oversight

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

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-07-14.

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

OFFICE OF AUDIT
   Boggan030
REGION 6
FORT WORTH, TX




                  Office of Public Housing
                      Greensboro, NC

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




2014-FW-0004                                 July 14 , 2014
                                                        Issue Date: July 14, 2014

                                                        Audit Report Number: 2014-FW-0004




TO:            Michael A. Williams
               Director of the Greensboro Office of Public Housing, 4FPH

               //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 Greensboro 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 Greensboro 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.
                                           July 14, 2014

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


Highlights
Audit Report 2014-FW-0004


 What We Audited and Why                    What We Found

 We audited the U.S. Department of       The Greensboro Office did not follow environmental
 Housing and Urban Development’s         requirements at 24 CFR Part 50 when it determined
 (HUD) Greensboro, NC, Office of         compliance with National Environmental Policy Act of
 Public Housing as part of a nationwide  1969-related laws and authorities for the 126 public
 audit of HUD’s oversight of             housing agencies in its jurisdiction. Specifically, it did
 environmental reviews. We selected      not properly evaluate environmental conditions or
 the Greensboro Office based on our      maintain required documentation, and may have
 risk assessment. Our audit objectives   allowed a housing agency to circumvent requirements.
 were to determine whether the           This condition occurred because the Greensboro Office
 Greensboro Office of Public Housing     did not have adequate standard operating procedures
 ensured that it performed the required  and its staff was not adequately trained to ensure
 reviews and did not release funds until environmental compliance. As a result, the
 all requirements were met and required  Greensboro Office may have increased the risk to the
 documents were submitted.               health and safety of public housing agency residents
                                         and the general public and may have failed to prevent
 What We Recommend                       or eliminate damage to the environment. Further, the
                                         Greensboro Office approved 126 housing agencies to
                                         spend more than $180 million, including more than
We recommend that the Greensboro         $83 million in American Recovery and Reinvestment
Office implement policies and            Act funds, on projects that did not have a proper
procedures to ensure that public housing environmental review or the environmental reviews
agencies comply with public              were not adequately supported.
notification requirements at 24 CFR
(Code of Federal Regulations) Part 58
or Part 50. To correct systemic
weaknesses identified in this 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 Greensboro Office of Public Housing Did Not Follow
                    24 CFR Part 50 Requirements When It Performed
                    Environmental Reviews                                    4

Scope and Methodology                                                        12

Internal Controls                                                            14

Appendixes
A.    Auditee Comments                                                       17
B.    Criteria                                                               18




                                             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 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 50, Protection
and Enhancement of Environmental Quality. Regulations at 24 CFR Part 50 direct HUD to carry
out the policies of NEPA and other laws and authorities. This responsibility includes performing an
independent evaluation of the environmental issues, determining the scope and content of the
environmental compliance finding, and making the environmental determination.

Our audit objectives were to determine whether the Greensboro Office of Public Housing
ensured that it performed the required reviews and did not release funds until all requirements
were met and required documents were submitted.




                                                  3
                                 RESULTS OF AUDIT


Finding 1: The Greensboro Office of Public Housing Did Not Follow
24 CFR Part 50 Requirements When It Performed Environmental
Reviews
The Greensboro Office did not follow environmental requirements at 24 CFR Part 50 when it
determined compliance with NEPA-related laws and authorities for the 126 public housing
agencies in its jurisdiction. Specifically, it did not properly evaluate environmental conditions or
maintain required documentation, and may have allowed a housing agency to circumvent
requirements. This condition occurred because the Greensboro Office did not have adequate
standard operating procedures, and its staff was not adequately trained to ensure environmental
compliance. As a result, the Greensboro 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 Greensboro Office approved 126 housing
agencies to spend more than $180 million, including more than $83 million in American
Recovery and Reinvestment Act funds, on projects that did not have a proper environmental
review or the environmental reviews were not adequately supported.


