oversight

Improvements Are Needed Over Environmental Reviews of Public Housing and Recovery Act Funds in the Kansas City Office

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-05-12.

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

OFFICE OF AUDIT
REGION 6
   ‘
FORT WORTH, TX




                  Office of Public Housing
                      Kansas City, KS

        Public Housing Capital Fund and American
          Recovery and Reinvestment Act of 2009
                 Environmental Reviews




2014-FW-0002                                 May 12 , 2014
                                                        Issue Date: May 12, 2014

                                                        Audit Report Number: 2014-FW-0002




TO:            Frances M. Cleary
               Director of the Kansas City Office of Public Housing, 7APH

               //signed//
FROM:          Gerald R. Kirkland
               Regional Inspector General for Audit, Fort Worth Region, 6AGA


SUBJECT:       Improvements Are Needed Over Environmental Reviews of Public Housing and
               Recovery Act Funds in the Kansas City Office


    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 Kansas City Office of Public
Housing’s oversight and performance of environmental reviews pertaining to the Public Housing
Capital Fund 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
(817) 978-9309.
                                           May 12, 2014

                                           Improvements Are Needed Over Environmental Reviews of
                                           Public Housing and Recovery Act Funds in the Kansas City
                                           Office



Highlights
Audit Report 2014-FW-0002


 What We Audited and Why                    What We Found

 We audited the U.S. Department of         The Kansas City Office did not provide adequate
 Housing and Urban Development’s           oversight of two public housing agencies to ensure that
 (HUD) Kansas City, KS, Office of          the responsible entities properly completed and
 Public Housing as part of a nationwide    documented environmental reviews as required by 24
 audit of HUD’s oversight of               CFR (Code of Federal Regulations) Part 58. Further, it
 environmental reviews. We selected        did not maintain sufficient internal control records.
 the Kansas City Office based on our       These conditions occurred because the Kansas City
 risk assessment. Our audit objectives     Office thought that the Office of Community Planning
 were to determine whether the Kansas      and Development (CPD) was responsible for
 City Office ensured that (1) the          monitoring responsible entities; thus, it did not monitor
 responsible entities or the Kansas City   them or the housing agencies, and it did not properly
 Office performed the required reviews     implement the environmental requirements.
 and (2) HUD did not release funds
 until all requirements were met and       The Kansas City Office also did not follow
 required documents were submitted.        environmental requirements of 24 CFR Part 50 for the
                                           nine public housing agencies that we reviewed. This
                                           occurred because the Kansas City Office did not have
 What We Recommend
                                           adequate standard operating procedures and its culture
                                           concerning environmental reviews was inattentive.
We recommend that two housing
agencies repay HUD, for transmission       As a result, the Kansas City Office may have increased
to the U.S. Treasury, more than $1         the risk to the health and safety of public housing
million and support or repay almost $19    agency residents and the general public, and may have
million. We also recommend that the        failed to prevent or eliminate damage to the
Director of the Kansas City Office of      environment. Further, the 11 housing agencies spent
Public Housing take available actions      more than $27 million, including more than $12
against two housing agencies and their     million in Recovery Act grant funds, for projects that
responsible entities. To correct           either did not have environmental reviews, or that did
systemic weaknesses identified in this     not have adequately supported environmental reviews.
report, we will make recommendations
to HUD headquarters in an upcoming
nationwide audit report.
                             TABLE OF CONTENTS

Background and Objectives                                                        3

Results of Audit
      Finding 1     The Kansas City Office of Public Housing Did Not Provide
                    Adequate Oversight of 24 CFR Part 58 Environmental Reviews   4

      Finding 2:    The Kansas City Office of Public Housing Did Not Follow
                    24 CFR Part 50 Requirements When It Performed
                    Environmental Reviews                                        17

Scope and Methodology                                                            27

Internal Controls                                                                29

Appendixes
A.    Schedule of Questioned Costs                                               31
B.    Auditee Comments and OIG’s Evaluation                                      32
C.    Criteria                                                                   39




                                             2
                      BACKGROUND AND OBJECTIVES

In January 1970, Congress passed the National Environmental Policy Act of 1969 (NEPA). The
objective of this legislation was to establish a national policy that would encourage productive and
enjoyable harmony between man and his environment and to promote efforts to prevent or eliminate
damage to the environment and biosphere and stimulate the health and welfare of man. To carry out
the policy set forth in the Act, Congress directed that it is the continuing responsibility of the
Federal Government to improve and coordinate Federal plans, functions, programs, and resources to
the end that the Nation may attain the widest range of beneficial uses of the environment without
degradation, risk to health or safety, or other undesirable and unintended consequences. Further,
Congress authorized and directed all agencies of the Federal Government to identify and develop
methods and procedures to ensure that the agencies complied with environmental policies,
regulations, and public laws of the United States.

To further the purpose and policy of NEPA, the President issued Executive Order 11514, Protection
and Enhancement of Environmental Quality, on March 5, 1970. Based on the executive order, the
heads of Federal agencies are required to continually monitor, evaluate, and control their agencies’
activities so as to protect and enhance the quality of the environment. In addition, Federal agencies
are required to review their agencies’ statutory authority, administrative regulations, policies, and
procedures, including those relating to loans, grants, contracts, leases, licenses, or permits, to
identify any deficiencies or inconsistencies that prohibit or limit full compliance with the purposes
and provisions of the Act.

The U.S. Department of Housing and Urban Development (HUD) responded to NEPA and
Executive Order 11514 by developing 24 CFR (Code of Federal Regulations) Part 58,
Environmental Review Procedures for Entities Assuming HUD Environmental Responsibilities, and
24 CFR Part 50, Protection and Enhancement of Environmental Quality. Regulations at 24 CFR
Part 58 allow State and local governments to assume HUD’s responsibility for environmental
reviews. This responsibility includes the environmental review, decision making, and action that
would otherwise apply to HUD under NEPA and other provisions of law. However, the
regulations also require HUD to monitor, inspect, and ensure that the environmental process
decisions are carried out during project development and implementation. Regulations at 24
CFR Part 50 direct HUD to carry out the policies of NEPA and other laws and authorities. This
responsibility includes an independent evaluation of the environmental issues, the scope and content
of the environmental compliance finding, and making the environmental determination.

Our audit objectives were to determine whether the Kansas City Office of Public Housing
ensured that (1) the responsible entities or the Kansas City Office performed the required reviews
and (2) HUD did not release funds until all requirements were met and required documents were
submitted.




                                                  3
                               RESULTS OF AUDIT


Finding 1: The Kansas City Office of Public Housing Did Not Provide
Adequate Oversight of 24 CFR Part 58 Environmental Reviews
The Kansas City Office did not provide adequate oversight of two public housing agencies to
ensure that the responsible entities properly completed and documented environmental reviews.
Further, it did not maintain sufficient internal control records. These conditions occurred
because the Kansas City Office thought that the Office of Community Planning and
Development (CPD) was responsible for monitoring responsible entities; thus, it did not monitor
them or the housing agencies, and it did not properly implement environmental requirements. As
a result, the Kansas City Office may have increased the risk to the health and safety of public
housing agency residents and the general public, and may have failed to prevent or eliminate
damage to the environment. Further, the two housing agencies spent more than $20 million,
including almost $9 million in Recovery and Reinvestment Act of 2009 grant funds, for projects
that either did not have environmental reviews that met requirements or had environmental
reviews that were not adequately supported.


 The Kansas City Office Did Not
 Provide Adequate Oversight To
 Ensure Environmental
 Compliance


              To assess compliance with requirements, we performed reviews of the Kansas
              City, KS, and Kansas City, MO, housing authorities and their responsible entities,
              the Government of Wyandotte County-Kansas City, KS, and the City of Kansas
              City, MO, respectively. There were significant deficiencies at each housing
              agency. Although, the Kansas City Office maintained environmental records of
              the housing agencies, it failed to recognize that the reviews did not meet
              regulatory requirements. Instead, it improperly implemented requirements and
              released funding to the housing agencies. As a result, the Kansas City Office may
              have increased the risk to the health and safety of public housing agency residents
              and the general public, and may have failed to prevent or eliminate damage to the
              environment.

              The Kansas City Office Did Not Provide Adequate Oversight To Ensure
              That the Responsible Entities Properly Completed Part 58 Environmental
              Reviews
              Because the Kansas City Office did not provide adequate oversight, it did not
              determine that the two public housing agencies and their responsible entities
              improperly implemented 24 CFR Part 58 environmental review requirements. A
              responsible entity assumes the responsibility for conducting the environmental


                                               4
               reviews, decision making, and other actions that would otherwise apply to HUD
               under NEPA and other provisions of law that further the purposes of NEPA. 1 The
               environmental review process consists of all actions that a responsible entity must
               take to determine compliance. 2 The Kansas City Office did not determine that the
               responsible entities

                      •   Improperly used tiering when performing a housing agency’s
                          environmental reviews;
                      •   Incorrectly classified many housing agency projects as categorically
                          excluded not subject to 24 CFR 58.5;
                      •   Incorrectly implemented compliance determinations;
                      •   Had not completed the environmental reviews before releasing funds;
                      •   Failed to reevaluate project changes; and
                      •   Failed to meet public notification requirements.

               The City of Kansas City, MO, Improperly Used Tiering
               The Kansas City Office did not determine that the City of Kansas City, MO,
               improperly used tiering when performing environmental reviews of the Kansas
               City, MO Housing Authority’s developments and projects. A responsible entity
               may tier the environmental review to eliminate repetitive discussions of the same
               issues when there is a requirement to evaluate a policy or proposal in the early
               stages of development. Tiering is also appropriate when site-specific analysis or
               mitigation is not currently feasible and it would be better to conduct a more
               narrow or focused analysis at a later date. 3 In a tiered review, the responsible
               entity conducts a broad level of review (tier I) that addresses and analyzes those
               environmental impacts related to the proposed action that might occur on a typical
               site within the geographic area, to include floodplains, coastal zones, wetlands,
               etc. Once the broad review is completed, a public notification and certification to
               Request Release of Funds (form HUD-7015.15) is issued.

