OFFICE OF AUDIT
REGION 6
FORT WORTH, TX
Office of Public Housing
Detroit, MI
Public Housing Capital Fund and American
Recovery and Reinvestment Act of 2009
Environmental Reviews
2014-FW-0005 September 24, 2014
Issue Date: September 24, 2014
Audit Report Number: 2014-FW-0005
TO: Willie C.H. Garrett, EMPA,
Director, Detroit Office of Public Housing, 5FPH
//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 Detroit Office
Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) results of our review of the Detroit Office of Public Housing’s
oversight 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.
Septmber 24, 2014
Improvements Are Needed Over Environmental
Reviews of Public Housing and Recovery Act Funds
in the Detroit Office
Highlights
Audit Report 2014-FW-0005
What We Audited and Why What We Found
We audited the U.S. Department of The Detroit Office did not provide adequate oversight
Housing and Urban Development’s of three public housing commissions to ensure that the
(HUD) Detroit Office of Public responsible entities properly completed and
Housing as part of a nationwide audit documented environmental reviews as required by 24
of HUD’s oversight of environmental CFR (Code of Federal Regulations) Part 58. Further, it
reviews. We selected the Detroit did not maintain sufficient internal control records.
Office based on our risk assessment. These conditions occurred because the Detroit Office
Our audit objectives were to determine thought that the State of Michigan’s environmental
whether the Detroit Office’s oversight officer was responsible for monitoring responsible
of public housing environmental entities for compliance with requirements and because
reviews within its jurisdiction ensured it did not properly implement the environmental
that (1) the responsible entities requirements. As a result, the Detroit Office may have
performed the required reviews and (2) increased the risk to the health and safety of public
HUD did not release funds until all housing agency residents and the general public and
required documents were submitted. may have failed to prevent or eliminate damage to the
environment. Further, the three housing commissions
spent more than $34.7 million, including more than
What We Recommend
$18 million in Recovery and Reinvestment Act grant
funds, for projects that either did not have required
We recommend that three housing environmental reviews or the environmental reviews
commissions repay HUD, for were not adequately supported.
transmission to the U.S. Treasury,
almost $1 million and support or repay
more than $33 million. We also
recommend that the Director of the
Detroit Office of Public Housing take
available actions against the three
housing commissions and their
responsible entities. To correct
systemic weaknesses identified in this
report, we will make recommendations
to HUD headquarters officials in an
upcoming nationwide audit report.
TABLE OF CONTENTS
Background and Objectives 3
Results of Audit
Finding: The Detroit Office of Public Housing Did Not Provide Adequate
Oversight of 24 CFR Part 58 Environmental Reviews 4
Scope and Methodology 20
Internal Controls 22
Appendixes
A. Schedule of Questioned Costs 24
B. Auditee Comments and OIG’s Evaluation 25
C. Criteria 27
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 58,
Environmental Review Procedures for Entities Assuming HUD Environmental Responsibilities,
which allows 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.
Our audit objectives were to determine whether the Detroit Office of Public Housing’s oversight
of public housing environmental reviews within its jurisdiction ensured that (1) the responsible
entities performed the required reviews and (2) HUD did not release funds until all required
documents were submitted.
3
RESULTS OF AUDIT
Finding: The Detroit Office of Public Housing Did Not Provide
Adequate Oversight of 24 CFR Part 58 Environmental Reviews
The Detroit Office did not provide adequate oversight of three public housing commissions to
ensure that the responsible entities properly completed and documented environmental reviews
as required by 24 CFR Part 58. Further, it did not maintain sufficient internal control records.
These conditions occurred because the Detroit Office thought that the State of Michigan’s
environmental officer was responsible for monitoring responsible entities for compliance with
requirements and because it did not properly implement the environmental requirements. As a
result, the Detroit 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 three housing commissions spent more than $34.7 million, including
more than $18 million in Recovery and Reinvestment Act grant funds, for projects that either did
not have required environmental reviews or the environmental reviews were not adequately
supported.
The Detroit Office Did Not
Provide Adequate Oversight To
Ensure Environmental
Compliance
To assess compliance with requirements, we reviewed the Dearborn Housing
Commission, the Detroit Housing Commission, and the Pontiac Housing
Commission and their respective responsible entities, the City of Dearborn, the
City of Detroit, and the City of Pontiac. There were significant deficiencies at
each housing commission. Although Detroit Office staff reviewed responsible
entity environmental review records, it failed to discern that the reviews did not
meet regulatory requirements. Instead, it accepted the responsible entities’
reviews at face value and released funding to the housing commissions. As a
result, the Detroit 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 Detroit Office Did Not Provide Adequate Oversight To Ensure That the
Responsible Entities Properly Completed Part 58 Environmental Reviews
Because the Detroit Office did not provide adequate oversight, it did not
determine that the three public housing commissions 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 Detroit Office did not determine that the
responsible entities
Failed to notify HUD when they would not perform the environmental
reviews,
Failed to review the housing commissions’ consultants’ work to ensure
proper compliance,
Had not certified as the responsible entities on the requests for release of
funds and certifications,
Had not completed the environmental reviews before the Detroit Office
released funds,
Failed to reevaluate project changes, and
Failed to meet public notification requirements.
The Responsible Entity Failed To Notify HUD That It Would Not Perform the
Environmental Reviews for the Dearborn Housing Commission
The City of Dearborn, as the responsible entity, did not perform the Dearborn
Housing Commission’s environmental reviews, nor did it review the
environmental records completed by the housing commission for compliance with
the requirements. The housing commission’s executive director stated that the
housing commission had performed its own environmental reviews and had made
the compliance determinations because HUD began requiring them in 1998 under
24 CFR Part 58. According to the housing commission’s executive director, the
City of Dearborn denied the commission’s request to perform the reviews and told
the commission it would need to perform its own reviews.
The City offered advice and guidance on how to perform the environmental
reviews but confirmed that it did not perform the housing commission’s
environmental reviews. According to requirements,3 a responsible entity that
believes it does not have the legal capacity to carry out the environmental
responsibilities must notify the local HUD office for further instructions.
However, this requirement was not met. Rather, the Dearborn Housing
Commission assumed all responsibility for its environmental reviews. Therefore,
the housing commission and responsible entity improperly implemented the
environmental review process. Additionally, the mayor of Dearborn, as the
certifying officer, signed the request for release of funds and certification,4
certifying that his office had fully carried out its responsibilities for environmental
review, decision making, and action related to the projects set forth. The mayor
1
24 CFR 58.4(a)
2
24 CFR 58.30(a)
3
24 CFR 58.11(a)
4
Form HUD-7015.15
5
further certified that his office assumed responsibility for and complied with
NEPA, the environmental procedures, and statutory obligations of the laws cited
in 24 CFR 58.5 and 58.6 on projects for which it did not perform the
environmental reviews.
