OFFICE OF AUDIT REGION 1 estimated BOSTON, MA Vermont Department of Housing and Community Development, Montpelier, VT Disaster Recovery Programs 2014-BO-1004 SEPTEMBER 29, 2014 Issue Date: September 29, 2014 Audit Report Number: 2014-BO-1004 TO: Robert Shumeyko, Director, Office of Community Planning and Development, Boston Hub, 1AD //SIGNED// FROM: Edgar Moore, Regional Inspector General for Audit, Boston Region, 1AGA SUBJECT: The Department of Housing and Community Development, Montpelier, VT, Did Not Always Operate Its Disaster Recovery Programs Effectively and Efficiently Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General’s (OIG) final results of our review of the Vermont Department of Housing and Community Development’s disaster recovery programs. 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 (212) 264-4174. September 29, 2014 The Department of Housing and Community Development, Montpelier, VT, Did Not Always Operate Its Disaster Recovery Programs Effectively and Efficiently Highlights Audit Report 2014-BO-1004 What We Audited and Why What We Found We audited the State of Vermont, The State expended funds for eligible activities; Department of Housing and Community however, it did not always administer its Community Development’s disaster recovery Development Block Grant Disaster Recovery programs programs. We initiated this audit (CDBG-DR1 and -DR2) effectively and efficiently in because of the significant funding accordance with all program requirements. awarded and the Boston Office of Specifically, it did not (1) have the staffing capacity to Community Planning and administer its disaster recovery programs in Development’s concerns about the accordance with all program requirements, (2) submit State’s capacity to administer this all quarterly performance reports in a timely manner, funding. Our audit objective was to (3) perform adequate monitoring or oversight of determine whether the State funded activities, (4) follow HUD requirements administered its disaster recovery regarding substantial and nonsubstantial amendments programs effectively and efficiently in to action plans, and (5) correct discrepancies contained accordance with applicable regulations; in quarterly progress reports submitted by specifically, whether the State had (1) subrecipients. This condition occurred because the the capacity to administer its disaster State relied on its existing staff for oversight of programs, (2) established and CDBG-DR1 program activities and failed to hire implemented controls to ensure that sufficient staff to oversee both the CDBG-DR1 and - program activities were adequately DR2 programs. As a result, there is a risk that the documented and administered, and (3) program mission will not be accomplished and that expended funds for eligible activities. obligated CDBG-DR2 funding of $13.2 million will not be expended by the deadline of December 10, What We Recommend 2015. In addition, HUD lacked assurance that the State and its subrecipients complied with laws, regulations, grant agreements, and program We recommend that the U.S. requirements. Department of Housing and Urban Development (HUD) require the State to determine the portion of the $13.2 million in disaster recovery funds that it believes will not be expended by the December 10, 2015, deadline and request a waiver from HUD for an extension and hire additional staff sufficient to ensure its disaster recovery programs are administered effectively. TABLE OF CONTENTS Background and Objective 3 Results of Audit Finding: The State Did Not Always Administer Its Disaster Recovery Programs Effectively and Efficiently 4 Scope and Methodology 9 Internal Controls 11 Appendixes A. Schedule of Funds To Be Put to Better Use 13 B. Auditee Comments and OIG’s Evaluation 14 C. Criteria 20 2 BACKGROUND AND OBJECTIVE The State of Vermont’s Agency of Commerce and Community Development is organized into three departments (1) the Department of Economic Development, (2) the Department of Tourism and Marketing, and (3) the Department of Housing and Community Development, which is responsible for administering the Community Development Block Grant (CDBG) program funded by the U.S. Department of Housing and Urban Development (HUD). The Community Development Block Grant Disaster Recovery (CDBG-DR) assistance program was authorized under Title I of the Housing and Community Development Act of 1974. Disaster recovery funds may be used for activities such as buying, constructing, and rehabilitating homes, buildings, or structures; enhancing public facilities; or providing public services, such as assistance to homeowners and businesses that create jobs. The funds may not be used on activities when they duplicate funding already made available from the Federal Emergency Management Agency, the Small Business Administration, the U.S. Army Corps of Engineers, etc. Section 239 of the HUD Appropriations Act of 2012 (Pub. L. 112-55, approved November 18, 2011) made available up to $400 million in disaster funding (CDBG-DR1) until expended. The law provides that grants may be awarded directly to a State or unit of general local government at the discretion of the HUD Secretary. Of the $400 million, more than $21.6 million (under grant number B-12-DT-50-0001 DF3) was allocated to Vermont for use on disaster recovery activities in Vermont’s Washington