               The last process consists of the site-specific reviews (tier II), during which
               environmental effects are addressed based on a known site location. This process
               includes historic preservation, hazardous materials, noise abatement, asbestos
               removal, etc. The City’s environmental review coordinator, in response to his
               review of the 5-year Capital Fund plan, reported in the environmental review
               record that tier II reviews would be conducted on development sites and activities
               “as they are identified.” However, the developments and projects were identified
               in the housing agency’s 5-year Capital Fund plan, which included repairs,
               rehabilitation, and improvements. Therefore, the City’s environmental
               certification on the form HUD-7015.15 was inaccurate as the City certified
               compliance with the requirements of 24 CFR 58.5 and 58.6 when they had not
               been met and site-specific compliance had not been determined.
1
    24 CFR 58.4(a)
2
    24 CFR 58.30(a)
3
    24 CFR 58.15



                                                   5
                The Responsible Entity Incorrectly Classified Kansas City, KS, Housing
                Authority Projects as Categorically Excluded Not Subject to Requirements
                The Kansas City Office did not find that the responsible entity incorrectly
                categorized the Kansas City, KS, Housing Authority’s 2009 Recovery Act and its
                2011 and 2012 Capital Fund projects as categorically excluded not subject to 24
                CFR 58.5 when many of the projects should have been classified as categorically
                excluded subject to the requirements. By incorrectly categorizing the housing
                agency’s projects as “maintenance” activities, the housing agency was allowed to
                spend significant funds on “repairs and improvements” that failed to meet 24 CFR
                58.5 requirements. Further, it appeared that the housing agency influenced the
                responsible entity to determine that the projects were categorically excluded from
                review and provided the responsible entity with a sample environmental letter to
                use. Categorically excluded refers to a category of activities for which no
                environmental impact statement or environmental assessment and finding of no
                significant impact under NEPA is required. However, compliance with the other
                applicable Federal environmental laws and authorities listed in 24 CFR 58.5 is
                required for certain projects considered as categorically excluded subject to the
                requirements. This category includes activities such as acquisition, repair,
                improvement, reconstruction, or rehabilitation of public facilities when the
                facilities and improvements are in place and will be retained in the same use. 4

                The City of Kansas City, MO, Incorrectly Implemented Compliance Factors
                The City of Kansas City, MO, incorrectly implemented several compliance
                factors. For example, the City determined that the Kansas City, MO, Housing
                Authority’s program activities fell below the noise reduction and control threshold
                for compliance with 24 CFR Part 51, Subpart B. The City interpreted HUD’s
                noise rule regulation as not applying to modernization projects, such as repair,
                rehabilitation, or improvements. However, HUD encouraged noise attenuation
                features for modernization projects located in all noise-exposed areas. 5 As a
                result of the misinterpretation, the Kansas City, MO, Housing Authority replaced
                windows at several properties where the presence of noise impacts should have
                been considered but were not. Failure to consider the noise impacts precluded the
                opportunity to include noise mitigation during renovations and potentially
                exposed residents to avoidable environmental effects.

                Other compliance factors incorrectly implemented by the City included floodplain
                management, explosive and flammable (hazardous) operations, and
                environmental justice. For example, the City of Kansas City, MO, misapplied a
                particular provision of HUD’s floodplain management regulation to the housing
                agency’s entire inventory of properties. The City applied a provision related
                solely to single-family dwellings when the housing agency’s properties were
                multifamily developments. Because the City misapplied the floodplain

4
    24 CFR 58.35(a)(1)
5
    24 CFR 51.101(a)(5)



                                                 6
                management regulation, it may have failed to identify and mitigate any potential
                flood hazards for developments that may have been located in a floodplain. In
                addition, neither of the responsible entities, the Government of Wyandotte
                County-Kansas City, KS, nor the City of Kansas City, MO, provided
                documentation showing how the housing agencies achieved compliance with
                floodplain management requirements. 6

                The Kansas City Office Failed To Find That a Housing Agency Obligated Funds
                Before the Environmental Review Determination
                The Kansas City Office failed to determine that the Kansas City, KS, Housing
                Authority obligated more than $1 million in Recovery Act funds before the
                responsible entity, the Unified Government of Wyandotte County-Kansas City,
                KS, performed and documented the environmental review determination. HUD
                assistance cannot be committed to any activity or project until the responsible
                entity has documented its environmental determination and HUD has approved
                the form HUD-7015.15. 7 The Kansas City, KS, Housing Authority obligated
                more than $1 million in 2009 Recovery Act capital funds before the
                environmental review was completed. The housing agency and various
                contractors signed five contracts between May 21 and October 8, 2009; however,
                the environmental review was not signed by the responsible entity until
                November 17, 2009.

                The Kansas City Office Did Not Determine That a Housing Agency Failed To
                Report Substantial Project Changes
                The Kansas City Office did not determine that the Kansas City, KS, Housing
                Authority failed to submit to the responsible entity for its reevaluation any
                changes that occurred between the housing agency’s annual plan and approved
                5-year environmental review. However, the Kansas City Office reported in its
                Recovery Act remote monitoring report that some work items, including
                significant amendments, were not in the 2009 annual plan or the 5-year Capital
                Fund program action plan. The housing agency must inform the responsible
                entity promptly of any proposed substantial changes in the nature, magnitude, or
                extent of the project, including adding new activities not anticipated in the
                original scope. 8 The responsible entity must reevaluate its environmental
                findings to determine whether the original findings are still valid and update the
                environmental review record by including the reevaluation in its record. The
                Authority’s modernization coordinator and the responsible entity’s director agreed
                that changes to the annual plan were not submitted for reevaluation of the
                environmental clearance.




6
    24 CFR Part 55, Subpart C-Procedures for Making Determinations on Floodplain Management
7
    24 CFR 58.22(a)
8
    24 CFR 58.47(a)(1) and (b)(3)



                                                    7
                The Kansas City Office Failed To Determine That a Responsible Entity Did Not
                Comply With Public Notification Requirements
                The Kansas City Office failed to determine that the City of Kansas City, MO, did
                not provide required public notification of specific locations affected by a housing
                agency’s use of its 2009 Recovery Act and its 2011 and 2012 Capital Fund grants.
                According to requirements, 9 the responsible entity, using the current
                HUD-recommended format or an equivalent, must prepare and publish a notice of
                intent to request release of funds before it signs the form HUD-7015.15. The
                HUD-recommended format includes identifying the project title, purpose,
                location, and estimated cost. The responsible entity listed the location only as
                “citywide, Kansas City, Missouri,” although it knew the actual project locations.

                The Kansas City Office Did Not Provide Adequate Oversight To Ensure
                That the Responsible Entities Properly Documented Part 58 Environmental
                Reviews
                The Kansas City Office did not determine that responsible entities failed to
                properly identify their project descriptions or adequately document support in
                their environmental review records. The responsible entity must maintain a
                written record of the environmental review. The environmental review record
                must contain all of the environmental review documents, public notices, and
                written determinations or findings as evidence of the review, decision making,
                and actions. Further, the documents must describe the project and the activities
                that the recipient has determined to be part of the project, evaluate the effects of
                the project on the environment, and document compliance with applicable statutes
                and authorities. 10

                The Kansas City, MO, Housing Authority’s environmental review records for its
                2009 Recovery Act and its 2011 and 2012 Capital Fund grants did not provide
                adequate project descriptions of the activities that the housing agency determined
                to be part of the project. Project descriptions should detail the (1) location so the
                public can locate the site; (2) purpose and need to describe what is being done and
                why it is necessary; (3) area, which provides the character, features, resources,
                and trends; and (4) activity description, which gives complete details about what
                will be done, the type of project, and the timeframe for implementation.

                Similarly, the Kansas City, KS, Housing Authority’s environmental review
                records for its 2009 Recovery Act and its 2011 and 2012 Capital Fund grants did
                not contain complete project descriptions of the various developments.
                Specifically, the responsible entity did not provide significant and relevant
                information, including the number of buildings, number of units, age of
                structures, location maps, or site photographs. Further, HUD’s Office of
                Environment and Energy guidance 11 states that a complete and clear project

9
     24 CFR 58.43(a) and 58.70
10
     24 CFR 58.38
11
     OneCPD Storyboards: Environmental Review, dated November 13, 2012



                                                   8
                 description is the first step in the environmental review process. The project
                 description should provide location-specific information and geographic
                 boundaries, as well as a delineation of all activities included in the overall scope
                 of the project. However, the housing agency and the responsible entity provided
                 only a property name and work items such as roof replacement; exterior repair or
                 painting; and heating, ventilation, and air conditioning improvements.

                 None of the records for the Kansas City, MO, Housing Authority’s Recovery Act
                 or 2011 and 2012 Capital Fund grants complied with requirements to document
                 all factors identified in 24 CFR 58.5 and 58.6. While the environmental review
                 was performed based on a 5-year plan that covered the years 2008-2012, the
                 record did not contain the required compliance documentation supporting most of
                 the items identified on the statutory checklists. For example, the statutory
                 checklist requires compliance with airport clear zones and accident potential
                 zones. 12 However, the responsible entity determined that no single-family
                 housing existed within the zones without providing a basis to support its
                 determination.

                 Similarly, the Kansas City, KS, Housing Authority’s environmental review
                 records did not comply with records requirements. 13 None of the records
                 contained required compliance documentation supporting the items identified on
                 the checklist. For example, the responsible entity determined that the housing
                 agency’s projects were not located in a Federal Emergency Management Agency
                 (FEMA)-identified special flood hazard area. 14 However, it did not provide
                 supporting documentation to verify that the housing agency’s projects were
                 located outside a special flood hazard area.

                 The Kansas City Office Did Not Ensure That Agencies Verified and
                 Documented Compliance Requirements
                 The two housing agencies and their responsible entities did not address or provide
                 documentation supporting their compliance with any of the following
                 requirements: historic preservation, floodplain management, flood insurance,
                 contamination and toxic site hazards, noise control, explosive and flammable
                 operations, environmental justice, air quality, sole-source aquifers, wetland
                 protection, endangered species, wild and scenic rivers, farmland protection, and
                 airport clear zones. For example, neither of the responsible entities provided
                 documentation showing how the two housing authorities achieved compliance
                 with floodplain management requirements 15 or that they complied with flood
                 insurance requirements. Other specific examples of noncompliance include



12
     24 CFR Part 51, Subpart D
13
     24 CFR 58.38
14
     24 CFR 58.6
15
     24 CFR Part 55, Subpart C-Procedures for Making Determinations on Floodplain Management



                                                     9
                     •   Contamination and toxic site hazards - The Kansas City, KS, Housing
                         Authority’s environmental review record contained Environmental
                         Protection Agency (EPA) facts sheets indicating low levels of metals and
                         pesticides in the soil near one of its projects and that the responsible entity
                         was working with EPA to remove any remaining hazardous materials from
                         the site. However, it did not consider this information in the housing
                         agency’s environmental review.

                     •   Explosive and flammable operations - The City of Kansas City, MO,
                         determined that the proposed activities did not provide an increase in unit
                         density; therefore, the housing agency was not implicated. However, it
                         neglected to mention other thresholds, such as regulations 16 that apply to
                         vacant units made habitable, as well as converting a building to residential
                         use.

                     •   Historic preservation - The housing agencies and their responsible entities
                         did not completely comply with Section 106 of the National Historic
                         Preservation Act, which requires an agency official to identify historic
                         properties in consultation with the State historic preservation officer of the
                         intended effect on historic properties. Consultation is required even if the
                         responsible entity believes that no historic properties are present or that
                         historic properties may be present but the undertaking will have no
                         adverse effect upon them.