The Responsible Entity Failed To Review the Detroit Housing Commission’s
Consultant’s Work for Proper Compliance
The City of Detroit, as the responsible entity, failed to review the Detroit Housing
Commission’s consultant’s work for proper compliance with environmental
requirements. While a housing commission may use consultants to perform a
significant portion of the environmental review, only HUD or a responsible entity
may determine compliance with requirements. In accordance with the
requirements,5 a responsible entity assumes the responsibility for conducting the
environmental reviews, decision making, and other actions that would otherwise
apply to HUD under NEPA and other provisions of law. However, the Detroit
Housing Commission submitted a memorandum to the City, stating that the
environmental review was completed by a consultant, who determined that the
capital improvements for the developments were considered to be categorically
excluded according to 24 CFR 58.35 and would not require a request for release
of funds and certification. The City accepted the consultant’s environmental
review at face value and stated to HUD that the review indicated that the capital
improvements were in compliance and requested HUD to release the funds to the
housing commission. Had the responsible entity performed an independent
review and made the compliance determination, it should have determined that a
request for release of funds and certification was required based on the
development activities being categorically excluded subject to 24 CFR 58.35.
The Detroit Office Did Not Determine That the City of Pontiac Did Not Certify
the Request for Release of Funds and Certification
The Detroit Office allowed the Pontiac Housing Commission to expend its 2011
Public Housing Capital Fund grant of $457,861 without the responsible entity
certifying to compliance with environmental requirements. The City of Pontiac
did not certify the 2011 request for release of funds and certification. According
to the requirements,6 the responsible entity must certify that it has complied with
the requirements that would apply to HUD under NEPA before a recipient can
undertake any physical activities. However, the request for release of funds and
certification improperly showed the Pontiac Housing Commission as the
responsible entity and the recipient. Further, the request was signed by the
housing commission’s finance report manager as the certifying officer of the
responsible entity, and the housing commission’s executive director signed as the
recipient. The requirements at 24 CFR 58.72(b) state that HUD may disapprove a
certification and request for release of funds if it has knowledge that the
responsible entity or other participants in the development process have not
5
24 CFR 58.4(a)
6
24 CFR 58.2(a)(7)(B) and 58.5
6
complied with the items in 24 CFR 58.75. Had the Detroit Office provided proper
oversight, it should have found that the request for release of funds and
certification was not properly executed by the responsible entity, and it should not
have released the funds.
In addition, the mayor’s signature on the Pontiac Housing Commission’s 2009
Recovery Act grant request for release of funds and certification did not appear to
be authentic.
The Detroit Office Failed To Find That Two Housing Commissions Obligated
and Expended Funds Before the Responsible Entities Completed the
Environmental Reviews
The Detroit Office failed to determine that the Pontiac Housing Commission
obligated and expended more than $270,000 in Recovery Act funds before the
responsible entity, the City of Pontiac, 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 request for release of
funds and certification7 if required. The Pontiac Housing Commission obligated
and expended more than $270,000 in 2009 Recovery Act capital funds on
contracts for repairs and improvements before the environmental review was
completed. The housing commission and various contractors signed seven
contracts between April 13 and September 17, 2009; however, the Detroit Office
did not sign the form HUD-7015.16, Authority to Use Grant Funds, until October
15, 2009. All but one of the contracts had terms of completion of no more than 2
months. In addition, on March 22, 2012, the Detroit Office disbursed more than
$82,000 of the Pontiac Housing Commission’s 2012 capital funds for operations
use without a completed environmental review. The Detroit Office noted in the
Line of Credit Control System (LOCCS) that no environmental review had been
received, but it released the funds to the housing commission anyway. As of
November 7, 2012, the 2012 Capital Fund grant environmental review was in
process.
Further, the Dearborn Housing Commission obligated and expended more than
$63,000 between April 28, 2009, and January 22, 2010, in 2009 Recovery Act
funds on architect and engineering fees and a rehabilitation contract before the
environmental review was completed. On December 29, 2009, HUD reported in
its remote monitoring report to the housing commission that it had identified work
items, specifically, replacement of exterior windows and doors and an exterior
insulating finish system at Townsend Towers that required an environmental
review. The housing commission responded that it had submitted a multiyear
environmental review for the upcoming 5-year Capital Fund program on
September 29, 2009, which included the replacement work. However, after
further discussion, the Detroit Office informed the housing commission that an
7
24 CFR 58.22(a)
7
environmental review and request for release of funds and certification was
required for the 2009 Recovery Act grant projects. According to HUD’s remote
monitoring report, the housing commission had already obligated 100 percent of
its funds. HUD was concerned that the housing commission may have
inappropriately obligated the Recovery Act funds due to a deficient procurement
policy and before completing the environmental review. After receiving the
monitoring report, the Dearborn Housing Commission completed and submitted a
request for release of funds and certification with a statutory checklist covering 24
CFR 58.6 that was dated January 5, 2010. However, HUD noted receipt of the
certification on October 1, 2009, several months before the housing commission
and the responsible entity actually signed and submitted the request for release of
funds and certification. The Acting Director of the Detroit Office of Public
Housing did not sign the Authority to Use Grant Funds until February 23, 2010.
The Detroit Office Did Not Determine That a Housing Commission Failed To
Report Substantial Project Changes
The Detroit Office did not determine that the Detroit Housing Commission failed
to submit to the responsible entity for reevaluation any changes that had occurred
between the housing commission’s annual plan and its approved 5-year
environmental review. For example, the housing commission’s 2011 annual
statement showed Americans With Disabilities Act 504 compliance work totaling
$825,000 at Brewster Homes, but the 5-year environmental review did not list any
type of 504 compliance work. Further, the 2012 annual statement listed nine
activities in six different developments totaling more than $2.9 million that were
not included in the 5-year environmental review record (see table 1). The housing
commission 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 finding to determine whether the original
findings are still valid and update the environmental review record by including
the reevaluation in its record. However, the housing commission’s director of
compliance and capital improvements stated that the commission had not had any
changes in activities that would have required the environmental review to be
updated.