and Windsor Counties, which saw the greatest degree of damage from flooding, primarily from Hurricane Irene. On January 29, 2013, Congress passed the Disaster Relief Appropriations Act (Public Law 113- 2), which consisted of a supplemental appropriation to improve and streamline disaster assistance for Hurricane Sandy, but it also expanded the use of the funding for other eligible events that occurred in calendar years 2011, 2012, and 2013. As a result, Vermont received another allocation of disaster funding (CDBG-DR2) of more than $17.9 million (under grant number B-13-DS-50-0001), which will remain available through September 30, 2017. The State of Vermont asked HUD to obligate only about $13.2 million, or approximately 74 percent of the total $17.9 million in CDBG-DR2 funds allocated to Vermont. As projects get underway, the State plans to amend its action plan and request that HUD obligate the additional funds, thus starting a new 2-year expenditure timeline for the additional funds requested. The State will have until June 1, 2017, to submit an amendment to budget the remaining $4.7 million. The objective of the audit was to determine whether the State administered its disaster recovery programs effectively and efficiently in accordance with applicable regulations. Specifically, we wanted to determine whether the State had (1) the capacity to administer its disaster recovery programs, (2) established and implemented the necessary controls to ensure that program activities were adequately documented and administered, and (3) expended funds for eligible activities. 3 RESULTS OF AUDIT Finding: The State Did Not Always Administer Its Disaster Recovery Programs Effectively and Efficiently The State of Vermont, Department of Housing and Community Development expended the funds tested for eligible activities; however, it did not always administer its disaster recovery programs (CDBG-DR1 1 and -DR 2 2) effectively and efficiently. Specifically, state officials did not (1) have the staffing capacity to administer the disaster recovery programs in accordance with all program requirements, (2) submit all quarterly performance reports in a timely manner, (3) perform adequate monitoring or oversight of funded activities, (4) follow HUD requirements regarding substantial and nonsubstantial amendments to action plans, and (5) correct discrepancies contained in quarterly progress reports submitted by subrecipients. These deficiencies occurred because the State relied on its existing staff for oversight of CDBG-DR1 program activities and failed to hire sufficient staff to oversee both the CDBG-DR1 and -DR2 programs. As a result, there is a risk that the program mission will not be accomplished and that obligated CDBG-DR2 funding of $13.2 million will not be expended by the deadline of December 10, 2015. In addition, HUD lacked assurance that the State and its subrecipients complied with laws, regulations, grant agreements, and program requirements. The State Lacked the Capacity To Administer Disaster Recovery Programs State officials did not have the capacity to properly administer the disaster recovery grants as certified to per the Federal register section VI(35)(M) (see Appendix C for criteria). On January 20, 2012, the HUD Secretary announced that $21.6 million would be allocated to the State to support disaster recovery efforts, primarily for flooding from Hurricane Irene. The State’s action plan submitted to HUD on July 20, 2012, showed that the State planned to rely on its existing staff to oversee CDBG-DR1 program activities. Although there is no expenditure deadline for CDBG-DR1 funding, HUD regulations [FR, Section VI(30)] state that each grantee is expected to promptly obligate and expend all funds. In the summer of 2012, when it became clear that it needed additional staff to operate the CDBG-DR1 program, State officials began a search for a grant management specialist to work exclusively with disaster recovery programs. 1 The HUD Appropriations Act (CDBG DR1) passed by Congress on November 18, 2011 states funds were allocated to Vermont for use on disaster recovery activities in Vermont’s Washington and Windsor Counties, which saw the greatest degree of damage from flooding, primarily from Hurricane Irene. 2 The HUD Disaster Relief Appropriations Act (CDBG DR2) passed by Congress on January 29, 2013 consisted of a supplemental appropriation to improve and streamline disaster assistance for Hurricane Sandy, but it also expanded the use of the funding for other eligible events that occurred in calendar years 2011, 2012, and 2013. 4 However, the grant management specialist did not officially begin working until March 11, 2013. Because a new position had to be created and approved, it was several months before the State was able to advertise this position and find the appropriate candidate. On March 27, 2013, the HUD Secretary announced that $17.9 million (in CDBG- DR2 funds) would be allocated to help Vermont communities recover from the lingering effects of Hurricane Irene. 