                     •   Air quality, sole-source aquifers, wetland protection, endangered species,
                         wild and scenic rivers, farmland protection, and airport clear zones - The
                         housing agencies and their responsible entities provided no documentation
                         to support that the above compliance factors were addressed and met
                         requirements. If these compliance factors did not require further review
                         and the specific projects met the requirements, documentation supporting
                         that they were addressed must be maintained in the environmental review
                         record.

                 The Kansas City Office Did Not Ensure That Operating Costs Met
                 Environmental Requirements
                 For both 24 CFR Parts 58 and 50 reviews, the Kansas City Office did not ensure
                 that funds transferred to housing agency operating accounts met environmental
                 requirements. Staff members stated that no requirement or guidance existed that
                 prohibited operating costs from being used as a capital improvement; therefore,
                 they did not look at the work items performed with operating funds as the funds
                 lose their Capital Fund requirements once transferred from the Capital Fund
                 account to the operating account. They further stated that this determination was
                 based on the definition and perception of what is defined for modernization and
16
     24 CFR Part 51, Subpart C-Siting of HUD-Assisted Projects Near Hazardous Operations Handling
     Conventional Fuels or Chemicals of an Explosive or Flammable Nature



                                                     10
                  capital improvements and claimed that the definition was too vague and left to the
                  users’ interpretation. However, HUD’s Field Office Environmental Review
                  Guidance 17 states that housing agencies should provide a description of operating
                  costs to HUD or the responsible entity to allow completion of the environmental
                  review.

                  Further, 24 CFR 990.116 provides that the environmental review procedures of
                  NEPA and the implementing regulations at 24 CFR Parts 50 and 58 are applicable
                  to the operating fund program. In addition, the housing agencies’ annual
                  contributions contracts 18 prohibit any costs incurred as part of the development or
                  modernization costs from being included in operating expenditures.
                  Responsibility for determining whether operating funds meet environmental
                  requirements is determined by the type and nature of the projects or activities for
                  which the costs were incurred and not on the characterization of funds, such as
                  capital or operating.

     The Kansas City Office Did
     Not Maintain Sufficient
     Internal Control Records

                  The Kansas City Office did not meet the minimum internal control requirements
                  of HUD’s Field Office Environmental Review Guidance. The guidance required,
                  at a minimum, maintaining tracking logs that detailed who performed the
                  environmental reviews, whether the form HUD-7015.15 was received and
                  cleared, and whether HUD performed the environmental reviews directly. The
                  guidance further required maintaining a separate environmental file for each
                  housing agency.

                  The Kansas City Office tracking log did not include the date on which the form
                  HUD-7015.15 was received, the date on which the environmental review was
                  completed by the responsible entity, the date on which the review was signed by
                  the responsible entity’s certifying official, the date for the Kansas City Office’s
                  required 15 day wait period, the release of funds date, the year of the grant, or the
                  grant number. Further, several staff members maintained their own personal logs,
                  which were also incomplete and did not meet the requirements.




17
      Section 5: Program Requirements – Capital Fund Program (Special Note)
18
      Form HUD-53012A



                                                      11
     The Kansas City Office Did Not
     Properly Implement
     Environmental Requirements

                  The Kansas City Office Did Not Allow the Responsible Entities To Review
                  Projects in Annual Statements Against the Approved 5-Year Environmental
                  Record
                  The Kansas City Office did not follow requirements 19 that mandated that the
                  responsible entities make all environmental compliance determinations on work
                  items listed in the housing agencies’ annual statements, to include comparing
                  them to the approved 5-year environmental review. Instead, it compared the
                  annual statements to the approved 5-year environmental reviews and added a
                  typed “note to file,” stating that the work was equal or substantially similar in
                  nature. Therefore, it was not necessary to request that the responsible entity
                  determine whether the results of that year’s annual environmental review
                  remained valid. In some instances, staff added handwritten notes that described
                  work items, which were considered categorically excluded subject to 24 CFR
                  58.5, thus requiring further review by the responsible entity that performed the
                  original 5-year environmental review. The responsible entities were required to
                  accept legal responsibility for environmental reviews by certifying compliance
                  with the requirements, which the Kansas City Office placed at risk by making
                  decisions that should have been made by the responsible entities.

                  The Kansas City Office Did Not Adequately Monitor Housing Agencies or Their
                  Responsible Entities
                  The Kansas City Office did not monitor the housing agencies or their responsible
                  entities for environmental compliance. Further, the Kansas City Office itself had
                  not been monitored for compliance. According to the Kansas City Office’s Public
                  Housing technical division director, the Kansas City Office did not perform onsite
                  monitoring of housing agencies to ensure environmental compliance. However,
                  according to 24 CFR 58.77(d), HUD intended to conduct in-depth monitoring and
                  exercise quality control (through training and consultation) over the
                  environmental activities performed by responsible entities at least once every 3
                  years. Further, Executive Order 11514 required Federal agencies to continually
                  monitor, evaluate, and control their agencies’ activities to protect and enhance the
                  quality of the environment.

                  The Kansas City Office Did Not Provide Training Directly Related to Capital
                  Funds and Processing of Environmental Reviews
                  The Kansas City Office did not provide environmental training to the housing
                  agencies or responsible entities to ensure compliance. It could require training for
                  housing agencies and their responsible entities if it became aware of deficiencies


19
      24 CFR 58.4 and 58.30



                                                   12
                   through monitoring; 20 however, it did not require training for anyone directly
                   involved in meeting or ensuring compliance with the requirements. For example,
                   a housing agency modernization coordinator told us that the Office of Public
                   Housing had not provided it formal training on environmental reviews and
                   compliance requirements. A housing agency assistant director told us that agency
                   staff did receive training from CPD, but the training was geared toward CPD
                   programs and was not relevant for Capital Fund modernization programs.

     The Kansas City Office
     Believed That CPD Was
     Responsible for Ensuring
     Compliance

                   In its response to the draft report, the Director of the Kansas City Office of Public
                   Housing stated that the Office of Public Housing is not the delegated HUD office
                   that ensures that responsible entities perform appropriately under the regulations
                   at 24 CFR Part 58. The Director further stated that implementation and
                   interpretation of the provisions is the responsibility of CPD and the Office of
                   Environment and Energy. The Director also stated that it is the Kansas City
                   Office’s position that CPD is responsible for monitoring responsible entities
                   performing environmental reviews. The Director’s response included a Federal
                   Register Notice to support the position. 21

                   While CPD is responsible for implementation and interpretation of the provisions,
                   it is only responsible for monitoring compliance for CPD programs. According to
                   the Notice’s summary, its purpose was for the Assistant Secretary for CPD to
                   redelegate to the CPD Deputy Assistant Secretaries and other specified HUD
                   officials all powers and authorities necessary to carry out CPD programs, except
                   those powers and authorities specifically excluded. The Notice did not delegate
                   authority for CPD to conduct environmental reviews of Office of Public and
                   Indian Housing programs. Even if the notice had been interpreted to grant such
                   authority, it was issued after the questioned environmental reviews were
                   completed and certified. Thus, it would not have applied to the grants reviewed
                   during the audit.




20
      24 CFR 58.77(d)(ii)
21
      The Kansas City Office’s response included an attachment. The attachment was Federal Register Notice 31972
      Volume 77, Number 104 dated May 30, 2012 Consolidated Delegation of Authority for the Office of
      Community Planning and Development. We did not include the attachment in the report, but it is available for
      review or can be obtained at www.federalregister.gov.



                                                        13
The Two Housing Agencies
Spent More Than $20 Million
for Questioned Costs

             Because the environmental reviews did not comply with requirements, the two
             housing agencies incurred more than $20 million in questioned costs, including
             almost $9 million in Recovery Act funds, as detailed in table 1.

             Table 1: Questioned costs
                                 Kansas City, KS, Kansas City, MO,
                                     Housing          Housing
                     Year            Authority       Authority                    Total
              2009 Recovery            $4,478,750       $4,517,915              $8,996,665
              Act funds
              2011 capital funds        2,827,316        2,920,093              5,747,409
              2012 capital funds        2,555,880        2,710,079              5,265,959
              Total                    $9,861,946      $10,148,087            $20,010,033

Conclusion

             The Kansas City Office did not provide adequate oversight to ensure that the
             housing agencies and responsible entities properly completed and documented
             environmental reviews for the two public housing agencies in its jurisdiction that
             we reviewed. Thus, it was unaware that the public housing agencies and their
             responsible entities did not properly implement environmental review
             requirements. Because the environmental reviews did not comply with
             requirements, the Kansas City Office may have increased the risk to the health
             and safety of public housing agency residents and the general public, and may
             have failed to prevent or eliminate damage to the environment. Further, the
             housing agencies incurred more than $20 million in questioned costs, including
             almost $9 million in Recovery Act funds.

             The Kansas City Office was responsible for verifying that environmental reviews
             complied with requirements, conducting periodic monitoring, and providing
             training to the housing agencies and responsible entities. Since the conditions
             described above appeared to have been systemic, there are no recommendations in
             this report to address the causes. Rather, we plan to make recommendations to
             HUD headquarters in a future report. However, based on the results of our review
             of the two agencies, the Kansas City Office should review the deficiencies cited
             and implement the recommended corrective actions, including repaying more than
             $1 million in ineligible costs and supporting or repaying more than $18.9 million
             in unsupported costs.




                                             14
Recommendations

          We recommend that the Director of the Kansas City Office of Public Housing
          require

          1A. The Kansas City, KS, Housing Authority to repay $1,039,797 in Recovery
              Act grant funds to HUD for its transmission to the U.S. Treasury for
              contract obligations that occurred before the environmental review was
              completed by the responsible entity. Repayment must be from non-Federal
              funds.

          1B. The Kansas City, KS, Housing Authority and the Unified Government of
              Wyandotte County-Kansas City, KS, to provide support that they complied
              with 24 CFR Part 58 requirements for the Authority’s Recovery Act grant or
              require the housing agency to repay $3,438,953 to HUD for its transmission
              to the U.S. Treasury. Repayment must be from non-Federal funds.

          1C. The Kansas City, KS, Housing Authority and the Unified Government of
              Wyandotte County-Kansas City, KS, to provide support that they complied
              with 24 CFR Part 58 requirements for the Authority’s 2011 Capital Fund
              grant or require the housing agency to repay $2,827,316 to HUD from non-
              Federal funds.

          1D. The Kansas City, KS, Housing Authority and the Unified Government of
              Wyandotte County-Kansas City, KS, to provide support that they complied
              with 24 CFR Part 58 requirements for the Authority’s 2012 Capital Fund
              grant or require the housing agency to reimburse $2,555,880 to the
              Authority’s 2012 Capital Fund grant from non-Federal funds.