8
24 CFR 58.47(a)(1) and (b)(3)
8
Table 1 Activities not included in the 5-year environmental review record
Brewster Forest Sheridan Smith Riverbend Woodbridge
Activity Total
Home Park Place I and II Homes Towers Senior Village
Replace $ 80,000 $80,000
storm doors
Asphalt 425,000 425,000
shingles
Replace $550,000 550,000
windows
Replace $ 60,000 60,000
trash
compactors
Replace 1,018,318 1,018,318
windows &
seal exterior
Replace $625,000 625,000
vinyl siding
Replace $35,000 35,000
exhaust fans
Replace 45,000 $ 93,000 138,000
boilers
Replace 34,000 34,000
aluminum
railings
Totals $505,000 $550,000 $1,078,318 $625,000 $80,000 $127,000 $2,965,318
The Detroit Office Failed To Determine That Two Responsible Entities Did Not
Comply With Public Notification Requirements
The Detroit Office failed to determine that the Pontiac Housing Commission,
instead of the responsible entity, prepared, published, and received public
comments. The requirements9 state that if the responsible entity makes a finding
of no significant impact, it must prepare a finding of no significant impact notice,
using the current HUD-recommended format or an equivalent format. The
responsible entity must consider the comments and make modifications, if
appropriate, in response to the comments before it completes its environmental
certification and before the recipient, the housing commission, submits its request
for release of funds and certification. However, the housing commission, instead
of the responsible entity, developed its own finding of no significant impact
notice, it did not use the HUD-recommended format or equivalent, and there was
no evidence it was published as a publication date was not provided. Further, the
finding of no significant impact did not include a request for comments or state
the comment period, it did not provide information on where project information
was maintained and could be examined or copied, and it did not provide for
objections to the request for release of funds and certification by the public.
9
24 CFR 58.43
9
The Detroit Office also failed to determine that the responsible entity, the City of
Detroit, did not publish the required finding of no significant impact and a notice
of intent to request a release of funds and certification after the environmental
determination was made that the Detroit Housing Commission’s projects were
categorically excluded under 24 CFR 58.35. If the responsible entity had
determined that the projects could convert from categorically excluded to exempt,
publication would not have been required. Since the City did not make this
determination, a public notification was required.
The Detroit Office Did Not Provide Adequate Oversight To Ensure That the
Responsible Entities Properly Documented Part 58 Environmental Reviews
The Detroit 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 Pontiac Housing Commission’s environmental review records for its 2009
Recovery Act and its 2011 Capital Fund grant 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 Dearborn Housing Commission’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 guidance11
states that a complete and clear project 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
commission and the responsible entity provided only a property name, and
activities that included replacement of exterior windows, doors, and an exterior
10
24 CFR 58.38(a)
11
OneCPD Storyboards: Environmental Review, dated November 13, 2012
10
insulation and finish system as outlined in the housing commission’s revised
5-year plan.
None of the records for the Detroit Housing Commission’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 Section 106 of the National Historic Preservation Act.
The Detroit Housing Commission’s consultant unilaterally determined that all 20
developments were “not listed as a historic property” and provided summaries
that included a “limited historical review” of Sanborn fire insurance maps, aerial
photographs, and municipal records. However, the City of Detroit was required
to consult with the State historic preservation officer regardless of the properties’
historical status.12 In addition, the support should have included evidence of a
documented finding sent to the State historic preservation officer or a supported
determination that the projects complied with a State historic preservation officer
programmatic agreement.
Similarly, none of the records for the Dearborn Housing Commission’s Capital
Fund grants contained all the required compliance documentation supporting the
items identified on the statutory checklists. For example, while the environmental
review records showed that all the housing commission’s developments were less
than 50 years old and that no monitoring or adverse historical impact is
applicable, the environmental review records should still have documentation
supporting consultation with the State historic preservation officer, or
documentation that the projects complied with a specific stipulation in a
programmatic agreement.
Further, the Pontiac Housing Commission’s environmental review records did not
comply with records requirements.13 None of the records contained all of the
required compliance documentation supporting the items identified on the
checklist. For example, the statutory checklist requires compliance with airport
clear zones and accident potential zones.14 However, the Pontiac Housing
Commission determined that airport clear zones and accident potential zones did
not apply to the projects without providing a basis to support its determination.
The support could have included a map documenting the proximity of the airport
to the project sites.
12
36 CFR 800.4(d)(1)
13
24 CFR 58.38(b)
14
24 CFR 51, subpart D
11
The Detroit Office Did Not Ensure That Agencies Verified and Documented
Compliance Requirements
The three housing commissions and their responsible entities did not properly
evaluate or provide documentation supporting their compliance with the
following requirements:
Historic preservation - The housing commissions and their responsible
entities did not 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, and
determine the intended effect on historic properties. Consultation is
required even if the housing commission and responsible entity believe
that no historic properties are present or that historic properties may be
present but the undertaking will have no adverse effect upon them. While
the Pontiac Housing Commission sent notification letters to the State
historic preservation officer, the requirements state that only HUD or an
agency official has delegated legal responsibility for compliance with
Section 106.
Floodplain management and flood insurance - The housing commissions
and their responsible entities did not always comply with floodplain
management or flood insurance requirements. While 12 of the 20
environmental review records for the Detroit Housing Commission
contained a Federal Emergency Management Agency map with the
subject property identified, none of the maps identified the flood zones the
properties were located in. Further, the remaining eight developments had
no documentation showing whether the developments were in a
designated flood zone or required flood insurance. Similarly, the Pontiac
Housing Commission did not address or provide supporting
documentation to verify that its properties were not in a flood zone.
Contamination and toxic site hazards - The housing commissions and
their responsible entities did not comply with requirements regarding
contamination and toxic site hazards. The Dearborn Housing
Commission’s environmental review record stated that there was no
landfill, waste incineration facility, or compost facility within the City
limits. The Dearborn Housing Commission further stated that the project
would not produce hazardous waste, debris, fumes, or noxious odors and
would not cause the elimination of lead-based paint hazards and asbestos,
if encountered. However, the responsible entity did not evaluate the
presence or possible presence of contamination, toxic materials, or
radioactive substances as required by 24 CFR 58.5(i)(2). The Detroit
Housing Commission’s responsible entity failed to evaluate the threat
from radon gas, which is a radioactive substance and subject to the noted
requirements, while the Pontiac Housing Commission provided no
12
supporting documentation to validate the statement “not applicable” in the
environmental review record.
Noise control - The housing commissions and their responsible entities
did not comply with noise control requirements for major rehabilitation or
conversion projects to determine whether there was a need for noise
reduction features. The Detroit Housing Commission stated that “no
known noise hazards were identified within the project areas”; however,
seven of its properties were adjacent to a Detroit freeway and located
within an “unacceptable” noise zone that exceeded the 65 decibels
allowed. Regulations15 strongly encourage HUD to convert noise-exposed
sites to land uses compatible with the high noise levels or at least actively
seek to incorporate noise attenuation features into rehabilitation projects.
The Dearborn Housing Commission stated that no activities anticipated
under the Capital Fund grant rehabilitation program would increase the
noise in or around the subject activities and that no noise pollution
problems existed in residential areas, other than traffic noise from major
thoroughfares. However, the housing commission did not address the
noise control from these major thoroughfares. The Pontiac Housing
Commission stated that noise control was not applicable to its
rehabilitation projects but did not provide supporting documentation to
substantiate the decision.