 The Greensboro Office Did Not
 Follow 24 CFR Part 50
 Requirements

               For the 126 public housing agencies in its jurisdiction, the Greensboro Office did
               not properly implement environmental review requirements to ensure 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 performing an
               independent evaluation of the environmental issues, determining the scope and
               content of the environmental compliance finding, and making the environmental
               determination. Failure by HUD to adequately conduct 24 CFR Part 50
               environmental reviews may have increased the risk to the health and safety of
               public housing agency residents and the general public since HUD could not
               ensure that they were not exposed to an unnecessary risk of contamination,
               pollution, or other adverse environmental effects. The Greensboro Office did not

                   •   Follow the environmental requirements when it performed environmental
                       reviews,
                   •   Properly evaluate environmental conditions with the required compliance
                       factors,
                   •   Maintain complete environmental records and supporting documentation,
                   •   Comply with internal control requirements,


                                                 4
                    •   Ensure that funds transferred to housing agencies’ operating accounts met
                        environmental requirements, or
                    •   Monitor staff for compliance.

                The Greensboro Office Did Not Follow Environmental Requirements When It
                Performed Environmental Reviews
                The Greensboro Office did not perform the environmental reviews or address the
                compliance factors listed in part A of the form HUD-4128 1 on an individual basis
                for each housing agency. Rather than performing an independent evaluation for
                each housing agency, the general engineers stated that they looked at each of the
                housing agencies’ annual plans and completed one form HUD-4128 for all 126
                housing agencies’ environmental reviews. The staff stated that the form was
                based on all housing agencies’ activities being exempt or categorically excluded;
                therefore, no further review was performed.

                However, failure to evaluate each housing agency’s projects or activities based on
                the environment surrounding that particular location can lead to inaccurate
                conclusions. For example, the City of Elizabeth City is on the east coast of North
                Carolina and has a large mass of land zoned as a special flood zone area, which
                can have a direct impact on public housing projects. These projects, if located
                within the special zone, were required to meet the Federal requirements 2
                regarding flood insurance. Conversely, the City of Charlotte is located more in
                the western region of the State, and the majority of its land mass is considered
                outside any flood zone requirements. Thus, flood insurance was not required for
                the majority of the land mass. However, because the Greensboro Office did not
                make individual assessments showing that the housing developments were either
                inside or outside the flood zones, it was unable to ensure that potentially at-risk
                units and tenants were protected from loss. Regulations at 24 CFR 50.11 state
                that the HUD approving official must make an independent evaluation of the
                environmental issues and maintain copies of the environmental reviews and
                findings in the project files. The environmental information must be an accurate
                scientific analysis and concentrate on the issues that are truly significant to the
                project or activities in question related to that particular area.

                The Greensboro Office Did Not Properly Evaluate Environmental Conditions
                With the Required Compliance Factors
                The Greensboro Office did not properly evaluate compliance with the factors
                listed at 24 CFR 50.4. Rather, it marked the one form HUD-4128 completed for
                all of the housing agencies’ compliance factors as “not applicable,” stating that an
                environmental assessment was not required because the Capital Fund grants
                satisfied the criteria. While an environmental assessment may not have been
                required if the projects were determined to be categorically excluded based on 24
                CFR 50.20, the compliance factors listed in 24 CFR 50.4 must be evaluated.
1
    Environmental Assessment and Compliance Findings for the Related Laws
2
    24 CFR 50.4(b) and 55.20


                                                    5
                Following are examples of compliance factors that the Greensboro Office did not
                evaluate:

                    •   Historic preservation – The Greensboro Office did not evaluate historic
                        preservation impacts before activities were undertaken at any of the
                        housing agencies. The regulations require a HUD official to identify
                        historic properties in consultation with the State historic preservation
                        officer, even if HUD believes that no historic properties are present or that
                        historic properties may be present but the undertaking will have no
                        adverse effect upon the properties. 3

                    •   Floodplain management and flood insurance – The Greensboro Office did
                        not evaluate compliance with floodplain management or flood insurance
                        requirements. 4 The State of North Carolina has several flood zones,
                        including special flood hazard areas that have a 26 percent chance of
                        flooding during a standard 30-year home mortgage. Federal floodplain
                        management regulations and mandatory flood insurance purchase
                        requirements apply to special flood hazard areas. However, the
                        Greensboro Office did not ensure compliance by correctly identifying on
                        Federal Emergency Management Agency maps where the developments
                        were located and whether they were located in a special flood hazard area.

