does not equate to
gerrymandering. The County also included a footnote stating that our comment related to citizen
complaints was unclear.

The County is required to determine the actual area benefit for each individual activity. County
staff stated that the County’s board of commissioners made the final decision on which areas
would be designated as the County’s CDBG target areas. In reviewing the board minutes, we
determined that the County commissioners’ interests played a role in the final decision regarding
which areas were designated as the County’s CDBG target areas.

The citizen’s complaint regarding the need for increased code enforcement was for the County’s
Town ‘n Country CDBG target area. A County employee disclosed to the County board that the
only way to qualify the Town ‘n Country area would be to average in the census tract block
groups. The Town ‘n Country CDBG target area was a newly created area based on the
County’s calculation of the 2000 census data. More than half of the census block groups in this
target area did not meet the County’s minimum required 48.21 low- and moderate-income
percentage threshold. This area was mainly a moderate- to high-income area that the County
used for more than 10 years. The County agreed in a written email that this area should not have
been designated as a CDBG target area because the area did not qualify. The County discovered
this error in January 2013 and removed the Town n’ Country CDBG target area at the end of
April 2013.

Comment 12 – The County objects to our use of present-day photographs from recent visits as a
reason to question its target areas.

As stated in the Scope and Methodology section of the audit report, all of the service areas
questioned did not meet the low- and moderate-income area percentage threshold and, therefore,
were already disqualified. After identifying the service areas that did not meet the first
requirement, we conducted site visits to the areas that did not meet the low- to moderate-income
threshold percentage to determine the characteristics of the properties in the areas. We asked the
County for documentation to support that the CDBG target areas were in deteriorated conditions
and primarily residential in nature and were told that the County generally did not consider these
factors in determining the eligibility of its CDBG low- and moderate-income area national
objective-based activities. The CDBG low- and moderate-income area national objective criteria
require that the area also be primarily residential in character; otherwise the activity would not
qualify.

If the types of properties and conditions in the County’s questioned CDBG target areas have
changed in the past 3 years, the County should have had and provided us with documentation to
show what had been there during the past 3 years as well as reflecting such changes in its annual
action plan submitted to HUD.


                                                36
According to community development memorandum, dated April 23, 1991, the purpose of the
primarily residential requirement is to preclude activities that serve an area consisting primarily
of businesses from qualifying on the basis of the income of those persons who happen to reside
within the boundaries of that area. For example, the County’s Causeway target area contained
only a small section of residential areas, while the remaining majority of the target area consisted
mainly of industrial and commercial properties, along with some vacant land and a few
agricultural areas.
                                                                                                         Planned Development -
                                                                                                         Industrial


                                                                                                       Agricultural SF
                                                                                                       Conventional


                                                                                                       Agricultural Industrial


                                                                                                        Agricultural SF
                                                                                                        Conventional


                                                                                                        Agricultural Industrial

                                                                                                         Planned Development –
                                           Manufacturing   Planned Development       SF Conventional     Currently Majority of the
                                                           –Currently Commercial     6 uts / acre        Area is Vacant Land.
                                                           / Industrial Properties


Comment 13 – We identified the $6,315 in misclassified and ineligible costs and informed the
County of this issue. The County originally categorized the costs as a code enforcement activity
expense and later reclassified the costs as a clearance and demolition activity expense. This
expense was associated with cleanup campaigns that were unrelated to the code enforcement or
the clearance and demolition activities.

We found additional misclassified costs among the code enforcement, interim assistance, and
clearance and demolition activities. In addition, the County charged ineligible code enforcement
payroll costs as reported in finding 1 and other regular local government costs charged to the
CDBG program as reported in finding 2 of the audit report.

This issue would have been reported as a finding regardless of whether the County fixed
problems found during our review because the issue of misclassifying costs and charging
ineligible costs appeared to be systemic problem and not an isolated incident.

Comment 14 – The County requested specific detail to substantiate the ineligible salary costs.

We reviewed a sample of timesheets from the code enforcement activity and found more than
300 cases in which CDBG-funded code officers’ time was charged to the CDBG program for
ineligible work or misclassified work without adjusting the officers’ timesheets accordingly.
Specifically, we found that CDBG-funded code officers performed (1) more than 30 cases of
code inspection work occurring outside the County’s CDBG target areas used as the County’s
                                                 37
identifier of low- and moderate-income areas (based solely on the zip codes) and (2) more than
350 cases of abatement work specifically disallowed by the CDBG code enforcement activity
requirements. As a result, the County did not charge allowable salary expenditures to the CDBG
program. We discussed this issue with the County and provided examples of the deficiencies.

Comment 15 – Activity 3434 USF Tropical Storm Debby did not meet either the slum or blight
area national objective or interim assistance requirements. This specific activity was not
questioned with the national objective or interim assistance requirements because it was already
questioned as an ineligible local government expense on page 11 of the audit report.

Comment 16 – The County stated that it could meet the interim assistance activity requirements
and could also provide pictures documenting the code violations found during the “Fight the
Blight” campaigns.

The County did not meet the interim assistance activity requirements, which were discussed with
the County and with the local HUD Office of Community Development office that generally
oversees the County. The County should refer to its correspondences with the local HUD office
and our office when it was informed that the activities did not qualify under the interim
assistance activity requirements. The correspondence included emails and meetings held in July,
August, September, October and November of 2013.