Air quality - The housing commissions and their responsible entities did
not comply with air quality requirements to determine whether hazardous
air pollutants were in the building materials that were replaced. All of the
housing commissions performed major rehabilitation activities, such as
replacement of roofs or heating, ventilation, and air conditioning systems,
which can have asbestos-containing building materials. Failure to
properly identify, abate, dispose of, and perform other required actions
regarding asbestos before beginning renovation activities may create
health hazards.
Environmental justice - The housing agencies and their responsible
entities did not comply with environmental justice requirements.
Environmental justice requirements are designed to focus Federal attention
on the environmental and human health conditions that any of the
compliance factors may have on minority and low-income communities.
Any unmitigated adverse impact that can occur with such things as
contamination or toxic sites, noise, and air quality could result in an
environmental justice compliance violation.
15
24 CFR 51, subpart B
13
Sole-source aquifers, coastal zone management, wetland protection,
endangered species, wild and scenic rivers, farmland protection,
explosive and flammable operations, and airport hazards - On most
occasions, the housing commissions and their responsible entities
provided no documentation supporting 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.
Because these compliance requirements were not verified, HUD may have
allowed an increased risk to the health and safety of the residents and the general
public since it could not ensure that they were not exposed to an unnecessary risk
of contamination, pollution, or other adverse environmental effects.
The Detroit Office Did Not Ensure That Operating Costs Met Environmental
Requirements
The Detroit Office did not ensure that funds transferred to housing commission
operating accounts met environmental requirements because it believed there was
no regulation that required it to do so. A staff member stated that there was
nothing in the operating subsidy regulations, 24 CFR Part 990, to allow an
environmental review or give control over what is moved from the Capital Fund
account to the operating account; therefore, the Detroit Office did not require a
breakdown of what operating funds were used for. However, HUD’s Field Office
Environmental Review Guidance16 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 Public Housing Operating Fund program. In addition, the housing
agencies’ annual contributions contracts17 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 58.5 laws and authorities. However, the Office of Public Housing or the
responsible entity 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.
16
Section 5: Program Requirements – Capital Fund Program (Special Note)
17
Form HUD-53012A
14
The Detroit Office Did Not
Maintain Sufficient Internal
Control Records
The Detroit 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 request for release of funds and certification
was received and cleared, and whether HUD performed the environmental
reviews directly. The guidance further required maintaining a separate
environmental file for each housing commission.
The Detroit Office’s tracking log for fiscal years 2001 through 2012 had only the
public housing commission’s name and either a date or the word “exempt” under
each year. There was no explanation as to what the date referred to. The tracking
log for fiscal years 2013 through 2018 expanded this information to include the
date of the exempt or categorically excluded letter or the date of the request for
release of funds and certification notice and the date the Detroit Office released
the funds. However, neither of the tracking logs included the grant number,
identified the responsible entity, 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, or the date of the Detroit Office’s
required 15-day wait period.
The Detroit Office Believed
That the State of Michigan’s
Environmental Officer Was
Responsible for Monitoring for
Compliance
The Detroit Office did not monitor the housing commissions or their responsible
entities for environmental compliance. According to the Detroit Office’s Public
Housing Director, the monitoring role is assigned to the environmental officer for
the various States. The Director stated that he could not speak for the current
environmental officer but the previous State of Michigan environmental officer
had completed onsite monitoring reviews for the responsible entities. However,
according to 24 CFR 58.77(d), HUD intended to conduct indepth 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 criteria does not provide for the transfer of
monitoring responsibility to the States.
15
The Detroit Office Did Not
Properly Implement the
Environmental Requirements
The Detroit Office Did Not Understand the Environmental Requirements
The Detroit Office did not understand the environmental requirements when
releasing funds to the recipients. For example, it would override the responsible
entity’s decision-making process and release funds to the recipient. During a
quality management review in July 2011, HUD’s Office of Environment and
Energy found that the Detroit Office had violated two environmental
regulations.18 The first violation occurred when three housing commissions
received an authority to use grant funds from HUD before waiting the required 15
calendar days from receipt of the request for release of funds and certification or
from the time specified in the notice published by the responsible entity,
whichever was later. The other violation occurred when the Detroit Office failed
to determine that a responsible entity did not publish the required notification, but
the Detroit Office issued the authority to use grant funds in violation of the
environmental requirements. The Detroit Office of Public Housing Director, in
response to the violations, stated that what the quality management review team
observed were cases in which the responsible entity submitted a request for
release of funds and certification when such a request was not necessary. The
Director further stated that his office’s “practice” was to release the funds to the
housing commission without waiting for the 15-day comment period when it
decided that a responsible entity had unnecessarily submitted a request for release
of funds and certification.
The Director assured the quality management review team that his office would
no longer correct determinations made by the responsible entity and would wait
the 15 days after receiving the request for release of funds and certification from
the responsible entity. While the Detroit Office should not change determinations
made by the responsible entity that assumed the responsibilities of NEPA and
other laws and authorities for HUD, it should provide oversight and guidance to
the housing commission and responsible entity to ensure that the environmental
requirements are properly implemented in the future. However, a public housing
staff member stated that management had instructed staff to process the
environmental reviews and not check them for compliance.
The Detroit Office Did Not Provide Training Directly Related to Capital Funds
and Processing of Environmental Reviews
The Detroit Office did not provide environmental training to the housing
commissions or responsible entities to ensure compliance. The quality
management review report included a corrective action encouraging staff and
recipients involved with environmental reviews to attend training provided, but
18
24 CFR 58.73 and 58.77(a)
16
the Director of the Detroit Office of Public Housing responded that his office
would only “encourage” staff to attend training. The regulations19 allow HUD to
“require” training for housing agencies and their responsible entities if it becomes
aware of deficiencies through monitoring; however, the Detroit Office did not
require training for anyone directly involved in meeting or ensuring compliance
with the requirements. Further, two of the housing commission’s executive
directors stated they had not received environmental training and were not aware
of training being offered. Both executive directors commented that they wished
there was some type of guidance provided by HUD, other than 24 CFR Part 58,
that explained the environmental review process.
The Three Housing
Commissions Spent More Than
$34.7 Million for Questioned
Costs
Because the environmental reviews did not comply with requirements, the three
housing commissions incurred more than $34.7 million in questioned costs,
including more than $18 million in Recovery Act funds, as detailed in table 2.
Table 2: Questioned costs
Dearborn Detroit Pontiac
Housing Housing Housing
Year Commission Commission Commission Total
2009 Recovery $564,270 $17,275,908 $589,605 $18,429,783
Act funds
2011 capital funds 366,971 7,756,710 457,861 8,581,542
2012 capital funds 337,776 7,275,028 82,470 7,695,274
Total $1,269,017 $32,307,646 $1,129,936 $34,706,599
Conclusion
The Detroit Office did not provide adequate oversight to ensure that the housing
commissions and responsible entities properly completed and documented
environmental reviews for the three public housing commissions in its jurisdiction
that were reviewed. Thus, it was unaware that the public housing commissions
and their responsible entities did not properly implement environmental review
requirements. Because the environmental reviews did not comply with
requirements, the Detroit Office may have increased the risk to the health and
safety of public housing commission residents and the general public and may
have failed to prevent or eliminate damage to the environment. Further, the
19
24 CFR 58.77(d)(ii)
17
housing commissions incurred more than $34.7 million in questioned costs,
including more than $18 million in Recovery Act funds.