                    •   Noise control – The Greensboro 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. 5 For
                        example, the Charlotte Housing Authority used Recovery Act funds for
                        the demolition and infrastructure of the Boulevard Homes development.
                        Any project that reuses a development must undergo a noise evaluation.
                        The Boulevard Homes development lies adjacent to a major roadway and
                        is located near the Charlotte International Airport and should have been
                        considered for potential noise impacts. However, the Greensboro Office
                        did not determine whether there was a need for noise reduction features.

                    •   Hazardous operations and toxic site hazards – The Greensboro Office did
                        not evaluate or support that it evaluated housing agencies for hazardous
                        operations or toxic chemicals and radioactive substances. 6 Contamination
                        can occur in the surface soil, subsurface soil, and ground water on or near
                        a project site and can be attributed to multiple potential sources, including
                        naturally occurring substances such as radon or releases of hazardous
                        chemicals and substances.


3
    24 CFR 50.4(a) and 36 CFR 800.4(d)(1)
4
    24 CFR 50.4(b) and 55.20
5
    24 CFR 50.4(k) and 24 CFR Part 51, Subpart B
6
    24 CFR 50.3(i)(1)


                                                   6
                     •   Air quality – The Greensboro Office did not evaluate or record whether
                         any of the 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. 7 Housing
                         agency rehabilitation projects included replacement of major systems
                         (heating, ventilation, and air conditioning), roofing, flooring, and
                         windows, all of which can contain asbestos materials. Therefore, the
                         Greensboro Office should have evaluated the air quality and implemented
                         the proper procedures. Instead, it marked the form HUD-4128 as not
                         applicable to the air quality plan and provided no evidence of how
                         compliance was met.

                     •   Other NEPA-related laws and authorities cited in 24 CFR 50.4 – The
                         Greensboro Office also did not evaluate compliance with environmental
                         justice, sole-source aquifers, wetland protection, endangered species, wild
                         and scenic rivers, coastal barrier resources, farmland protection, and
                         airport clear zones. These other NEPA-related laws and authorities were
                         marked on the form as “not applicable” without evidence to validate the
                         determinations.

               The Greensboro Office’s Environmental Records Were Incomplete and Lacked
               Supporting Documentation
               The Greensboro Office did not properly document its decision making for
               compliance with NEPA. The environmental review records for the housing
               agencies’ 2009 Recovery Act and 2011 and 2012 Capital Fund grants did not
               include complete project descriptions. For example, they did not identify the
               project names or locations. Instead they listed “Reference PHA’s [public housing
               agency] Annual Statements” or “Reference Attached PHA Listing” without
               providing the street, city, county, or State information as requested on the form
               HUD-4128. Also, the activities proposed for each development were not clearly
               described, and the number of buildings, number of units, and age of structures
               were not listed. The records also did not provide site plans, locational maps, or
               site photographs that would support what activities comprised the projects, where
               the projects were located, and when the activities would be performed.

               The one environmental review record for each year reviewed contained form
               HUD-4128 as required; however, the Greensboro Office staff marked all of the
               housing agencies’ compliance factors as “not applicable” without supporting
               documentation to validate the compliance determinations made. Examples of
               valid source documentation include

                     •   A properly marked Federal Emergency Management Agency map
                         identifying the locations of housing agency properties,

7
    24 CFR 50.4(h)


                                                  7
                    •   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.