3 This amount supplemented the $21.6 million awarded in January 2012. As a result of this announcement, the staffing level was increased with the hiring of two additional staff members, an environmental officer and a grant specialist. Having an environmental officer is beneficial for community planning and development programs. However, the hiring of the environmental officer was not directly related to the disaster recovery programs but, rather, was based on the recommendations from a HUD environmental review performed June 24-25, 2013. In addition, most of the environmental officer’s time was spent on the CDBG and HOME Investment Partnerships programs, with only a small percentage of her time being spent on the CDBG-DR programs. The State’s primary needs for disaster recovery included staff to perform compliance oversight and monitoring, along with financial oversight and analysis of independent public auditor reports. The grant specialist added for disaster recovery was transferred from the State’s Division of Community Planning and Revitalization within the Agency of Commerce and Community Development. The grant specialist was initially used to assist another grant specialist who oversaw the regular CDBG program and was unable to work a 40-hour week. The grant specialist did not officially begin working until October 2013, approximately 7 months after the HUD Secretary’s announcement. The State was responsible for an active Housing Acquisition and Rehabilitation Program, involving HUD’s Neighborhood Stabilization Programs 1 and 3, CDBG program, and HOME program. However, the State had only one main person responsible for the review and analysis of the independent public audit reports, and she worked primarily on the CDBG program, spending less than 2 percent of her time on disaster recovery activities. This same person was responsible for closeout agreement management and assisting with financial management monitoring and oversight of the regular CDBG program. A State official stated that in addition to the grant management specialist and grant specialist recently hired, there was a need for an additional grant management specialist for disaster recovery programs for compliance oversight and monitoring and one more grant management specialist for review and analysis of independent public auditor 3 The State asked HUD to obligate only $13.2 million of the total $17.9 million in funds allocated to it. When projects were underway, the Agency planned to amend its action plan and request that HUD obligate the additional $4.7 million. The State will have until June 1, 2017, to submit an amendment to budget the remaining $4.7 million. 5 reports. The State had significant unexpended funding. As of June 5, 2014, about $7 million of the $21.6 million awarded for CDBG-DR1 had been expended, and only $190,220 of the $17.9 million awarded for CDBG-DR2 had been expended. Quarterly Performance Reports Were Not Submitted in a Timely Manner The primary reports HUD requires for disaster recovery activities are the quarterly performance reports. The State failed to submit the quarterly performance reports to HUD in a timely manner. It submitted a total of five quarterly performance reports covering periods ending from December 31, 2012, to December 31, 2013. HUD dictates that reports are due no later than 30 days following the end of each calendar quarter 4. However, only one of the reports was submitted in a timely manner. The number of late days for the remaining five reports ranged from 54 to 295 days. For example, the report for the period ending December 31, 2012, was due on January 31, 2013, but was not submitted until May 31, 2013, and the report for the period ending June 30, 2013, was due on July 31, 2013, but was not submitted until December 9, 2013. It should be noted that all outstanding quarterly performance reports have been subsequently submitted. There Was a Lack of Proper Monitoring We noted deficiencies with several of the State’s onsite monitoring reviews of subrecipients. Specifically, the State (1) did not maintain documentation supporting the monitoring work performed, (2) failed to notify a subrecipient of the results of the review in a timely manner, and (3) did not follow up to determine that identified deficiencies had been resolved (per HUD Handbook 6509, Chapters 2-10, 2-14(A) and 2-12(B)(1) see Appendix C for specific criteria). For example, an onsite monitoring performed by the State on September 13, 2013, of the Two Rivers-Ottauquechee Regional Commission (subrecipient) was not adequately supported. The State subgranted CDBG-DR1 funding to this subrecipient to administer its buyout program. However, there was no documentation to support the details of the review, including checklists, notes, writeups, or other documentation supporting monitoring work or activities (per HUD handbook 6509, Chapter 2-14(A)). With no documentation, HUD could not substantiate that all procedures were followed. 