          1E. The Kansas City, MO, Housing Authority and the City of Kansas City, MO,
              to provide support that they complied with 24 CFR Part 58 requirements for
              the Authority’s Recovery Act grant or require the housing agency to repay
              $4,517,915 to HUD for its transmission to the U.S. Treasury. Repayment
              must be from non-Federal funds.

          1F. The Kansas City, MO, Housing Authority and the City of Kansas City, MO,
              to provide support that they complied with 24 CFR Part 58 requirements for
              the Authority’s 2011 Capital Fund grant or require the housing agency to
              repay $2,920,093 to HUD from non-Federal funds.

          1G. The Kansas City, MO, Housing Authority and the City of Kansas City, MO,
              to provide support that they complied with 24 CFR Part 58 requirements for
              the Authority’s 2012 Capital Fund grant or require the housing agency to
              reimburse $2,710,079 to the Authority’s 2012 Capital Fund grant from
              non-Federal funds.



                                        15
1H. The housing agencies to work with their respective responsible entities and
    local HUD environmental officer to show that no harm occurred from
    completion of all the projects or mitigate any harm that did occur.

We also recommend that the Director of the Kansas City Office of Public
Housing

1I.   Take one or more of the following actions with the two housing agencies
      and their respective responsible entities:

      •   Require attendance by responsible staff and management of the housing
          agency and responsible entity at HUD-sponsored or -approved training;
      •   Refuse to accept the certifications of environmental compliance on
          subsequent grants;
      •   Suspend or terminate the responsible entity’s assumption of the
          environmental review responsibility; and
      •   Initiate sanctions, corrective actions, or other remedies specified in
          program regulations or agreements or contracts with the housing agency.




                                 16
Finding 2: The Kansas City Office of Public Housing Did Not Follow
24 CFR Part 50 Requirements When It Performed Environmental
Reviews
The Kansas City Office did not follow 24 CFR Part 50 environmental requirements when it
performed environmental reviews for all nine public housing agencies within its jurisdiction that
we reviewed. 22 This condition occurred because the Kansas City Office did not have standard
operating procedures that followed requirements and the culture concerning environmental
reviews was inattentive. As a result, the Kansas City Office may have increased the risk to the
health and safety of public housing agency residents and the general public, and may have failed
to prevent or eliminate damage to the environment. Further, the nine housing agencies spent more
than $7 million, including more than $3 million in Recovery Act funds, for projects that did not
have a proper environmental review and were not adequately supported.


     The Kansas City Office Did Not
     Follow 24 CFR Part 50
     Requirements

                  For the nine public housing agencies reviewed, the Kansas City Office did not
                  follow requirements when it performed environmental reviews and when it
                  determined compliance with NEPA. Regulations at 24 CFR Part 50 direct HUD to
                  carry out the policies of NEPA and other laws and authorities. This responsibility
                  includes an independent evaluation of the environmental issues, the scope and
                  content of the environmental compliance finding, and making the environmental
                  determination. Failure by HUD to adequately conduct Part 50 environmental
                  reviews results in the residents’ having no assurance that they were not exposed to
                  unnecessary risk, contamination, pollution, or other adverse environmental
                  effects. The Kansas City Office did not

                       •   Properly evaluate compliance with the majority of the required
                           compliance factors,
                       •   Provide verification as environmental records were incomplete and lacked
                           supporting documents,
                       •   Comply with internal control requirements,
                       •   Monitor staff for compliance, or
                       •   Follow training provided by HUD environmental officers.




22
      We reviewed the Bancroft, IA, Council Bluffs, IA, Sedgwick, KS, Topeka, KS, Valley Falls, KS, Anderson,
      MO, Independence, MO, Plattsburg, MO, and Sedalia, MO housing agencies.




                                                       17
                 The Kansas City Office Did Not Properly Evaluate Compliance With the Majority
                 of the Compliance Factors
                 The Kansas City Field Office did not comply with 24 CFR Part 50 environmental
                 review requirements for any of the nine sampled housing agencies’ 2009
                 Recovery Act or 2011 and 2012 Capital Fund grants. It sent questionnaires to
                 housing agencies that asked questions related to only a few of the compliance
                 factors and then used the information obtained to complete the Environmental
                 Assessment and Compliance Findings for the Related Laws (form HUD-4128)
                 and the Sample Field Notes Checklist. However, there was no documentation
                 supporting the answers provided by the housing agencies or the environmental
                 determinations made by the Kansas City Office. Further, the questionnaires for
                 some housing agencies were missing.

                 The Kansas City Office did not properly evaluate compliance with any of the
                 following compliance factors: historic preservation, floodplain management and
                 flood insurance, noise impacts, contamination and toxic site hazards, air quality,
                 sole-source aquifers, wetlands protection, endangered species, wild and scenic
                 rivers, farmland protection, explosive and flammable operations, airport clear
                 zones, and environmental justice. Kansas City Office staff marked the majority of
                 the housing agencies’ forms HUD-4128 compliance factors as “not applicable”
                 and then marked the compliance factors on the Sample Field Notes Checklist as
                 “review is unnecessary due to nature of physical improvements.” However, the
                 Kansas City Office did not have supporting documentation to validate the
                 compliance determination made on either document. The following examples
                 demonstrate the Kansas City Office’s failure to properly evaluate or document
                 compliance with some of the compliance factors.

                     •   Historic preservation – Historic preservation impacts were not evaluated
                         before activities were undertaken at any of the selected housing agencies.
                         Two of the housing agencies had developments that either could have
                         been eligible for listing as a historic property or could have impacted
                         historic properties adjacent to the development and required consultation
                         with the State Historic Preservation Office. 23

                         (1) The Plattsburg Housing Authority undertook rehabilitation at a
                             building that may have been eligible for listing in the National
                             Register of Historic Places. It appeared that the Authority’s executive
                             director reported to the Kansas City Office that no historic properties
                             were registered on or adjacent to the site. However, without
                             consulting with the State Historic Preservation Office, the Kansas City
                             Office did not ensure compliance with the requirements.

                         (2) The Council Bluffs Housing Authority provided the Kansas City
                             Office information stating that a project was not located adjacent to a
23
     24 CFR 50.4(a) and 36 CFR 800.4(d)(1)



                                                  18
                              property listed in the National Register of Historic Places. However,
                              there were two historic properties adjacent to the development.
                              Rehabilitation of the development included exterior work, which could
                              have had an adverse effect on these historic properties. In addition, the
                              historic eligibility of the development was not determined. The
                              Kansas City Office claimed that the proposed work items consisted of
                              nonroutine maintenance and did not have the potential to adversely
                              affect the historic properties. This claim contradicted the reported
                              “rehabilitation” work that was performed.

                          (3) The remaining seven housing agencies lacked adequate documentation
                              to substantiate compliance. The Kansas City Office did not consult
                              with the State Historic Preservation Office to determine whether the
                              housing agency’s properties were affected. Instead, it used
                              generalized language on the form HUD-4128 or the checklists, stating
                              that the work performed did not have an effect on historical properties
                              if any were present.

                     •    Floodplain management and flood insurance – The Kansas City Office
                          did not evaluate floodplain management or flood insurance requirements
                          at any of the selected housing agencies. Three of the nine housing
                          agencies had developments that did not meet the requirements. 24

                          (1) The Sedgwick Housing Authority had a development that was
                              identified as being in a special flood hazard area; thus, flood insurance
                              was required. However, contrary to the requirements, the Kansas City
                              Office concluded that the development did not require flood insurance.

                          (2) The Bancroft Housing Authority had several developments that
                              appeared to be located within a special flood hazard area; thus, flood
                              insurance was required. However, the Kansas City Office did not
                              ensure compliance by correctly identifying on the FEMA maps where
                              the developments were located and whether they were located in a
                              special flood hazard area.

                          (3) The Council Bluffs Housing Authority had a development located
                              within a 500-year floodplain. However, the Kansas City Office
                              incorrectly determined that the development was outside the zone and,
                              therefore, did not determine whether the projects constituted a “critical
                              action” that would require compliance with the floodplain
                              management 8-step decision-making process.



24
     24 CFR Parts 50.4(b) and 55.20



                                                   19
                         (4) The remaining six housing agencies lacked supporting documentation
                             to substantiate that the developments were not located in a special
                             flood hazard area. The Kansas City Office generally referenced a
                             FEMA map panel number on the form HUD-4128 or checklist, but the
                             map was not included in the files.

                     •   Noise control – The Kansas City Office did not evaluate compliance with
                         noise control requirements for major rehabilitation or conversion projects
                         to determine whether there was a need for noise reduction features. Five
                         (Topeka, Sedalia, Independence, Anderson, and Sedgwick) of the nine
                         housing agencies had substantial rehabilitation projects that did not meet
                         the noise reduction and control requirements. 25 All five had railroads
                         within their established threshold distances. Two of the housing agencies
                         also had a main road or highway within the threshold, and another had a
                         major interstate. As a result, the noise levels at each development
                         exceeded requirements, which required HUD to strongly consider
                         conversion of the developments to land uses that were compatible with
                         high noise levels. However, the Kansas City Office incorrectly
                         determined that noise control was “not applicable due to nature of physical
                         improvements” at the five developments.

                     •   Hazardous operations and toxic site hazards – The Kansas City Office did
                         not evaluate any of the nine housing agencies for hazardous operations or
                         toxic chemicals and radioactive substances. The Bancroft Housing
                         Authority was not identified as having potentially hazardous operations or
                         toxic hazards at or near the property. The Kansas City Office marked the
                         housing agency’s form and checklist for its Pleasantview Manor
                         development as having complied because no industrial facilities handling
                         explosive or fire-prone materials, such as storage tanks, were adjacent to
                         the property. However, the Iowa Department of Natural Resources
                         identified two leaking underground storage tanks located 0.4 and 0.3 miles
                         from the development site as “high risk.” The Kansas City Office’s
                         review did not identify or evaluate these tanks, nor did it provide
                         supporting documentation to validate compliance with the requirements. 26

                     •   Air quality – The Kansas City Office did not evaluate or record whether
                         any of the nine housing agencies had been properly inspected for the
                         presence of asbestos and if found, whether the appropriate notification,
                         abatement, and disposal measures had been implemented as required. 27
                         Four of the housing agencies’ rehabilitation projects included replacement
                         of major systems (heating, ventilation, and air conditioning), roofing,
                         windows, and flooring, all of which can contain asbestos materials. The

25
     24 CFR 50.4(k) and 24 CFR Part 51, Subpart B
26
     24 CFR 50.3(i)(1)
27
     24 CFR 50.4(h)



                                                    20
                        other five housing agencies did not provide specific projects. Thus, a
                        determination could not be made as to whether air quality should have
                        been addressed. The Kansas City Office marked the housing agencies’
                        forms and checklists as complying with the air quality State
                        implementation plan, but no supporting documentation was provided to
                        substantiate these determinations. Noncompliance with Federal asbestos
                        requirements can result in criminal as well as civil charges.