The Detroit Office was responsible for verifying that environmental reviews
complied with requirements, conducting periodic monitoring, and providing
training to the housing commissions and responsible entities. Since these
conditions 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 three commissions, the Detroit Office should review the deficiencies cited and
implement the recommended corrective actions, including repaying almost $1
million in ineligible costs and supporting or repaying more than $33 million in
unsupported costs.
Recommendations
We recommend that the Director of the Detroit Office of Public Housing require
1A. The Dearborn Housing Commission to repay $63,255 in Recovery Act grant
funds to HUD for its transmission to the U.S. Treasury for architect and
engineering fees and contract obligations that occurred before the
environmental review was completed by the responsible entity. Repayment
must be from non-Federal funds.
1B. The Dearborn Housing Commission and the City of Dearborn to provide
support that they complied with 24 CFR Part 58 requirements for the
Commission’s Recovery Act grant or require the Commission to repay
$501,015 to HUD for its transmission to the U.S. Treasury. Repayment
must be from non-Federal funds.
1C. The Dearborn Housing Commission and the City of Dearborn to provide
support that they complied with 24 CFR Part 58 requirements for the
Commission’s 2011 Capital Fund grant or require the Commission to repay
$366,971 to HUD from non-Federal funds.
1D. The Dearborn Housing Commission and the City of Dearborn to provide
support that they complied with 24 CFR Part 58 requirements for the
Commission’s 2012 Capital Fund grant or require the housing commission
to reimburse $337,776 to its 2012 Capital Fund grant from non-Federal
funds.
1E. The Detroit Housing Commission and the City of Detroit to provide support
that they complied with 24 CFR Part 58 requirements for the Commission’s
Recovery Act grant or require the Commission to repay $17,275,908 to
18
HUD for its transmission to the U.S. Treasury. Repayment must be from
non-Federal funds.
1F. The Detroit Housing Commission and the City of Detroit to provide support
that they complied with 24 CFR Part 58 requirements for the Commission’s
2011 Capital Fund grant or require the Commission to repay $7,756,710 to
HUD from non-Federal funds.
1G. The Detroit Housing Commission and the City of Detroit to provide support
that they complied with 24 CFR Part 58 requirements for the Commission’s
2012 Capital Fund grant or require the Commission to reimburse $7,275,028
to its 2012 Capital Fund grant from non-Federal funds.
1H. The Pontiac Housing Commission to repay $273,774 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.
1I. The Pontiac Housing Commission and the City of Pontiac to provide
support that they complied with 24 CFR Part 58 requirements for the
Commission’s Recovery Act grant or require the Commission to repay
$315,831 to HUD for its transmission to the U.S. Treasury. Repayment
must be from non-Federal funds.
1J. The Pontiac Housing Commission to repay $457,861 in 2011 capital funds
to HUD for its statutory violation of the requirement that the responsible
entity, not the Commission, sign as certifying officer on the request for
release of funds and certification. Repayment must be from non-Federal
funds.
1K. The Pontiac Housing Commission to reimburse $82,470 to the
Commissions’ 2012 Capital Fund grant for operation expenditures that
occurred before the environmental review was completed by the responsible
entity. Repayment must be from non-Federal funds.
1L. The housing commissions to work with their respective responsible entities
and local HUD environmental officer to show that no harm occurred from
completion of all of the projects or mitigate any harm that occurred.
We also recommend that the Director of the Detroit Office of Public Housing
1M. Take one or more of the following actions with the three housing
commissions and their respective responsible entities:
19
Require attendance by responsible staff and management of the housing
commission and responsible entity at HUD-sponsored or approved
training;
Refuse to accept the certifications of environmental compliance on
future 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
commission.
20
SCOPE AND METHODOLOGY
We conducted our audit work between November 2012 and August 2013 in Detroit, MI, at the
HUD field office, Dearborn Housing Commission, City of Dearborn, Detroit Housing
Commission, City of Detroit, Pontiac Housing Commission, and City of Pontiac and 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;
Interviewed staff from HUD’s Detroit Office, selected housing commissions, and their
respective responsible entities’;
Analyzed HUD’s field office’s, the housing commissions’, and the responsible entities’
environmental review processes for compliance with environmental requirements;
Analyzed environmental review records for the selected housing commissions to ensure that
environmental requirements were met;
Compared the housing commissions’ 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 commissions and
noted any noncompliance issues related to environmental reviews;
Reviewed HUD’s LOCCS grant budgets, vouchers, and obligations and expenditures detail
data. We verified the reliability of LOCCS data with other sources of information, such as
contracts, annual plans, and environmental certifications; however, we did not rely on
LOCCS data to support our conclusions.
Compared the Detroit 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 commissions’ 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 Detroit Office and 3 of 129 housing commissions within its jurisdiction based on
our risk assessment, using information that we obtained related to funding levels, historic value,
industry uses, and the environmental process used.
We did not use or rely on computer-processed data to support our conclusions.
21
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 finding
and conclusions based on our audit objectives.
22
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 Detroit Office, the housing commissions, and
responsible entities properly implemented mandated environmental review
requirements including
Controls to ensure that HUD did not release funds and the housing
commissions did not obligate or expend funds before completion of the
environmental reviews by the responsible entity;
Controls to ensure that the Detroit Office complied with HUD’s Field
Office Environmental Review Guidance for maintaining tracking logs and
files;
Controls to ensure that the housing commissions and responsible entities
were monitored for environmental compliance; and
Controls to ensure that the housing commissions and responsible entities
received adequate training on environmental compliance for Capital Fund
grants.
We assessed the relevant controls identified above.
23
A deficiency in internal control exists when the design or operation of a control does
not allow management or employees, in the normal course of performing their
assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
impairments to effectiveness or efficiency of operations, (2) misstatements in
financial or performance information, or (3) violations of laws and regulations on a
timely basis.
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:
The Detroit Office did not provide adequate oversight to ensure that the
housing commissions and responsible entities within its jurisdiction
complied with environmental requirements (finding).
24
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
Recommendation
Ineligible 1/ Unsupported 2/
number
1A $ 63,255
1B $ 501,015
1C 366,971
1D 337,776
1E 17,275,908
1F 7,756,710
1G 7,275,028
1H 273,774
1I 315,831
1J 457,861
1K 82,470
Totals $877,360 $33,829,239
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.