4 Federal Register [Docket No. FR–5628–N–01] Disaster Recovery DR-1 Section VI(31)(B) 6 In addition, the State failed to notify the Central Vermont Community Action Council (subrecipient) on a timely basis regarding the results of an onsite monitoring review it performed on November 7, 2013. The State sent the letter notifying the subrecipient of the results of the review on May 20, 2014, about 6 months after the site visit was performed. However, HUD regulations dictate that a monitoring letter be sent within 60 days after completion of monitoring to the program participant describing the results of the review (HUD handbook 6509, Chapter 2-10. Also, there was no evidence that the State maintained documentation to substantiate how findings from a September 25, 2013, onsite monitoring review at the Brattleboro Development Credit Corporation (subrecipient) were resolved. The State requested a response by November 22, 2013, stating how these findings were resolved, but there was no evidence that the State followed up to ensure how or whether the deficiencies noted were corrected (HUD handbook 6509, Chapter 2-12(B)(1). HUD Requirements Regarding Amendments to Action Plans Were Not Followed The State submitted a revised action plan for a substantial amendment, which involved moving funds from the mobile home financing activity to the competitive municipal infrastructure activity. The action plan also noted changes in completion dates for its buyout and housing recovery programs. However, the State did not follow Federal Register requirements (sections VI (1) G) for action plans with substantial amendments, which provide that the beginning of every amended action plan must include a section that identifies exactly what content is being added, deleted, or changed and shows a chart or table that clearly illustrates where funds are coming from and where they are moving to. In addition, the action plan did not include a revised budget allocation table that reflected all of the funds as amended. The State also failed to post the amendment to its Web site as required (section VI (2) B). Discrepancies Were Noted in Progress Reports We found inaccuracies or inconsistencies in the quarterly progress reports submitted by two subrecipients; specifically, the Brattleboro Development Credit Corporation and the Central Vermont Community Action Council. The State subgranted funding to the two agencies to provide business assistance in the form of grants and loans to meet businesses’ unmet needs. The actual to-date figures reflected in the quarterly reports ending December 31, 2013, for the number of businesses assisted and jobs created were reported incorrectly based on a comparison to the actual to-date figures in the prior quarter (period ending 7 September 30, 2013). A State official stated that this error may have been attributed to software problems in the system(s) interfacing with HUD. The State’s policy was to have a grant specialist verify the accuracy of data in the progress reports submitted by subrecipients; however, limited staffing hindered these efforts. Conclusion The State did not adequately administer its disaster recovery programs as officials relied on the State’s existing staff for oversight of CDBG-DR1 program activities and failed to hire sufficient staff to oversee both the CDBG-DR1 and -DR2 programs. By not having sufficient staffing to administer its disaster recovery programs, there is a risk that the program mission will not be accomplished and that obligated CDBG-DR2 funding of $13.2 million will not be expended by the deadline of December 10, 2015. In addition, because of the State’s failure to submit performance reports in a timely manner, perform proper monitoring or oversight of funded activities, follow HUD requirements regarding substantial and nonsubstantial amendments to action plans, and correct discrepancies in progress reports, HUD lacked assurance that the State and its subrecipients complied with laws, regulations, grant agreements, and program requirements. Recommendations We recommend that the Director of HUD’s Boston Office of Community Planning and Development require State officials to 1A Determine the portion of the $13.2 million in CDBG-DR2 funds that the State believes will not be expended by the December 10, 2015, deadline and request a waiver in a letter to HUD justifying the necessity for extending the deadline and identify the date by when the specified portion of funds will be expended, to ensure that these funds are put to their intended use. 1B. Develop controls that will allow for sufficient staff to be hired to ensure that the disaster recovery programs are administered effectively. 8 SCOPE AND METHODOLOGY We performed our onsite audit work at the State’s main office located at One National Life Drive, Montpelier, VT, from January to May 2014. Our audit generally covered the period August 1, 2011, to December 31, 2013, and was extended when necessary to meet our objective. We relied in part on computer-processed data for obtaining information on the State’s expenditure of disaster recovery funds. We performed a minimal level of testing and found the data to be adequate for our purposes. To accomplish our audit objective, we • Reviewed applicable laws, regulations, HUD handbooks , HUD notices, and the State’s policies and procedures, including its action plans. • Conducted discussions with State officials to gain an understanding of the State’s financial structure, procurement practices, reporting activities, monitoring policies, applicant selection process, and staffing capacity issues. • Evaluated internal controls and reviewed computer controls to identify potential weaknesses related to our objective. • Reviewed records of the State’s board minutes, independent public auditor’s reports, and written HUD monitoring reviews of the State’s disaster recovery program. • Evaluated the State’s allocation plan to determine whether the allocation of costs was reasonable and evaluated the State’s monitoring practices and reporting process. • Evaluated the State’s rating