                The Greensboro Office Did Not Comply With Internal Control Requirements
                The Greensboro 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 request for
                release of fund certifications that had been received and the corresponding
                clearance provided, (3) a list of environmental reviews conducted by the
                Greensboro Office, and (4) separate environmental files for each housing agency
                within its jurisdiction. The Greensboro Office’s tracking log was incomplete as it
                was maintained for new construction or demolition and disposition projects only.
                It did not include Capital Fund grants completed under 24 CFR Part 50 because
                the Greensboro Office completed only one environmental review per year for all
                housing agencies’ Capital Fund grants. The tracking log contained a list of the
                project names; proposed action-acquisition, demolition, or disposition; comments;
                State historic preservation officer action dates; environmental review completion
                dates; and Special Applications Center approval dates. However, it did not
                contain the project or grant numbers, the fund years, the names of the officials
                who performed the reviews, any mitigation actions required, the dates on which
                they were signed, and the dates on which the letters were sent to the housing
                agencies approving use of the funds. The Greensboro Office also did not
                maintain a list of responsible entities that HUD determined would or would not
                perform the environmental reviews on its behalf.

                The Greensboro Office Did Not Ensure That Operating Costs Met Environmental
                Requirements
                The Greensboro Office did not ensure that funds transferred to housing agency
                operating accounts met environmental requirements. A Greensboro Office staff
                member stated that the small housing agencies transferred 100 percent of their
                capital funds into their operating accounts, while the large housing agencies
                transferred the allowed 20 percent. The staff member further stated that some of
                the housing agencies would provide a description of what operating costs were
                used for but it was not required. However, HUD’s Field Office Environmental
                Review Guidance 8 states that housing agencies should provide a description of
                operating costs to HUD or the responsible entity to allow completion of the
                environmental review.



8
    Section 5: Program Requirements – Capital Fund Program (Special Note)


                                                     8
               Further, 24 CFR 990.116 provides that the environmental review procedures of
               NEPA and the implementing regulations at 24 CFR Part 50 are applicable to the
               operating fund program. In addition, the housing agencies’ annual contributions
               contracts 9 prohibited 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. Operating costs, such as maintenance, security, operation,
               utilities, furnishings, equipment, supplies, staff training and recruitment, and other
               incidental costs, are categorically excluded not subject to 24 CFR 50.4 laws and
               authorities. However, HUD’s Office of Public Housing must review the
               expenditures from the operating account to ensure that a proper level of
               environmental review was performed for activities that were subject to review.

               Greensboro Office Management Did Not Monitor Its Staff To Ensure Compliance
               The Greensboro Office’s management did not monitor its staff to ensure that staff
               properly performed the 24 CFR Part 50 environmental reviews for compliance
               with environmental requirements. Further, the Greensboro field environmental
               officer stated that he monitored only HUD’s community planning and
               development programs because he did not have authority over other HUD
               programs. 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 Greensboro Office May
    Have Allowed the Charlotte
    Housing Authority To
    Circumvent Environmental
    Requirements

               The Greensboro Office, based on a request, dated January 14, 2010, from the
               Charlotte Housing Authority, allowed the Authority to perform its own
               environmental reviews. Neither 24 CFR Part 50 nor 24 CFR Part 58 allows
               housing agencies to perform their own environmental reviews. Under 24 CFR
               Part 50, HUD must perform the reviews, while under 24 CFR Part 58, the
               responsible entity must perform the reviews. The Authority stated in its letter that
               it was concerned with the extended amount of time added to the environmental
               review process if a responsible entity performed reviews under 24 CFR Part 58.
               The Authority estimated that the process would take a minimum of 39-53 days,
               whereas a review under 24 CFR Part 50 required only 6-15 days to process. The
               Authority stated that it would accomplish the environmental reviews by hiring a
               consultant to perform them and complete the form HUD-4128 and would submit

9
     Form HUD-53012A


                                                 9
                   the completed form to HUD for review and approval. The Authority also stated
                   that it would not have to publish a finding of no significant impact and a notice of
                   intent to request release of funds 10 in the local newspaper as 24 CFR Part 50 does
                   not require publication. However, Federal regulations 11 require HUD to inform
                   the affected public about NEPA-related hearings, public meetings, and the
                   availability of environmental documents. All required notices must be published
                   in an appropriate local printed news medium and sent to individuals and groups
                   known to be interested in the proposed action. When project actions result in a
                   finding of no significant impact, documentation must be available in the project
                   file.