25
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
U.S. Department of Housing and Urban Development
Michigan State Office
Office of Public Housing
Patrick V. McNamara Federal Building
477 Michigan Avenue
Detroit, MI 48226-2592
Tel. (313) 226-6880
To: Ms. Dana Young, Senior Auditor, CFE, CICAHUD - Office of Inspector General
From: Willie C. H. Garrett, 5FPH, Director, Office of Public Housing
Subject: Office of Inspector General Environmental Review (at Pontiac, Detroit, and Dearborn)
Per our exit conference discussion held on August 21, 2014, the following are a few of
the comments to the draft “subject” report.
Finding: Detroit Field Office did not provide adequate oversight of 24 CFR Part 58 Reviews by
the following actions:
OIG Comment: DFO accepted, at face-value, the responsible entities reviews.
Comment 1 DFO Response: Under part 24 CFR 58, the responsible entity assumes all responsibilities
under NEPA. The role of HUD is to ascertain that the responsible entity sign off on the
certification (form HUD 7015.15), if needed; or that it signs the letter to HUD advising of
findings, as appropriate. It is not the role of HUD to second-guess responsible entities.
OIG Comment: The City of Dearborn, as the responsible entity, did not perform the
environmental review. It was performed by the PHA.
DFO Response: The DFO is unaware of any part 58 rules that prevent the PHAs and/or
Comment 2 its consultants from performing the necessary steps for the environmental clearance, so
long as the responsible entity sign off on the findings. In this case, the City of Dearborn
signed off on the certification. HUD is in no position to direct responsible entities on
how to conduct their tasks. The City of Dearborn fulfilled its responsibilities by signing
off on the certification, as required by 24 CFR Part 58.
OIG Comment: The City of Detroit accepted the consultant’s review at face value.
DFO Response: Same response as above.
OIG Comment: The Detroit Office did not determine the City of Pontiac did not certify
the request for release of funds (form HUD 7015.15). The Detroit office, thus, allowed
the PHC to expend its funds of $457,861 (the entire amount of its 2011 CFP grant).
DFO Response: This is a legitimate observation. However, the certifying officer’s
Comment 3 signature title box indicated “Finance Manager”. DFO staff, erroneously, assumed the certifier is
the Finance Manager for the City of Pontiac. The DFO office disagrees with the IG in its
recommendation that the entire grant amount of $457,861 should be recaptured from the PHC.
A sizable amount of the grant was expended on activities that are classified as “exempt” after a
Visit us on the web at http://www.hud.gov/local/det/detpmain.html
26
2
certain point during the review (BLI 1406, 1410, 1408, and 1430).
OIG Comment: The Mayor’s signature on form 7015.15 for the Pontiac HC’s 2009
Comment 4 ARRA grant appears “unauthentic”.
DFO Response: This is a very subjective and accusatory observation. It is the opinion of
the DFO-PIH staff that such comment be removed from the report.
OIG Comment: The DFO allowed the Pontiac Housing Commission to obligate and
Comment 5 expend $270,000 in the 2009 ARRA grant (between April 13 and September 17, 2009)
prior to the completion of the environmental review (October 15, 2009).
DFO Response: All PHAs were encouraged to use the ARRA grant for “shovel ready”
projects. Most of these projects were addressed prior and already had an environmental review
completed. The reviewer failed to inquire whether or not these projects were previously
addressed in an existing ER.
Comment 6 OIG Comment: The DFO allowed the Pontiac HC to expend $82,000 in its 2012 CFP
grant for BLI 1406 (operations), without a completed environmental review.
DFO Response: BLI 1406 is an activity involving the “transfer” of funds from the capital
fund grant to the operating subsidy. This activity end up being classified as an “exempt” activity
under the NEPA requirements. While the DFO requires ALL of its PHA to address the
operations budget line item in the ER, allowing expenditures under this BLI without a FULL ER
is considered on an individual basis.
OIG Comment: The Dearborn HC obligated and expended $63,000 between April 28,
Comment 5 2009 and January 22, 2010, under the 2009 ARRA grant prior to the completion of the
ER. The reviewer appears to have addressed this matter with the PHA. The PHA stated
that these activities were addressed in its approved 5 year action plan and the activities
have previously been included in an ER.
DFO Response: All PHAs were encouraged to use the ARRA grant for “shovel ready”
projects. Most of these projects were addressed prior and already had an environmental
review completed. The 2009 did not “mandate” new environmental reviews for activities
that had an existing ER.
OIG Comment: The Detroit HC failed to notify the Responsible Entity (the City of
Comment 7 Detroit) for reevaluation of changes since the completion of the ER on its 5 year action
plan. The IG reviewer claims that the CFP 2012 Annual Statement listed 9 activities in 6
developments totaling more than $2.9 million that were not included in DHC’s 5 year
environmental review.
DFO Response: This observation was disputed (to the IG reviewer) by DHC’s Director
of Compliance and Capital Improvements.
2
27
3
Comment 8 OIG Comment: The DFO failed to determine that the PHC, not the City of Pontiac
prepared, published, and received public comments.
DFO Response: Not enough detail is provided.
Comment 9 OIG Comment: The DFO failed to determine that the RE (City of Detroit) failed to
publish FONSI on “categorically excluded” activities.
DFO Response: Even though the reviewer did not mention the grant number, a FONSI is
only required for categorically excluded and subject to 24 CFR Part 58.5, where one or more
categories (statutes) are affected. The reviewer failed to make that determination prior to citing
this issue as a finding.
Comment 10 OIG Comment: The DFO did not determine that the RE properly identifies project
descriptions (for Dearborn and Pontiac).
DFO Response: This is very subjective. What is adequate project description to the
reviewer may not be the same for the RE. HUD will not mandate to the RE on how to
Comment 11 do its business.
OIG Comment:The Dearborn HC and the Detroit HC did not have all of the ER records
Comment 12 (every single document) in their office.
DFO Response: DFO staff does not believe that every single ERR document is required
to be at the Commission office. The responsible entity is where all these records should be
retained.
OIG Comment: The Pontiac HC’s ERR did not contain records on the “airport clear zone
Comment 13 and accident potential zones”.
DFO Response:Most of these records will not apply to maintenance type activities (the
case at the Pontiac HC). Some of these items, addressed by the IG reviewer pertain to “new
construction”.
OIG Comment: DFO did not ensure that PHAs verified and documented compliance
requirements (reviewer lists all statues of part 58.5 – statutory check list).
DFO Response: The statutory checklist may be kept at the RE’s location. Furthermore,
most of these records will not apply to maintenance type activities. Some of these items,
addressed by the IG reviewer pertain to “new construction”.
OIG Comment: The DFO did not ensure operating costs met ER requirement.