and scoring of applications, ensuring that the State selected and evaluated subrecipients in accordance with its action plan. • Evaluated the State’s efforts to identify and prevent duplication of assistance and ineligible assistance. • Selected a sample of 4 requisitions for the competitive grant program, (totaling $766,474) from a universe of 33 requisitions (totaling more than $2.3 million). The selection was based on the four largest requisitions; one for each of the four subrecipients that expended funds through the program. Because two of the four subrecipients had multiple vendors, further sampling was warranted. The total number of vendors for 2 of the subrecipients were 13 (totaling $318,700) and 33 (totaling $245,559), respectively. Our sample selection represented the largest three vendor payments for each of the two vendors totaling $94,000 and $31,930, respectively. We evaluated activities to determine whether national objectives were met, the scoring process was reasonable, the State complied with written agreements, and expenses were eligible and adequately supported. 9 • Selected a sample of 3 requisitions for the State directed grant program, (totaling $480,467) from a universe of 39 requisitions (totaling more than $2.2 million) to evaluate the State’s practices and procedures. The selection was based on the three largest requisitions (totaling $480,467); one for each of the three activities for which the vast majority of the funding was expended; namely, the buyout, housing recovery, and downtown assistance programs. We evaluated procedures regarding deed restrictions and debt to equity ratios and determined whether national objectives were met, the scoring process was reasonable, the State complied with written agreements, and expenses were eligible and adequately supported. • Tested the procurements for demolition contracts awarded through the CDBG-DR1 program. We limited our review to the three highest payments for demolition projects. We selected a sample of 3 projects (total costs of $228,762) to review from a universe of 10 demolition projects totaling $982,300. • Selected a sample of 3 administrative cost line items for the CDBG-DR1 grant, (totaling $188,925) from a universe of 108 administrative cost line items (totaling $460,055). The selection was made from the expenditure summary of the Vision accounting system (accounting software) and was based on the largest expenditures in each of three categories; namely, salaries, computer software services and miscellaneous administrative costs (advertising, travel, etc.). For the CDBG-DR2 grant, we selected a sample of 1 administrative cost line item (totaling $85,072) from a universe of 32 administrative cost line items (totaling $168,761). The sample item was the largest dollar item in the universe. We tested to determine whether costs were reasonable, eligible, and supported. 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. 10 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: • Program operations – Policies and procedures that management has implemented to reasonably ensure that a program meets its objectives. • Compliance with laws and regulations – Policies and procedures that management has implemented to reasonably ensure that the use of funds is consistent with laws and regulations. • Safeguarding resources – Policies and procedures that management has implemented to reasonably ensure that the funds are safeguarded against waste, loss, and misuse. 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. 11 Significant Deficiencies Based on our review, we believe that the following items are significant deficiencies: • State officials did not have adequate controls over program operations when they failed to hire a sufficient number of staff members to properly administer the State’s two disaster recovery programs (see finding). • State officials did not have adequate controls over compliance with laws and regulations when they failed to submit quarterly performance reports in a timely manner, perform adequate monitoring, follow HUD requirements regarding substantial and nonsubstantial amendments to action plans, and correct discrepancies contained in quarterly progress reports submitted by subrecipients (see finding). 12 APPENDIXES Appendix A SCHEDULE OF FUNDS TO BE PUT TO BETTER USE Recommendation Funds to be put number to better use 1/ 1A $13,232,000 1/ Recommendations that funds be put to better use are estimates of amounts that could be used more efficiently if an Office of Inspector General (OIG) recommendation is implemented. These amounts include reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by implementing recommended improvements, avoidance of unnecessary expenditures noted in preaward reviews, and any other savings that are specifically identified. By implementing our recommendation requesting an extension of the deadline for the use of $13.2 million in CDBG-DR2 funding, the recapture of funds awarded to benefit the Vermont residents affected by natural disasters can be avoided. 