                   Included in the consultant’s environmental review would be a statutory checklist,
                   which would address such items as contacting the State Historical Preservation
                   Office for compliance. However, HUD or the responsible entity was required to
                   send out the historic preservation letters to the State Historic Preservation Office
                   for National Historic Preservation Act, Section 106, consultation and compliance,
                   not the consultant or the Authority. By not requiring the Authority to provide
                   public notice and allowing it to notify the State Historic Preservation Office, the
                   Greensboro Office circumvented the environmental requirements.

     The Greensboro Office Did Not
     Have Adequate Standard
     Operating Procedures To Meet
     24 CFR Part 50 Requirements

                   The Greensboro Office’s standard operating procedures 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 Greensboro Office’s approved procedures were dated April 10, 2009;
                   however, the staff followed unapproved procedures, dated May 27, 2009. Neither
                   of the procedures met the requirements of 24 CFR Part 50. For example, the
                   procedures stated that the environmental reviews pertaining to developments with
                   250 or more units were required to be reviewed by the field environmental officer.
                   However, 24 CFR Part 50 required the reviews by the field environmental officer
                   if developments had more than 200 units. The requirements 12 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.




10
      Regulations at 24 CFR 58.43 require the responsible entity, not the housing authority, to publish a finding of
      no significant impact and a notice of intent to request release of funds.
11
      24 CFR 50.23
12
      24 CFR 50.2(a) and 50.4


                                                           10
The Greensboro Office Staff
Was Not Adequately Trained
To Perform Environmental
Reviews

           The Greensboro Office’s public housing staff did not perform the environmental
           reviews according to the requirements at 24 CFR Part 50. The public housing
           division director was required to sign the form HUD-4128 as the supervisor
           reviewer before submitting it to the public housing director for signature as the
           HUD approving official. However, neither the division director nor the director
           signed any of the forms. Further, the division director stated that he had not
           received training related to 24 CFR Part 50 since joining HUD in June 2012.

           In addition, one general engineer who performed environmental reviews stated
           that he received environmental training when he first joined HUD 26 years earlier
           and had received only refresher training since, while the other general engineer
           who performed reviews stated that he had an environmental degree but had not
           received HUD training related to environmental reviews. Regulations at 24 CFR
           50.10 state that it is the responsibility of all Assistant Secretaries, the General
           Counsel, and the HUD approving official to ensure that the requirements are
           implemented; however, without adequate training for field office management
           and staff, HUD could not ensure that it complied with NEPA.

The 126 Housing Agencies
Expended More Than $180
Million Without Proper
Environmental Reviews

           As shown in table 1, the Greensboro Office approved 126 housing agencies to
           spend more than $180 million, including more than $83 million in Recovery Act
           funds, on projects that did not have a proper environmental review or the
           environmental reviews were not adequately supported. Since HUD failed to
           follow environmental review requirements, we are not recommending that the
           housing agencies repay the funds.

 Table 1: Expended funds
                     2009 Recovery            2011              2012
   Housing agency      Act funds          capital funds     capital funds        Total
  126 North Carolina
  housing agencies    $83,393,816          $52,558,305      $44,773,768      $180,725,889




                                           11
Conclusion

             The Greensboro Office did not properly perform and document environmental
             reviews for all 126 public housing agencies in its jurisdiction. Also, it did not
             enforce the public notification requirements at the Charlotte Housing Authority.
             Thus, it did not properly implement environmental review requirements. Because
             the environmental reviews did not comply with requirements, the Greensboro
             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 spent more
             than $180 million, including more than $83 million in Recovery Act funds, on
             projects that did not have a proper environmental review or the environmental
             reviews were not adequately supported.

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

Recommendations

             1A. We recommend that the Director of the Greensboro Office of Public
                 Housing implement policies and procedures to ensure that the housing
                 agencies follow public notification requirements set forth in either 24 CFR
                 Part 58 or 24 CFR Part 50.