                    •   Other NEPA-related laws and authorities cited in 24 CFR 50.4 – The
                        Kansas City Office did not evaluate any of the nine housing agencies for
                        compliance with environmental justice, sole-source aquifers, wetland
                        protection, endangered species, wild and scenic rivers, farmland
                        protection, and airport clear zones. These other NEPA-related laws and
                        authorities were marked on the form and checklist as “not applicable” and
                        “not applicable due to nature of physical improvements” without
                        supporting documentation to validate these determinations.

                Environmental Records Were Incomplete and Lacked Supporting Documentation
                The Kansas City Office did not properly document its decision making for
                compliance with NEPA. Specifically,

                    •   Project descriptions were missing from the files or were not adequate to
                        determine the level of environmental review needed to comply with
                        requirements. In addition, identical language was regularly used to
                        describe different projects in different communities. The common
                        language found in the review records was “listed in the HA’s [housing
                        agency] Annual Statement and 2005-2009 or 2010-2014 CFP [Capital
                        Fund program] 5-Year Action Plan.” However, a project description
                        should include the following details: (1) location – a street address or map
                        coordinates, information that the public could use to locate the
                        development; (2) purpose and need – what is being done and why; (3) area
                        – the character, features, and resources of the area and how the project
                        benefits it; and (4) activity description – complete details about what is
                        being done (the type of project, the timeframe, and the size of the project).

                        For example, the Topeka Housing Authority project information
                        associated with the form HUD-4128 failed to clearly describe the activities
                        proposed for each development. Further, the Authority’s annual statement
                        did not describe the number of buildings, number of units, or age of
                        structures. It also did not provide site plans, location maps, or site
                        photographs that would support what activities comprised the projects,
                        where the projects were located, and when the activities would be
                        performed. HUD’s Office of Environment and Energy guidance 28 states

28
     OneCPD Storyboards: Environmental Review, dated November 13, 2012



                                                   21
                        that a complete and clear project description is the first step in the
                        environmental review process.

                    •   The environmental review records contained form HUD-4128 as required,
                        and for the most part, the Sample Field Notes Checklist; however, they
                        lacked supporting documentation for the compliance factors addressed.
                        Staff marked the forms for many of the compliance factors, including
                        noise abatement, hazardous operations, airport hazards, and protection of
                        wetlands, as “not applicable.” The forms of source documentation were
                        statements on the field notes checklist of “not applicable due to nature of
                        physical improvements” and “questionnaire completed by housing agency
                        executive director.” Further, staff marked factors including floodplain
                        management, historic preservation, toxic chemicals, and radioactive
                        materials, and other authorities cited in 24 CFR 50.4 as “refer to attached
                        field notes checklist.” The source documentation for these factors
                        included statements of “HA’s 2005 & 2006 PHA [public housing agency]
                        Plans,” “review unnecessary due to nature of physical improvements,” and
                        “Housing Authority’s CFP Annual Statement and Five-Year Action Plan.”
                        A properly marked FEMA map identifying the actual locations of housing
                        agency properties, a documented finding sent to the State historic
                        preservation officer or a programmatic agreement with the State historic
                        preservation officer, an airport clear zone map that can be obtained by the
                        local airport management, and a national wetlands inventory map found
                        on the U.S. Fish and Wildlife Web site are examples of valid source
                        documentation.

                    •   Many of the environmental review records contained a “note to file,”
                        signed by a staff person, which stated, “proposed work for the 2009, 2011,
                        or 2012 CFP fund is either similar to or not substantially different than
                        work proposed under the 2005-2009 or 2010-2014 Five-Year PHA Plan
                        covered by the last environmental review. Work includes such items as
                        operations, management improvements, fees and costs and dwelling
                        structures, site improvement, equipment and repair and replacement of
                        building components.” The environmental review must be reevaluated
                        and updated when the basis for the original environmental or compliance
                        findings is affected by a change unless the change is the amount of
                        financing or mortgage insurance. 29

                The Kansas City Office Did Not Comply With Internal Control Requirements
                The Kansas City Office did not comply with internal control requirements set
                forth in HUD’s Field Office Environmental Review Guidance, which required, at
                a minimum, (1) a list of responsible entities that HUD determined would or would
                not perform the environmental reviews on behalf of HUD, (2) a list of form
                HUD-7015.15s that had been received and the corresponding clearance provided,
29
     24 CFR 50.36



                                                  22
           (3) a list of environmental reviews conducted by the Kansas City Office, and (4)
           separate environmental files for each housing agency within its jurisdiction. The
           Kansas City Office’s tracking log was incomplete as it did not contain a list of
           forms HUD-7015.15 that detailed the grant year, the grant number, the date
           received, the required waiting period, and the date on which funds were released.
           The log also did not contain a list of environmental reviews conducted by the
           Kansas City Office that included the grant year, grant number, date on which the
           environmental review was completed, date on which the review was signed by the
           approving official, and date on which the letter was sent to the housing agency
           approving its use of the funds. Further, several staff members maintained their
           own logs, which also did not meet the internal control requirements.

           The Kansas City Office Was Not Monitored for Compliance
           The Kansas City Office had not been monitored for compliance with
           environmental requirements. The Kansas City regional environmental officer
           stated that he monitored only HUD’s CPD programs because he did not have
           authority over any other HUD programs. The Kansas City Office’s Public
           Housing technical division director stated that unless the environmental reviews
           were included in HUD’s Office of Public and Indian Housing’s quality
           management reviews of the Kansas City Office, the Kansas City Office was not
           monitored for compliance with the requirements. Executive Order 11514
           required Federal agencies to continually monitor, evaluate, and control their
           agencies’ activities to protect and enhance the quality of the environment.

           The Kansas City Office Did Not Follow Training Provided by HUD
           Environmental Officers
           The Kansas City Office did not follow training requirements when it performed
           environmental reviews. The regional environmental officer stated that there was
           at least one 3-day training course held in the Kansas City region per year. He
           further stated that he had held half-day and 1-day training courses that focused on
           particular program areas including public housing. However, the Kansas City
           Office public housing staff members stated that they were not environmental
           specialists and did not have the time or knowledge to perform the environmental
           reviews under Part 50 as they were taught in the training classes, which included
           onsite reviews to ensure that housing agencies met requirements.

Kansas City Office Standard
Operating Procedures Did Not
Meet Part 50 Requirements


           The Kansas City Office developed standard operating procedures that did not
           meet the requirements set forth in 24 CFR Part 50. The standard operating
           procedures are written field office procedures for conducting environmental
           reviews of capital funds. The Kansas City Office’s procedures directed its staff to
           use information on the questionnaire provided by the housing agency’s executive



                                            23
                  director to satisfy the requirements and to complete part A of the form HUD-4128
                  by marking “not applicable” to the majority of compliance factors listed at 24
                  CFR 50.4. The questionnaire addressed only 3 of the 14 compliance factors and
                  directed the staff not to recreate the wheel, but to use historical data from previous
                  reviews as much as possible. The procedures also directed the staff that if the
                  question related to historical preservation was answered “no” by the housing
                  agencies, no further action would be required. However, all projects in Missouri
                  and Iowa have to be submitted to the State historic preservation officer for
                  consultation and clearance regardless of the effect. Only Kansas had a
                  programmatic agreement between the State Historic Preservation Office and HUD
                  that did not require consultation.

                  The standard operating procedures referenced that the procedures had been
                  developed through consultation with the regional environmental officer.
                  However, the regional environmental officer stated that use of the term “not
                  applicable” was not an acceptable method for explaining how a project met
                  environmental compliance. Further, he stated that he had not reviewed or
                  commented on any written document and that while he had consulted with staff to
                  develop procedures, the items he addressed were not part of the standard
                  operating procedures presented. Requirements 30 state that the environmental
                  review is a process for complying with NEPA and other laws and authorities and
                  that HUD must comply with all environmental requirements, guidelines, and
                  statutory obligations.

     The Kansas City Office Culture
     Was Inattentive Related to
     Environmental Reviews

                  The Kansas City Office culture concerning the environmental review process was
                  inattentive. Kansas City Office staff stated that housing agencies generally should
                  not be required to meet the environmental requirements as the requirements did
                  not apply to Capital Fund grants because all the housing agency activities were
                  routine maintenance. However, according to guidance 31 issued by the Office of
                  Environment and Energy, maintenance merely keeps a building in good order and
                  in ordinary, efficient operating condition, such as trimming trees and shrubs,
                  fixing gutters or floors, replacing broken windows, fixing leaks, or replacing
                  kitchen appliances that are not attached to the building. Repairs and
                  improvements add to the value of the building, appreciably prolong its useful life,
                  or adapt it to new uses, such as installing roofs; windows; or heating, ventilation,
                  and air conditioning systems.


30
      24 CFR 50.2(a) and 24 CFR 50.4
31
      Guidance for categorizing an activity as maintenance for compliance with HUD’s environmental regulations, 24
      CFR Parts 50 and 58, dated March 28, 2006



                                                        24
             Further, the staff members stated that Part 50 environmental reviews worked
             better for the office but that they had too much other work to deal with and could
             not spend a lot of time on environmental reviews. Kansas City Office
             management was not aware that Kansas City Office staff performed 78 percent of
             the environmental reviews for the jurisdiction, while responsible entities
             performed only 22 percent. The Kansas City Office’s Public Housing technical
             division director stated that there had been resistance from staff to allow the
             environmental reviews to be performed by the responsible entities under Part 58.
             The staff believed that the environmental reviews were too difficult to perform,
             and, thus, staff did not want to allow the responsible entities to perform them.
             However, the staff did not perform the environmental reviews as required by 24
             CFR Part 50.

The Nine Housing Agencies
Expended More Than $7
Million in Funds

             As shown in table 2, the Kansas City Office allowed nine housing agencies to
             spend more than $7 million, including more than $3 million in Recovery Act
             funds, on projects that did not have a proper environmental review and that were
             not adequately supported. Since HUD failed to follow environmental review
             requirements, we are not recommending that the housing agencies repay the
             funds.