Under the interim assistance activity (according to 24 CFR 201(f) and CDBG Program – Guide
to National Objectives and Eligible Activities for Entitlement Communities), certain activities
may qualify if they meet all requirements under one of the two subcategories described. This
activity type is seldom used because it has very specific requirements.

The first subcategory covers limited improvements to a deteriorating area as a prelude to
permanent improvements. The second subcategory covers activities to alleviate an emergency
condition. The County designated all five interim assistance activities as qualifying under the
first subcategory of the interim assistance requirement and then attempted to reclassify the
activities under the second subcategory when it could not meet the conditions for the first
subcategory. The local HUD office informed the County that the activities would not qualify
under either of the interim assistance activity subcategories if they did not meet all of the
requirements.

For the unsupported interim assistance activities (3385, 3433, 3501, and 3521), the County must
select a definition for deterioration. The actions must be a prelude to the permanent
improvements, which means that the actions were needed before the permanent improvements
could be made, and there must be specific documentation to show that the actions were necessary
and the permanent improvements related for those necessary actions, as well as those permanent
improvements to be made that were intended to address the deterioration identified. The
activities are limited to those specifically allowed, such as repairs of streets, sidewalks, etc.




                                               38
Between 1 and 2 years have passed since the cleanup events occurred, and there was no evidence
of specific plans for permanent improvements that correlated to the cleanup events in the cleanup
area boundary areas.

Comment 17 – Salary costs totaling $10,264 were ineligible because they were local
government expenses. Regulations at 24 CFR 570.207(a)(2) state that expenses required to carry
out the regular responsibilities of the unit of general local government are not eligible for
assistance. The records show that the costs generally covered five management staff members’
salaries for about 1 week. We met with all five management staff members to discuss (1) the
type of work performed during this event, (2) their actual time spent on this event, (3) their job
descriptions, and (4) the areas where they performed such work. Management staff members
stated that they performed damage assessment and monitored water levels at river and bay areas
for potential flooding, which was a part of their regular job function as outlined in their job
descriptions. The management staff members also did not know that their time was being
charged to the CDBG program and stated that such charges were incorrect. In addition, the
activity did not qualify under the interim assistance activity because it did not meet any of the
requirements listed under 24 CFR 570.201(f).

Salary costs totaling $4,223 were ineligible because management staff stated they did not
participate or spend their entire time at the clean-up event, as required by 24 CFR Part 225.




                                                39
Appendix C
          MAP OF THE COUNTY’S NINE CDBG
     LOW- AND MODERATE-INCOME TARGET AREAS




                      40
      Appendix D

                                   TABLE OF INELIGIBLE CDBG
                                BLOCK GROUPS AND PERCENTAGES
No.         Target            Low- and            2000 census          Ineligible        Types of properties      Map of CDBG
             area            moderate-               data                cost 6                                    target area
                            income area
                            percentages
1         Causeway              28%             Census tract              $21,203       Consists mainly of
                                                136.02,                                 commercial and
                                                block group 2                           industrial properties.
                                 47%            Census tract
                                                136.02,
                                                block group 3


2         Gibsonton              45%            Census tract              $14,679       Consists mainly of
                                                138.01,                                 solid waste facilities,
                                                block group 3                           commercial
                                                                                        businesses, and vacant
                                                                                        land.
                                 46%            Census tract                            Consists mainly of
                                                138.04,                                 new construction and
                                                block group 2                           existing moderate to
                                                                                        large residential
                                                                                        properties and vacant
                                                                                        land.


3           Ruskin             36-46%           Census tract              $31,805       Consists mainly of a
                                                141.07, block                           marina, a resort hotel
                                                groups 1 and 2                          and homes, some new
                                                                                        construction of
                                                                                        moderate to large
                                                                                        residential properties,
                                                                                        vacant land, some
                                                                                        commercial
                                                                                        businesses, and a few
                                                                                        small residential
                                                                                        properties.

                                 44%            Census tract                            Consists mainly of
                                                141.09, block                           new construction of
                                                group 3                                 moderate to large
                                                                                        single-family houses,
                                                                                        existing large houses,
                                                                                        vacant land, and a
                                                                                        cemetery.



      6
          Refer to “Scope and Methodology” section for more details on how ineligible costs were computed.
                                                                     41
No.    Target     Low- and     2000 Census      Ineligible cost    Types of properties      Map of CDBG
        area     moderate-        data                                                       target area
                income area
                percentages


4     Wimauma       9%        Census tract           $68,154      A majority of the area
                              139.06, block                       consists of vacant land
                              group 4                             and large farm land.



5     Town ‘n    34 - 44%     Census tracts          $53,526      A majority of the area
      Country                 116.07, 116.09,                     consists of moderate to
                              116.12 &                            high-end residential
                              116.13                              houses.



6      Dover       40%        Census tract           $23,854      A majority of the area
                              124.01,                             is vacant land, some
                              block group 2                       very large farm fields,
                                                                  and a few moderate to
                                                                  large houses.
                  Total                           $213,221




                                                42
Appendix E

 PICTURES OF INELIGIBLE CDBG BLOCK GROUP AREAS




                      43
44
45
46