                                             12
                         SCOPE AND METHODOLOGY
We conducted our audit work between November 2012 and August 2013 at the HUD field
office, the Greensboro Housing Authority, and the City of Greensboro in Greensboro, NC, and at
the Charlotte Housing Authority and the City of Charlotte in Charlotte, NC. We also conducted
audit work at our offices in Albuquerque, NM, and Houston, TX. Our review covered the 2009
Recovery Act grant from March 18, 2009, to March 17, 2010, and fiscal years 2011 and 2012
Capital Fund grants from October 1, 2010, to September 30, 2012.

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 Greensboro 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 to determine whether environmental requirements
    were met;
•   Compared the housing agencies’ original, revised, and final annual statements, as applicable,
    to determine the projects completed under the grants and any changes to the projects;
•   Reviewed HUD’s Line of Credit Control System (LOCCS) grant budget, vouchers, and
    obligation and expenditures detail data. We verified the reliability of LOCCS data with other
    sources of information, such as contracts, annual plans, and environmental certifications.
•   Compared the Greensboro 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 Greensboro Office based on our risk assessment, using information we obtained
related to funding levels, historic value, industry uses, and the environmental process used. We
selected the Greensboro and Charlotte Housing Authority’s and their respective cities, the Cities
of Greensboro and Charlotte, to gain an understanding of their environmental review knowledge.
In addition, we reviewed certain aspects of the environmental review process for all 126 housing
agencies within the Greensboro Office’s jurisdiction.

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

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit


                                               13
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                               14
                              INTERNAL CONTROLS

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

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

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


 Relevant Internal Controls

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

                  •   Controls to ensure that the Greensboro Office properly implemented
                      mandated environmental review requirements, including

                          o 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 the Greensboro Office,
                          o Controls to ensure that the Greensboro Office complied with
                            HUD’s Field Office Environmental Review Guidance for
                            maintaining tracking logs and files,
                          o Controls to ensure that the Greensboro Office monitored for
                            environmental compliance, and
                          o Controls to ensure that the Greensboro Office 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)
               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.


                                                 15
Significant Deficiency

            Based on our review, we believe that the following item is a significant deficiency:

            •      The Greensboro Office did not follow environmental requirements when it
                   performed environmental reviews for the public housing agencies within its
                   jurisdiction (finding).




                                             16
Appendix A

     AUDITEE COMMENTS AND OIG’S EVALUATION


                                      Auditee Comments

         The director of the Greensboro Office of Public Housing stated that his office
         had no comments.




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Appendix B
                                         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 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 4
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.”




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Criterion 5
Regulations at 24 CFR 50.4 state, “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 6
Regulations at 24 CFR 50.10(a) state, “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.”

Criterion 7
Regulations at 24 CFR 50.11(a) state that the HUD approving official must make an independent
evaluation of the environmental issues; take responsibility for the scope and content of the
compliance finding, environmental assessment, or environmental impact statement; and make the
environmental finding.

Criterion 8
Regulations at 24 CFR 50.11(b) state that copies of environmental reviews and findings must be
maintained in the project file.

Criterion 9
Regulations at 24 CFR 50.20(a) state that the following actions, activities, and programs are
categorically excluded from the NEPA requirements of this part. They are not excluded from
individual compliance requirements of other environmental statutes, executive orders, and HUD
standards cited in section 50.4, where appropriate. Form HUD-4128 must be used to document
compliance.

   •   Rehabilitation of structures when the following conditions are met:
          o In the case of residential buildings, the unit density is not changed more than 20
              percent,



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              o The project does not involves changes in land use (from nonresidential to
                residential or from residential to nonresidential), and
              o The estimated cost of rehabilitation is less than 75 percent of the total estimated
                cost of replacement after rehabilitation.

Criterion 10
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 11
Regulations at 24 CFR 55.20, Subpart C, state the procedures for making determinations on
floodplain management, which contain eight steps, including public notices and an examination
of practicable alternatives.

Criterion 12
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 Public Housing
Operating Fund program.

Criterion 13
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. 13 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 14
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.


13
     State historic preservation officer/tribal historic preservation officer


                                                            20
Criterion 15
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 request for release of fund certifications 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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