13 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments 14 Ref to OIG Evaluation Auditee Comments Comment 1 Comment 2 Comment 3 15 Ref to OIG Evaluation Auditee Comments Comment 4 Comment 5 Comment 6 Comment 7 Comment 8 16 Ref to OIG Evaluation Auditee Comments Comment 9 17 OIG Evaluation of Auditee Comments Comment 1 Department of Housing and Community Development (State) officials agreed with OIG that additional staff are necessary to meet its monitoring and oversight responsibilities. OIG modified recommendation 1B to direct the State to develop controls that would allow for sufficient staff to be hired to ensure that the disaster recovery programs are administered effectively. Comment 2 State officials agreed that they failed to submit quarterly performance reports on time. They indicated that, as discussed during the exit conference, the first report was not due until December 31, 2012, which means that five reports were late, not six. As such, State officials requested that these facts be corrected in the report. In addition, they suggested that the audit report emphasize that all outstanding quarterly performance reports have since been submitted. OIG agreed and revised the report, accordingly. Comment 3 State officials believed that there was some misunderstanding regarding the examples cited on monitoring. They state that regarding the Central Vermont Community Action Council they informed the auditors of the status of the review and since it was not completed, they did not yet provide a monitoring letter. Regarding Brattleboro they had the required documents related to their follow-up on the monitoring deficiencies, but were not asked for this information. Officials did agree that they did not have the capacity to adequately monitor, as activities have increased. However, we disagree that there were discussions of follow up activities pertaining to the Central Vermont Community Action Council review as the only documentation OIG received from the State related to this review was the May 20, 2014 letter where they notified this subrecipient of the results of a review performed six months ago on November 7, 2013. There was no indication that State officials followed-up on the deficiencies identified. Regarding Brattleboro, we disagree because on June 2, 2014, OIG requested support for all onsite monitoring activities for disaster recovery. Based on our review of the documentation provided, there was no evidence that the State followed-up to ensure deficiencies were corrected for this agency. It should also be noted that the formal written comments did not include documentation to support the State’s position on these matters. Therefore, better controls are needed to ensure that sufficient staff is hired to document the Sate’s monitoring actions, etc. Comment 4 We acknowledge State official’s admission that they failed to follow HUD requirements regarding amendments to action plans, and they will seek further HUD guidance to better adhere to requirements in the future. Comment 5 State officials emphasized that the inaccuracies in subrecipient progress reports, or any delay in correcting such inaccuracies, were not caused by a lack of staffing, but by problems entering data into HUD’s Disaster Recovery Grant Reporting system. OIG did not state that the inaccuracies in quarterly progress 18 OIG Evaluation of Auditee Comments reports were specifically caused by a lack of staffing capacity. However, the State’s Director of Grants Management informed OIG, during an interview conducted on February 19, 2014, that their policy is to have a grant specialist verify the accuracy of data in the progress reports submitted by subrecipients, but admitted that limited staffing hindered these efforts. We were informed that the responsibility for ensuring the accuracy of the progress reports will be assigned to a grant management specialist undergoing on the job training. Comment 6 State officials requested some revisions to the wording in the opening paragraph of the report. For example, while the first sentence of the report acknowledges that funds were expended for eligible activities, State officials believed that it was appropriate to state this more affirmatively to better reflect their work and program accomplishments. We concurred with the State’s request for revisions to the report’s opening paragraph with the exception of the matter related to the quarterly progress reports. Comment 7 State officials emphasized that the introduction of the CDBG-DR1 program occurred at a time when there was tremendous uncertainty about the federal budget and funding for its regular CDBG program was in serious jeopardy. As a result, the State did not believe it was prudent to hire new staff while facing potential cuts for existing staff. OIG believes any concerns regarding cuts to the regular CDBG program were unfounded. The introduction of the CDBG-DR1 program and the funding allocations for the regular CDBG program were announced almost simultaneously. HUD published funding allocations for all Community Planning and Development programs on January 18, 2012, and on January 20, 2012, the HUD Secretary announced Vermont would receive $21.6 million in CDBG-DR1 funding. Comment 8 The State did not agree that there is a "significant" risk, reported in the last sentence of the report’s opening paragraph, that the program mission will not be accomplished. They believed that the sentence would be more accurate if it stated that there is “a risk" without the modifier "significant. OIG concurred and removed the word “significant” from the report. Comment 9 State officials at the exit conference misunderstood and thought that the report would be modified from the draft language to direct the State to hire "two additional staff members to work on disaster recovery programs” rather than recommending that they "hire additional grant management staff and reassign an experienced employee to work on disaster recovery programs. However, we did adjust recommendation 1B to be less specific so that they could hire the staff that they considered to be sufficient enough to ensure that the disaster recovery programs are administered effectively". 