 Table 2: Expended funds
                       2009 Recovery               2011            2012
    Housing agency       Act funds             capital funds   capital funds        Total
 Bancroft, IA              $ 44,704              $ 28,909        $ 25,804         $ 99,417
 Council Bluffs, IA           431,026                290,779         268,294         990,099
 Sedgwick, KS                  32,024                 20,758          19,122          71,904
 Topeka, KS                 1,266,146                868,856         780,404       2,915,406
 Valley Falls, KS              32,634                 23,651          19,701          75,986
 Anderson, MO                  60,807                 42,490          36,400         139,697
 Independence, MO             956,075                578,339         532,892       2,067,306
 Plattsburg, MO                47,308                 30,593          28,319         106,220
 Sedalia, MO                  394,310                272,984         258,210         925,504
 Total                     $3,265,034            $2,157,359      $1,969,146       $7,391,539

Conclusion

             The Kansas City Office did not properly complete and document environmental
             reviews for all nine public housing agencies in its jurisdiction that we reviewed.
             Thus, it did not properly implement environmental review requirements. Because
             the environmental reviews did not comply with requirements, the Kansas City
             Office may have increased the risk to the health and safety of public housing


                                             25
          agency residents and the general public, and may have failed to prevent or
          eliminate damage to the environment. Further, the housing agencies spent more
          than $7 million, including more than $3 million in Recovery Act funds, on
          projects that did not have a proper environmental review and that were not
          adequately supported.

          Kansas City Office management was responsible for verifying that environmental
          reviews complied with requirements by conducting periodic monitoring and
          ensuring training provided to staff was followed. Since these conditions appeared
          to have been systemic, we will make recommendations to HUD headquarters in a
          future report.

Recommendations

          Recommendations will be made to HUD headquarters in a future report.




                                          26
                         SCOPE AND METHODOLOGY
We conducted our audit work between October 2012 and August 2013 in Kansas at the HUD
field office, Kansas City, KS, Housing Authority, Unified Government of Wyandotte County-
Kansas City, Topeka Housing Authority, and City of Topeka. We also conducted audit work at
the Kansas City, MO, Housing Authority, the City of Kansas City, MO, and our offices in
Albuquerque, NM, and Houston, TX. Our review covered the Recovery Act grant and the 2011
and 2012 Capital Fund grants for each of the housing agencies.

To accomplish our objectives, we

•   Reviewed applicable public laws and executive orders that direct the requirements of
    environmental compliance;
•   Reviewed Federal regulations related to the environmental review process and HUD’s
    handbooks and guidance on environmental compliance;
•   Reviewed various HUD job descriptions related to environmental oversight;
•   Conducted interviews with staff from HUD’s Kansas City field office, selected housing
    agencies, and their respective cities;
•   Analyzed HUD’s field office’s, housing agencies’, and the cities’ environmental review
    processes for compliance with environmental requirements;
•   Analyzed environmental review records for the selected housing agencies to ensure that
    environmental requirements were met;
•   Compared the housing agencies’ original, revised, and final annual statements, as applicable,
    to determine the actual projects completed under the grants and any changes to the projects;
•   Reviewed HUD’s Recovery Act monitoring reports for selected housing agencies and noted
    any noncompliance issues related to environmental reviews;
•   Reviewed HUD’s Line of Credit Control System (LOCCS) grant budget, vouchers, and
    obligation and expenditures detail data. We did not evaluate the reliability of the LOCCS
    data as we used the data for information purposes only.
•   Compared the Kansas City Office’s environmental tracking logs to the minimum internal
    control requirements set forth in HUD’s Field Office Environmental Review Guidance to
    ensure compliance; and
•   Compared the housing agencies’ contracts to LOCCS details and the environmental records
    to ensure that funds were not obligated or expended before completion of the review.

We selected the Kansas City Office and 11 of 228 housing agencies within its jurisdiction based
on our risk assessment using information we obtained related to funding levels, historic value,
industry uses, and environmental process used.

We did not use or rely on computer-processed data to support our conclusions.




                                               27
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 objectives.




                                               28
                              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
               objectives:

                  •   Controls to ensure that the Kansas City Office and the housing agencies
                      and responsible entities properly implemented mandated environmental
                      review requirements including

                          •   Controls to ensure that HUD did not release funds and the housing
                              agencies did not obligate or expend funds before completion of the
                              environmental reviews by either the responsible entity or the
                              Kansas City Office;
                          •   Controls to ensure that the Kansas City Office complied with
                              HUD’s Field Office Environmental Review Guidance for
                              maintaining tracking logs and files;
                          •   Controls to ensure that the Kansas City Office, housing agencies,
                              and responsible entities were monitored for environmental
                              compliance; and
                          •   Controls to ensure that the Kansas City Office, housing agencies,
                              and responsible entities received adequate training on
                              environmental compliance for Capital Fund grants.

               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)


                                                 29
             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 Kansas City Office did not provide adequate oversight to ensure that the
                    housing agencies and responsible entities within its jurisdiction complied
                    with environmental requirements (finding 1), and did not follow
                    environmental requirements when it performed environmental reviews for
                    the public housing agencies within its jurisdiction (finding 2).




                                              30
                                   APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

                 Recommendation
                                        Ineligible 1/      Unsupported 2/
                     number

                        1A                  $1,039,797
                        1B                                     $ 3,438,953
                        1C                                       2,827,316
                        1D                                       2,555,880
                        1E                                       4,517,915
                        1F                                       2,920,093
                        1G                                       2,710,079

                        Totals              $1,039,797         $18,970,236




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.




                                             31
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                               Auditee Comments

                                               U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMEN
                                                          Regional Administrator, Region VII
                                                             Gateway Tower II, Room 507
                                                                  400 State Avenue
                                                              Kansas City, KS 66101-2406
                                                             HUD Home Page: www.hud.gov




                                                                         April 23, 2014

             MEMORANDUM FOR:               Gerald R. Kirkland, Regional Inspector General for Audit,
                                            6AGA

             FROM:                         Frances M. Cleary, Director, Office of Public
                                            Housing, 7APH

             SUBJECT:                      Comments on Draft Report, Improvements Are Needed
                                            Over Environmental Reviews of Public Housing and
                                            Recovery Act Funds in the Kansas City Office


                       Thank you for providing this Office with the opportunity to respond to the draft report
             that was transmitted on March 28, 2014. As we discussed on April 10, 2014,
             please accept this memorandum as our response.

Comment 1               This Office will be in non-concurrence with Recommendation 1A. Recommendation 1A
             requires that the Kansas City, KS Housing Authority repay $1,039,797 in Recovery Act grant funds to
             HUD for its transmission to the U.S. Treasury for contract obligations that occurred before the
             environmental review was completed by the responsible entity and that the repayment be from non-
             Federal funds. While the timing of the signing of the environmental review by the responsible entity was
             after the contracts were executed, the environmental review did cover the work items and, therefore, no
             harm was done to the United States or to the local community. Because these were ARRA funds, housing
             authorities were under tremendous pressure to get the funds obligated and expended. A misjudgment
             based on expediting this procurement activity should not result in a financial penalty to the housing
Comment 2    authority. A nationwide working group has been commissioned to develop procedures to ensure
Comment 1    compliance with these issues in the future. In the interest of maintaining sound working relationships with
             those holding local place-based expertise, any mandatory repayments jeopardizes the desire to maintain
             part 58 reviews by the responsible entity.

Comment 3              Generally we are in disagreement and will be filing a non-concurrence memorandum for
             recommendations 1B, 1C, 1D, 1E, 1F and 1G, if these draft recommendations are finalized. Each of these
             draft recommendations suggest that the Kansas City Office of Public Housing should require the local
             housing authorities and the local responsible entities “to provide support that they complied with 24 CFR
             Part 58 requirements” for various Capital Fund grants (CFP) and Recovery Act (ARRA) grants provided
             to the housing authorities from 2009 through 2012. The Office of Inspector General found that this Office
             did not provide adequate oversight to these agencies to ensure that the responsible entities properly
             completed and documented environmental reviews.

                                                 Phone (913) 551-5462 ~ Fax (913) 551-5469
                                Kansas/Missouri Office Home Page: http://www.hud.gov/local/kan/kansashm.html
                                                       32
                    Please consider the following:

Comment 4       •   The Office of Public Housing is not the delegated HUD Office that ensures
                    that Responsible Entities perform appropriately under the regulations at 24
                    CFR Part 58. Implementation and interpretation of the provisions in 24 CFR
                    Parts 50 and 58 is the responsibility of the Office of Community Planning and
                    Development (CPD) and the Office of Environment and Energy (OEE).
                •   It is our position that CPD is responsible for monitoring Responsible Entities
                    performing environmental reviews and offers attachment A as supporting
                    evidence.
                •   As noted above, PIH supports the use of the local jurisdiction to serve as the
Comment 5           responsible entity on behalf of HUD so to ensure local land use agents are
                    involved early in the review process. Repayment obligations are likely to
                    harm local partnerships.

Comment 6           Recommendation 1H recommends a display of no harm in order to clear the
            recommendation. As is stated previously in the memorandum, it is the position of this
            Office that the Environmental Review record is complete. Since the record is clear
            we can find no harm caused by the implementation of the capital projects associated
            with the grants cited in this report. Further, we believe that the burden of proof that
Comment 4
            would be required to complete the actions recommended cannot be adjudicated by this
            Office since we are not delegated to act in this capacity.

Comment 7           Recommendation 1I recommends several actions. PIH encourages all persons
            involved in the preparation of environmental reviews to attend training sponsored by
            OEE. At this juncture, it is our intent to correct deficiencies via a nationwide protocol
            for PIH field offices.

Comment 8           For recommendations 2A and 2B, this Office will be in non-concurrence with
            these recommendations and recommend the issue be raised to the Headquarters level.
            Again, a nationwide working group is commissioned to develop procedures to ensure
            compliance with these issues in the future. Once these procedures are finalized, this
            Office will implement them in the Environmental Review process.
Comment 6            It appears that the underlying assertion of the Report is that harm was done
Comment 1   due to the timing or manner in which these reviews were completed. You have
            provided no evidence that any harm was caused to the Department, the local
            communities or the Department’s programs due to the timing or manner in which
Comment 9   these reviews were conducted. While you may not agree with the manner in which
            the reviews were done, the responsible entities signed the Part 58 reviews and our
            Office signed the Part 50 reviews. To hold the housing authorities financially
            accountable would be inappropriate and likely cause displacement of families
            currently housed. . In lieu of repayments, corrections are forthcoming through
            improved protocols. Again, any financial penalties to the housing authorities would
            affect the residents of the public housing developments.


                                      Phone (913) 551-5462 ~ Fax (913) 551-5469
                     Kansas/Missouri Office Home Page: http://www.hud.gov/local/kan/kansashm.html




                                                 33
         If you have any questions regarding this matter, please feel free to contact me
at (913) 551-5702.




                          Phone (913) 551-5462 ~ Fax (913) 551-5469
         Kansas/Missouri Office Home Page: http://www.hud.gov/local/kan/kansashm.html




                                      34
                                OIG Evaluation of Auditee Comments

Comment 1        The Kansas City Office stated that while the timing of the signing of the
                 environmental review by the responsible entity was after the Kansas City, KS
                 Housing Authority executed contracts, the environmental review did cover the
                 work items and there was no harm to the United States or the local community.
                 Further, because the funds were Recovery Act funds, housing authorities were
                 under tremendous pressure to get the funds obligated and expended. The Kansas
                 City Office concluded that a misjudgment based on expediting this procurement
                 activity should not result in a financial penalty to the housing authority. It also
                 expressed concerns about maintaining sound working relationships with the
                 responsible entities.