DFO Response. Do not concur. The DFO requires the PHAs to include BLI 1406 in its
Comment 6 review. It must be noted that BLI 1406 activities are categorically excluded and turned into
exempt activities (no further NEPA requirements) will then apply. No certification (form
7015.15, publication, or FONSI is require. BLI 1406 is a TRANSFER of funds from the CFP
3
28
4
OIG Evaluation of Auditee Comments
grant into the operating subsidy. These funds, once transferred, become eligible under the
operating subsidy rules at CFR 960.
OIG Comment: DFO did not maintain minimum internal control requirements for
HUD’s FO (tracking logs, etc).
DFO Response: Do not concur. The DFO PIH maintains a very comprehensive log. The
Comment 14 DFO places an automatic hold in LOCCS on any CFP,RHF,ARRA, Emergency, etc grants until
Comment 15 such grants have ERs (even when 100% are budgeted for operations).
OIG Comment: Reimburse $34.5 million from DHC, Dearborn, and Pontiac.
DFO Response: Disagree. No reimbursements should be required (due to all the responses
Comment 16 above).
Thank you!
4
29
OIG Evaluation of Auditee Comments
Comment 1 The Detroit Office stated that under part 24 CFR 58, the responsible entity
assumes all responsibilities under NEPA and that it is the role of HUD to
ascertain that the responsible entity signed off on the certification. Further, it is
not the role of HUD to second-guess the responsible entities.
While the regulations do require the responsible entity to make all decisions
related to the environmental reviews, the Detroit Office has a responsibility to
provide oversight and guidance to the housing commissions and responsible
entities to ensure that the environmental requirements are properly implemented.
Comment 2 The Detroit Office stated it is unaware of any part 58 rules that prevent the
housing commissions or hired consultants from performing the necessary steps for
environmental clearance as long as the responsible entity signs the certification.
Further, it stated that HUD is in no position to direct responsible entities on how
to conduct their tasks.
According to regulations at 24 CFR 58.4, the responsible entities must assume the
responsibility for environmental review, decision making, and action that would
otherwise apply to HUD under NEPA and other provision of law. In addition, 24
CFR 58.12 states that the responsible entity must develop the technical and
administrative capability necessary to comply with the requirements of this part.
Finally, 24 CFR 58.30 states the environmental review process consists of all the
actions that a responsible entity must take to determine compliance with this part.
If the responsible entity does not have the expertise to perform the reviews, or
does not want to perform them, they are required to notify HUD. The Detroit
Office has a responsibility to the public to ensure that the environmental reviews
are properly performed. Its failure to do so increases the risk of harm to the
public and the environment.
Comment 3 The Detroit Office stated that its staff erroneously assumed the certifier was the
Finance Manager for the City of Pontiac. It further disagreed that the entire grant
amount of $457,861 should be recaptured from the Pontiac Housing Commission
as a sizable amount of the grant was expended on activities that were classified as
“exempt” after a certain point during the review.
The Pontiac Housing Commission was listed with its name and address on the
certification as being the responsible entity rather than the City of Pontiac.
Detroit Office staff stated during the review that if they received a certification
and determined that it was complete, they were to just process it. The
certification was not reviewed to ensure it was properly completed and based on
the results of our review, we believe there is strong evidence that better
monitoring and oversight is needed with the environmental reviews. Accepting
certifications without a thorough review of them does not ensure tenants are
30
protected. The environmental review certification did not meet requirements;
therefore, expenditure of the funds violated requirements and must be repaid.
Comment 4 The Detroit Office stated that the comment that the Mayor’s signature on the
certification form appears unauthentic is very subjective and an accusatory
observation. The Detroit Office of Public Housing staff’s opinion is that the
comment should be removed from the report.
The statement made in the report is based on observation of documentation and an
interview with City of Pontiac officials. In addition, we did not question the
funds based on the possible improper signature. We did not remove the
statement.
Comment 5 The Detroit Office stated that all housing commissions were encouraged to use
the Recovery Act grant for “shovel ready” projects. Most of the projects were
addressed prior and already had an environmental review completed for which the
OIG reviewer failed to inquire whether or not these projects were previously
addressed in an existing environmental review. Further, the Detroit Office stated
that the 2009 Recovery Act did not “mandate’ new environmental reviews for
activities that had an existing environmental review.
The Recovery Act20 required that applicable environmental reviews under NEPA
be completed on an expeditious basis. Although the Detroit Office claimed that
“most” of the projects had prior reviews, it did not state that the Dearborn
Housing Commission’s Recovery Act activities had a prior approved review. If
an environmental review was previously performed, the environmental review
record for the Recovery Act grant should have included the support from the
previously approved reviews, but there was no evidence in the records. While the
housing agencies were under pressure to meet Recovery Act deadlines, they,
along with HUD, were still required to follow all regulations.
Comment 6 The Detroit Office stated it does not concur that it did not ensure operating costs
met environmental review requirements. It requires the housing commissions to
include budget line item 1406 in its reviews, but considers allowing expenditures
under this budget line item without a full environmental review on an individual
basis. It stated that the budget line item 1406 is an activity involving the
“transfer” of funds from the capital grant to the operating subsidy. This activity
ends up being classified as an “exempt” activity under the NEPA requirements
and no further requirements apply. The Detroit Office further stated that because
the budget line item 1406 is a transfer of funds from capital grants to operating
subsidy, once transferred, they become eligible under the operating subsidy rules
at 24 CFR 960.
20
Public Law 111-5, Section 1609
31
The environmental review records did not identify the activities for which the
housing commissions operating funds were used. The housing commissions
should have provided the responsible entity a detailed breakdown of the budget
line item 1406 so that the responsible entity could ensure it completed a proper
level of environmental review. While the requirements at 24 CFR 58.35(b)(3)
state that operating costs including maintenance, security, operation, utilities,
furnishings, equipment, supplies, staff training and recruitment and other
incidental costs are considered categorically excluded not subject to section 58.5,
it must be documented as such by the responsible entity. Further, the Detroit
Office circumvented the requirements of 24 CFR 58.22 by allowing expenditures
from the budget line item before the responsible entity completed the
environmental review. In addition, the requirements at 24 CFR 990.116 state that
the environmental review procedures are applicable to the Public Housing
Operating Fund program.
Comment 7 The Detroit Office stated that the Detroit Housing Commission’s Director of
Compliance and Capital Improvements disputed the OIG observation that it failed
to notify the responsible entity (City of Detroit) for reevaluation of changes since
the completion of the environmental review on its 5-year action plan.
The housing commission’s director did not dispute the OIG’s finding, but stated
that the housing commission did not have any changes occur in activities that
required an updated environmental review be completed. However, comparison
of the 5-year approved plan to the annual statements, found that the activities
listed in the annual statements were not part of the approved 5-year environmental
review.