19 Appendix C CRITERIA Federal Register [Docket No. FR–5628–N–01] Disaster Recovery DR-1 Section VI(31)(B) – Each grantee must submit a quarterly performance report, as HUD prescribes, no later than 30 days following the end of each calendar quarter, beginning after the first full calendar quarter after grant award and continuing until all funds have been expended and all expenditures have been reported. Section VI(1)G – In the case of Action Plan amendments, each amendment should constitute the entirety of the Action Plan, as amended. The beginning of every Action Plan amendment must include a section that identifies exactly what content is being added, deleted, or changed. This section must also include a chart or table that clearly illustrates where funds are coming from and where they are moving to. The Action Plan must include a revised budget allocation table that reflects the entirety of all funds, as amended. A grantee’s most recent version of its entire Action Plan should be able to be accessed and viewed as a single document at any given point in time, rather than the public having to view and cross-reference changes among multiple amendments. Section VI(2)B – Grantee must notify HUD, but is not required to undertake public comment, when it makes any plan amendment that is not substantial. However, every amendment to the Action Plan (substantial and nonsubstantial) must be numbered sequentially and posted on the grantee’s Web site. Section VI(30) – HUD expects each grantee to expeditiously obligate and expend all funds, including any recaptured funds or program income, and to carry out activities in a timely manner. Section VI(35)(M) – Each State or unit of local government receiving a direct award certifies that it (and any subrecipient or administering entity) has the capacity to carry out disaster recovery activities in a timely manner; or the State or unit of local government will develop a plan to increase capacity where such capacity is lacking. Federal Register [Docket No. FR-5696-N-06] Disaster Recovery Grants DR-2 Section III – To ensure timely expenditure of funds, section 904(c) under Title IX of the Appropriations Act requires that all funds be expended within two years of the date HUD obligates funds to a grantee (funds are obligated to a grantee upon HUD’s signing of the grantee’s CDBG-DR grant agreement). HUD CPD Grant Monitoring Handbook 6509.2 Chapter 1-4 – This Handbook is for the use of all HUD CPD [Office of Community Planning and Development] field staff and program participants involved in monitoring CDBG programs. 20 Chapter 2-7 Section C – The “real work” of monitoring entails interviews and file reviews to verify and document compliance and performance (and can include physical inspections, if monitoring is conducted on-site). Chapter 2-10 – Within 60 days after completion of monitoring, written correspondence must be provided to the program participant describing the results – in sufficient detail to clearly describe the areas that were covered and the basis for the conclusions. Chapter 2-12(B)(1) - In the event that a program participant fails to meet a target date - and has not alerted the Field Office as to the reasons prior to the date (and, if appropriate and agreed- upon, established a new date) - the HUD reviewer is to follow-up either by telephone or email, with a reminder. Either form of contact must be documented. Chapter 2-14 Section A – It is essential that each step of the monitoring process be adequately documented. Documenting preserves the valuable results, both positive and negative. All correspondence, documentation and working papers relating to the monitoring and conclusions are to be maintained in the official field office files. Code of Federal Regulations 24 CFR 85.40(a) – Grantees are responsible for managing the day-to-day operations of grant and subgrant supported activities. Grantees must monitor grant and subgrant supported activities to assure compliance with applicable Federal requirements and that performance goals are being achieved. Grantee monitoring must cover each program, function, or activity. Vermont’s CDBG Disaster Recovery 1 Action Plan, July 20, 2012 Part V, General Requirements, under section entitled “Building Capacity for Implementation and Compliance” – The Agency’s Action Plan states that it will provide technical and management assistance to the grant recipients. In addition, there will be staff available to provide day-to-day ongoing technical assistance via e-mail, telephone and on-site visits, when necessary. 21
The Department of Housing and Community Development, Montpelier, VT, Did Not Always Operate Its Disaster Recovery Programs Effectively and Efficiently
Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-09-29.
Below is a raw (and likely hideous) rendition of the original report. (PDF)