                 The Recovery Act 32 required that applicable environmental reviews under NEPA
                 be completed on an expeditious basis. In addition, when the housing agencies
                 signed their grant agreements, they agreed to carry out their capital activities in
                 accordance with all HUD regulations, including the environmental review
                 requirements under 24 CFR Part 58. Those regulations required the responsible
                 entities to complete environmental certifications for each activity. Regulations
                 required the housing agencies to refrain from undertaking any activities, including
                 obligations or expenditures, until HUD approved the certifications.

                 The Kansas City Office did not provide any documentation to support that no
                 harm occurred or that no adverse environmental conditions existed.

                 The Kansas City Office further attempted to justify the failure to follow
                 requirements by discussing the tremendous pressure that housing agencies were
                 under to obligate and expend the funds. While the housing agencies were under
                 pressure to meet Recovery Act deadlines, they, along with HUD, were still
                 required to follow all regulations.

                 In response to a previous OIG audit, the Assistant Secretary for Public and Indian
                 Housing concurred that Recovery Act funds expended on construction activities
                 were ineligible because the housing agency obligated and expended the funds
                 before the environmental clearance had been completed. The Assistant Secretary
                 required the housing agency to repay the ineligible amount. Similarly, because
                 the Kansas City, KS, Housing Authority obligated more than $1 million in
                 Recovery Act funds, in violation of requirements, and the obligation and
                 expenditure date has passed, it must repay the funds to HUD for its transmission
                 to the U.S. Treasury.

                 The purpose of NEPA was to establish a national policy that would promote efforts
                 to prevent or eliminate environmental hazards. We are concerned with the Kansas
                 City Office’s lack of regard for ensuring that the purpose of NEPA and other
32
     Public Law 111-5, Section 1609



                                                  35
            requirements were met. Rather it attempted to justify the improper expenditures
            as a timing issue and claimed that no harm occurred. Further, while we
            understand that repayments can affect a housing agency’s processes, and
            potentially affect relationships with the responsible entities, we are more
            concerned with the effects that the lack of environmental compliance can have on
            the health and welfare of the people for whom HUD is tasked to provide decent,
            safe, and sanitary housing.

Comment 2   We acknowledge that HUD recently established a nationwide working group to
            develop procedures to address future compliance with environmental
            requirements.

Comment 3   The Kansas City Office stated that it is generally in disagreement with
            recommendations 1B, 1C, 1D, 1E, 1F and 1G, which recommend that the local
            housing authorities and the local responsible entities provide support that they
            complied with requirements.

            If the housing agencies and responsible entities can provide proper documentation
            to support compliance of the environmental decisions made, any supported
            amounts will not need to be repaid. Since they were required to perform the
            reviews or support why they didn’t, the supporting documentation should be
            readily available for submission to the Kansas City Office. If the supporting
            documents cannot be provided, then the housing agencies and responsible entities
            cannot support the determinations. Thus, the expenditures would be in violation
            of environmental requirements and would require repayment. Further, as part of
            its oversight, the Kansas City Office was responsible for periodically monitoring
            the public housing agencies’ environmental review records. If the Kansas City
            Office had monitored the records, it should have found that the records were
            incomplete and the environmental reviews were improperly performed.

Comment 4   The Kansas City Office stated that the Office of Public and Indian Housing is not
            the delegated HUD Office that ensures that responsible entities perform
            appropriately under the regulations at 24 CFR Part 58. It claimed that
            implementation and interpretation of the provisions in 24 CFR Parts 50 and 58 are
            the responsibility of CPD and OEE.

            According to regulations at 24 CFR 50.10(a), it is the responsibility of all
            Assistant Secretaries, the General Counsel, and the HUD approving official to
            assure that the requirements of this part are implemented. The Office of Public
            Housing has an Assistant Secretary who is responsible for ensuring
            implementation. Further, it has an environmental clearance officer whose role
            includes providing environmental compliance reviews.

            The Kansas City Office’s response included an attachment. The attachment was
            Federal Register Notice 31972 Volume 77, Number 104 dated May 30, 2012,
            Consolidated Delegation of Authority for the Office of Community Planning and



                                            36
            Development. Federal Register notices can be obtained at
            www.federalregister.gov. The Kansas City Office believed this published Notice
            delegated the overall departmental responsibility for compliance with NEPA to
            CPD. However, according to the Notice’s summary, its purpose was for the
            Assistant Secretary for CPD to redelegate to the CPD Deputy Assistant
            Secretaries and other specified HUD officials all powers and authorities necessary
            to carry out CPD programs, except those powers and authorities specifically
            excluded. The Notice did not delegate authority for CPD to conduct
            environmental reviews of Office of Public and Indian Housing programs. Even if
            the Notice had been interpreted to grant such authority, it was issued after the
            questioned environmental reviews were completed and certified. Thus, it would
            not have applied to the grants reviewed during the audit. We revised Finding 1 to
            reflect the Kansas City Office’s misinterpretation of the Notice.

Comment 5   The Kansas City Office stated that the Office of Public and Indian Housing
            supports the use of the local jurisdiction to serve as the responsible entity on
            behalf of HUD to ensure local land use agents are involved early in the review
            process. While the regulations at 24 CFR part 58 allow the responsible entity to
            assume HUD’s responsibility for environmental reviews and maintaining this
            relationship can be important, if the responsible entities cannot follow the
            requirements, then the Kansas City Office has an oversight responsibility to
            suspend or terminate the responsible entities’ assumption authority of the
            environmental review process as outlined in 24 CFR 58.77(d)(iv).

Comment 6   The Kansas City office stated that the environmental review records were
            complete and there was no harm. However, according to our review of the
            records, the records were incomplete because there was no documentation to
            support the compliance factors listed in 24 CFR 58.5 or 58.6. Without complete
            environmental review records there is no evidence that no harm occurred. The
            regulations at 24 CFR 58.38 clearly state that the environmental review record
            must contain all verifiable source documents and relevant base data used as
            evidence of review, decision-making and actions pertaining to a particular project.

Comment 7   The Kansas City Office stated that the Office of Public and Indian Housing
            encourages all persons involved in the preparation of environmental reviews to
            attend training sponsored by OEE.

            Although Office of Public and Indian Housing may have encouraged persons
            involved in the preparation of environmental reviews to attend training, we found
            that only one housing authority in the Kansas City Office’s jurisdiction had
            attended training during the audit period, and that training was geared toward
            another program area.

Comment 8   The Kansas City Office stated that it will non-concur with recommendations 2A
            and 2B of the draft report, and requested that the issue be raised to the
            Headquarters level.



                                            37
            Since the conditions and causes in Finding 2 are systemic, we removed the
            recommendations and will include recommendations in an upcoming nationwide
            report.

Comment 9   Throughout its response, the Kansas City Office demonstrated that its primary
            concerns are the recommendations to repay funds, the effect that repayment could
            have on the housing agencies, and its relationships with the responsible entities.
            It again displayed lack of concern with NEPA and its purpose of promoting efforts
            to prevent or eliminate environmental hazards. Further, it appears to be confident
            that no harm was caused to the Department, the local communities or the
            Department’s programs. We fail to understand how the Kansas City Office can
            be confident that no harm was done when it did not monitor the housing agencies
            or responsible entities, and it did not perform its required Part 50 reviews. It is
            the Office of Pubic and Indian Housing’s responsibility to ensure that it complies
            with NEPA, to include assuring that no harm was done.




                                            38
Appendix C
                                         CRITERIA

Criterion 1
The purpose of NEPA is to declare a national policy that will encourage productive and
enjoyable harmony between man and his environment. To carry out the policy set forth in this
Act, it is the continuing responsibility of the Federal Government to use all practicable means,
consistent with other essential considerations of national policy to improve and coordinate
Federal plans, functions, programs, and resources to the end that the Nation may attain the widest
range of beneficial uses of the environment without degradation, risk to health or safety, or other
undesirable and unintended consequences.

Criterion 2
Executive Order 11514, section 2(a), states that the heads of Federal agencies must “monitor,
evaluate, and control on a continuing basis their agencies’ activities so as to protect and enhance
the quality of the environment. Agencies shall develop programs and measures to protect and
enhance environmental quality and shall assess progress in meeting the specific objectives of
such activities.”

Criterion 3
Regulations at 24 CFR 58.2(a)(7)(ii)(B) state that “responsible entity” means, for public housing
agencies, the unit of general local government within which the project is located that exercises
land use responsibility.

Criterion 4
Regulations at 24 CFR 58.4(a) state that responsible entities must assume the responsibility for
environmental review, decision making, and action that would otherwise apply to HUD under
NEPA and other provisions of law that further the purposes of NEPA as specified in section
58.5.

Criterion 5
Regulations at 24 CFR 58.30(a) state that “the environmental review process consists of all the
actions that a responsible entity must take to determine compliance with this part.”

Criterion 6
Regulations at 24 CFR 58.5 state that “the responsible entity must certify that it has complied
with the requirements that would apply to HUD under these laws and authorities and must
consider the criteria, standards, policies, and regulations of these laws and authorities.”

The statutory requirements (checklist) for categorically excluded projects subject to 24 CFR 58.5
include
    • Air quality,
    • Airport hazards (clear zones and accident potential zones),
    • Coastal zone management,
    • Contamination and toxic substances,


                                                39
   •   Endangered species,
   •   Environmental justice,
   •   Explosive and flammable operations,
   •   Farmlands protection,
   •   Floodplain management,
   •   Historic preservation,
   •   Noise abatement and control,
   •   Water quality (sole-source aquifers),
   •   Wetland protection, and
   •   Wild and scenic rivers.

Criterion 7
Regulations at 24 CFR 58.15 state that “responsible entities may tier their environmental reviews
and assessments to eliminate repetitive discussions of the same issues at subsequent levels of
review. Tiering is appropriate when there is a requirement to evaluate a policy or proposal in the
early stages of development or when site-specific analysis or mitigation is not currently feasible
and a more narrow or focused analysis is better done at a later date.”

Criterion 8
Regulations at 24 CFR 58.6 state that the responsible entity remains responsible for addressing
requirements in its environmental review record and meeting these requirements, as applicable,
regardless of whether the activity is exempt or categorically excluded.

The statutory requirements (checklist) for all projects subject to 24 CFR 58.6 include

   •   Airport runway protection zone and clear zone notification,
   •   The Coastal Barriers Resources Act and Coastal Barrier Improvement Act, and
   •   The Flood Disaster Protection Act (flood insurance).

Criterion 9
Regulations at 24 CFR Part 51, Subpart B, state that the purpose of this subpart is to provide
policy on the use of structural and other noise attenuation measures where needed.

Criterion 10
Regulations at 24 CFR 58.35 state that categorical exclusion refers to a category of activities for
which no environmental impact statement or environmental assessment and finding of no
significant impact under NEPA is required. Compliance with the other applicable Federal
environmental laws and authorities listed in section 58.5 is required for any categorical exclusion
listed in paragraph (a) of this section.

Criterion 11
Regulations at 24 CFR 58.35(a)(1) state that the following activities are categorically excluded
under NEPA but may be subject to review under authorities listed in section 58.5:

   •   Acquisition, repair, improvement, reconstruction, or rehabilitation of public facilities and
       improvements when the facilities and improvements are in place and will be retained in


                                                40
       the same use without change in size or capacity of more than 20 percent (for example,
       replacement of water or sewer lines, reconstruction of curbs and sidewalks, repaving of
       streets).

Criterion 12
Regulations at 24 CFR 51.101(a)(5) state that “for modernization projects located in all noise
exposed areas, HUD shall encourage noise attenuation features in alterations. For major or
substantial rehabilitation projects in the Normally Unacceptable and Unacceptable noise zones,
HUD actively shall seek to have project sponsors incorporate noise attenuation features, given
the extent and nature of the rehabilitation being undertaken and the level or exterior noise
exposure. In Unacceptable noise zones, HUD shall strongly encourage conversion of noise-
exposed sites to land uses compatible with the high noise levels.”

Criterion 13
Regulations at 24 CFR 55.20, Subpart C state the procedures for making determinations on
floodplain management, which contains eight steps, including public notices and an examination
of practicable alternatives.

Criterion 14
Regulations at 24 CFR 58.22(a) state that neither a recipient nor a participant in the development
process may commit HUD assistance under a program listed in section 58.1(b) on an activity or
project until HUD has approved the recipient’s form HUD-7015.15 and the related certification
from the responsible entity.

Criterion 15
Regulations at 24 CFR 58.47(a)(1) state that “a responsible entity must re-evaluate its
environmental findings to determine if the original findings are still valid, when the recipient
proposes substantial changes in the nature, magnitude or extent of the project, including adding
new activities not anticipated in the original scope of the project.”

Criterion 16
Regulations at 24 CFR 58.47(b)(3) state that when the recipient is not the responsible entity, the
recipient must inform the responsible entity promptly of any proposed substantial changes, new
circumstances or environmental conditions, or proposals to select a different alternative and must
then permit the responsible entity to reevaluate the findings before proceeding.

Criterion 17
Regulations at 24 CFR 58.43(a) state that if the responsible entity makes a finding of no
significant impact, it must prepare a notice, using the current HUD-recommended format or an
equivalent format. At a minimum, the responsible entity must send the notice to individuals and
groups known to be interested in the activities; to the local news media; to the appropriate tribal,
local, State, and Federal agencies; to the regional offices of the EPA having jurisdiction; and to
the HUD field office. The responsible entity may also publish the notice in a newspaper of
general circulation in the affected community. If the notice is not published, it must also be
prominently displayed in public buildings and within the project area or in accordance with
procedures established as part of the citizen participation process.



                                                 41
Criterion 18
Regulations at 24 CFR 58.38 state that the responsible entity must maintain a written record of
the environmental review undertaken under this part for each project. The document will be
designated the “environmental review record” and must be available for public review. The
responsible entity must use the current HUD-recommended formats or develop equivalent
formats.

Criterion 19
Regulations at 24 CFR 58.38(a) state that the environmental review record must contain all of
the environmental review documents, public notices, and written determinations or
environmental findings required by this part as evidence of review, decision making, and actions
pertaining to a particular project of a recipient. The document must

   •   Describe the project and the activities that the recipient has determined to be part of the
       project;
   •   Evaluate the effects of the project or the activities on the human environment;
   •   Document compliance with applicable statutes and authorities, in particular those cited in
       sections 58.5 and 58.6; and
   •   Record the written determinations and other review findings required by this part.

Criterion 20
Regulations at 24 CFR 58.70 state that “the notice of intent to request release of funds must be
disseminated and/or published in the manner prescribed by §58.43 and §58.45 before the
certification is signed by the responsible entity.”

Criterion 21
Regulations at 24 CFR 58.38(b) state that the environmental review record must contain
verifiable source documents and relevant base data used or cited in environmental assessments,
environmental impact statements, or other project review documents. These documents may be
incorporated by reference into the environmental review record, provided each source document
is identified and available for inspection by interested parties.

Criterion 22
Regulations at 24 CFR Part 51, Subpart D, state that the purpose of this subpart is to promote
compatible land uses around civil airports and military airfields by identifying suitable land uses
for runway clear zones at civil airports and clear zones and accident potential zones at military
airfields and by establishing them as standards for providing HUD assistance, subsidies, or
insurance.

Criterion 23
Regulations at 24 CFR Part 51, Subpart C, state that the purpose of this subpart is to establish
safety standards which can be used as a basis for calculating acceptable separation distances for
HUD-assisted projects from specific, stationary, hazardous operations which store, handle or
process hazardous substances; alert those responsible for the siting of HUD-assisted projects to
the inherent potential dangers when such projects are located in the vicinity of such hazardous


                                                42
operations; provide guidance for identifying those hazardous operations which are most
prevalent; provide the technical guidance required to evaluate the degree of danger anticipated
from explosion and thermal radiation (fire); and provide technical guidance required to
determine acceptable separation distances from such hazards.

Criterion 24
Office of Public and Indian Housing, Office of Field Operations, Field Office Environmental
Review Guidance, states that public housing agencies wishing to expend capital funds on
operating costs have been permitted to do so by reporting the amount of funds “transferred” to
operating costs on budget line item 1406 and drawing the funds down to the general ledger after
budget approval. Office of Public Housing staff should be aware that some public housing
agencies are expending funds reported on budget line item 1406 on standard capital – not
operating – costs after they have been added to the general ledger. Amounts allocated by public
housing agencies to line 1406 should be only those used for true operating costs. The public
housing agencies should provide a description of operating costs to HUD or the responsible
entity to allow completion of the environmental review.

Criterion 25
Regulations at 24 CFR 990.116 state that the environmental review procedures of the National
Environmental Policy Act of 1969 (42 U.S.C. [United States Code] 4332(2)(C)) and the
implementing regulations at 24 CFR parts 50 and 58 are applicable to the Operating Fund
Program.

Criterion 26
Regulations at 24 CFR 58.77(d) state that “at least once every three years, HUD intends to
conduct in-depth monitoring and exercise quality control (through training and consultation)
over the environmental activities performed by responsible entities under this part. Limited
monitoring of these environmental activities will be conducted during each program monitoring
site visit. If, through limited or in-depth monitoring of these environmental activities or by other
means, HUD becomes aware of environmental deficiencies, HUD may take one or more of the
following actions:

   i.   In the case of problems found during limited monitoring, HUD may schedule in-depth
        monitoring at an earlier date or may schedule in-depth monitoring more frequently;
 ii.    HUD may require attendance by staff of the responsible entity at HUD-sponsored or
        approved training;
 iii.   HUD may refuse to accept the certifications of environmental compliance on subsequent
        grants;
 iv.    HUD may suspend or terminate the responsible entity’s assumption of the environmental
        review responsibility; or
  v.    HUD may initiate sanctions, corrective actions, or other remedies specified in program
        regulations or agreements or contracts with the recipient.”




                                                 43
Criterion 27
Regulations at 24 CFR 50.4 state that “HUD and/or applicants must comply, where applicable,
with all environmental requirements, guidelines and statutory obligations under the following
authorities and HUD standards:”

     •   Historic properties;
     •   Flood insurance, floodplain management, and wetland protection;
     •   Coastal areas protection and management;
     •   Water quality and sole-source aquifers;
     •   Endangered species;
     •   Wild and scenic rivers;
     •   Air quality;
     •   Solid waste management;
     •   Farmlands protection;
     •   Noise abatement and control;
     •   Explosive and flammable operations;
     •   Airport hazards (clear zones and accident potential zones); and
     •   Environmental justice.

Criterion 28
Regulations at 36 CFR 800.4(d)(1) state, “No Historic Properties Affected – If the agency
official finds that either there are no historic properties present or there are historic properties
present but the undertaking will have no effect upon them as defined in §800.16(i), the agency
official shall provide documentation of this finding, as set forth in §800.11(d), to the
SHPO/THPO. 33 The agency official shall notify all consulting parties including Indian tribes
and Native Hawaiian organizations, and make the documentation available for public inspection
prior to approving the undertaking. If the SHPO/THPO, or the Council if it has entered the
section 106 process, does not object within 30 days of receipt of an adequately documented
finding, the agency official’s responsibilities under section 106 are fulfilled.”

Criterion 29
Regulations at 50.3(i)(1) state, “It is HUD policy that all property proposed for use in HUD
programs be free of hazardous materials, contamination, toxic chemicals and gasses, and
radioactive substances, where a hazard could affect the health and safety of occupants or conflict
with the intended utilization of the property.”

Criterion 30
Regulations at 24 CFR 50.36 state, “The environmental review must be re-evaluated and updated
when the basis for the original environmental or compliance findings is affected by a major
change requiring HUD approval in the nature, magnitude or extent of a project and the project is
not yet complete. A change only in the amount of financing or mortgage insurance involved
does not normally require the environmental review to be re-evaluated or updated.”


33
     State historic preservation officer/tribal historic preservation officer



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Criterion 31
Regulations at 24 CFR 50.2(a) state, “The definitions for most of the key terms or phrases
contained in this part appear in 40 CFR Part 1508 and in the authorities cited in §50.4,” to
include the following definitions:

   •   Environmental review means a process for complying with NEPA (through an
       environmental assessment or environmental impact statement) or with the laws and
       authorities cited in section 50.4.
   •   HUD approving official means the HUD official authorized to make the approval
       decision for any proposed policy or project subject to this part.
   •   Project means an activity or a group of integrally related activities undertaken directly by
       HUD or proposed for HUD assistance or insurance.

Criterion 32
Office of Public and Indian Housing, Office of Field Operations, Field Office Environmental
Review Guidance, states that at a minimum, the Office of Public Housing must maintain the
following:

   •   A list of responsible entities that HUD has determined will or will not perform the
       environmental review on behalf of HUD. This list will be an important document for
       determining which public housing agencies will need to submit the clearance documents.
   •   A list of forms HUD-7015.15 that have been received and for which clearance has been
       provided.
   •   A list of environmental reviews that have been conducted by the Office of Public
       Housing for each program requiring environmental clearance.
   •   Separate environmental clearance files for each public housing agency.




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