Comment 8 The Detroit Office stated that not enough detail was provided regarding its failing
to determine that the Pontiac Housing Commission, not the responsible entity,
prepared, published, and received public comments related to the environmental
reviews.
Although we discussed this issue with the Detroit Office during the review, it did
not at any time ask the OIG for additional information. A limited review by the
Detroit Office of the documentation that it received from the housing commission
related to the environmental review publication should have found that the public
notice requirements were not met.
Comment 9 The Detroit Office stated that even though the OIG reviewer did not mention the
grant number, a finding of no significant impact is only required for categorically
excluded and subject to 24 CFR part 58.5, where one or more categories (statutes)
are affected.
The responsible entity determined the projects were categorically excluded, but
did not clarify whether the projects were subject to section 58.5 or if the projects
could convert to exempt. Our review of the projects found that some of the
32
activities were categorically excluded subject to section 58.5; therefore, according
to 24 CFR 58.43, the responsible entity must prepare and publish a finding of no
significant impact notice along with a notice of intent to request the release of
funds and certification. The Detroit Office appears to have a misunderstanding
of these requirements.
Comment 10 The Detroit Office stated that what constitutes properly identified project
descriptions for Dearborn and Pontiac is very subjective, and may vary between
the OIG reviewer and the responsible entity.
According to 24 CFR 58.38 the environmental review records must describe the
project and the activities that the recipient has determined to be part of the project.
The OIG did not determine what constituted an adequate project description.
Rather, HUD’s Office of Environment and Energy has provided guidance through
its website and its training sessions on the specific requirements for project
descriptions.
Comment 11 The Detroit Office stated that HUD will not mandate to the responsible entity how
to conduct its business.
The Detroit Office continues to fail to accept its oversight responsibility. Rather,
it is willing to accept environmental reviews that are incomplete.
Comment 12 The Detroit Office stated that its staff does not believe that every single
environmental review record document is required to be at the housing
commission’s office. The responsible entity is where all these records should be
retained.
While the Detroit Office is correct that the responsible entity is required to
maintain all documents that support the environmental review record, we did not
state that it was required of the housing commissions. We stated that the
environmental records for three different housing commissions did not contain all
the required documentation as required per 24 CFR 58.38 and provided examples
of what should have been included in the records maintained by the responsible
entities.
Comment 13 The Detroit Office stated that most of the records, such as “airport clear zone and
accident potential zones” will not apply to maintenance type activities. It further
stated that some of the items addressed by the OIG reviewer pertain to “new
construction.”
The regulations at 24 CFR 58.35(a) state that activities including acquisition,
repair, improvement, reconstruction, or rehabilitation require compliance with
other applicable Federal environmental laws and authorities listed in section 58.5.
The Detroit Office is incorrect that the compliance factors are applicable to “new
construction” only. Projects that are categorically excluded subject to 58.5 still
33
have to be reviewed and supported with documentation for all the compliance
factors, even if the factor in question may not be applicable.
Comment 14 The Detroit Office stated it does not concur that it did not maintain the minimum
internal control requirements, but that it does maintain a very comprehensive log.
HUD’s Field Office Environmental Review Guidance provided a list of items that
were to be included in the tracking logs for the minimum internal control
requirements to be met. Review of the Detroit Office’s tracking logs found that
some of the listed items were lacking as noted in the finding. Thus, it did not
meet the minimum internal control requirements.
Comment 15 The Detroit Office stated it places an automatic hold in LOCCS on any capital
fund, rapid housing fund, Recovery Act fund, or emergency fund grant until such
grants have received an environmental review, even when the entire grant is
budgeted for operations.
While the Detroit Office may have placed automatic holds in LOCCS until the
environmental review is received, we found several instances where it disbursed
funds to housing commissions before the responsible entity completed the
environmental review. Therefore, the Detroit Office circumvented the
requirements.
Comment 16 The Detroit Office disagreed that any reimbursements of the $34.5 million from
the Detroit Housing Commission, Dearborn Housing Commission, or Pontiac
Housing Commission should be required.
If the housing commissions 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 did not complete them, the supporting
documentation should be readily available for submission to the Detroit Office. If
the supporting documents cannot be provided, then the housing commissions and
responsible entities cannot support the determinations, and the expenditures are
thus ineligible and must be repaid. Further, as part of its oversight, the Detroit
Office was responsible for limited monitoring of the public housing commissions’
environmental review records. We found that the commissions did not maintain
complete records and the environmental reviews were not in compliance with
requirements. Also, while 24 CFR part 58 allows the responsible entity to assume
HUD’s responsibility for environmental reviews, if the responsible entities cannot
follow the requirements, then the Detroit Office has a responsibility to suspend or
terminate the responsible entities’ assumption authority of the environmental
review process as outlined in 24 CFR 58.77(d)(iv).
As for requiring public housing commissions to repay ineligible funds, the former
Assistant Secretary for Public and Indian Housing concurred that Recovery Act
34
funds expended on construction activities in a prior audit 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 Dearborn Housing
Commission obligated more than $63 thousand and the Pontiac Housing
Commission obligated more than $356 thousand in Recovery Act and Capital
grant funds, in violation of requirements, it must repay the funds. Further, the
Pontiac Housing Commission committed a statutory violation of the
environmental requirements when it, not the responsible entity, signed the request
for release of funds and certification, a legal binding document.
35
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 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 4
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 5
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 6
Regulations at 24 CFR 58.4(a) state that “responsible entities shall assume the responsibility for
environmental review, decision-making, and action that would otherwise apply to HUD under
NEPA and other provision of law that further the purposes of NEPA, as specified in §58.5.”
Criterion 7
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.”
36
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,
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 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 58.11(a) state that a responsible entity that believes that it does not have
the legal capacity to carry out the environmental responsibilities required by this part must
contact the appropriate local HUD office for further instructions.
Criterion 10
Regulations at 24 CFR 58.22(a) state that neither a recipient nor any participant in the
development process, including public or private nonprofit or for-profit entities or any of their
contractors, may commit HUD assistance under a program listed in section 58.1(b) on an activity
or project until HUD or the State has approved the recipient’s request for release of funds and the
related certification from the responsible entity.
Criterion 11
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.”
37
Criterion 12
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 13
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 14
Regulations at 24 CFR 58.38(a) state that “the [environmental review record] shall contain all
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 shall:
1. Describe the project and the activities that the recipient has determined to be part of the
project;
2. Evaluate the effects of the project or the activities on the human environment;
3. Document compliance with applicable statutes and authorities, in particular those cited in
sections 58.5 and 58.6; and
4. Record the written determinations and other review findings required by this part.”
Criterion 15
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. Proprietary material and special
studies prepared for the recipient that are not otherwise generally available for public review
must not be incorporated by reference but must be included in the environmental review record.
Criterion 16
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 Environmental Protection
Agency 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.
38
Criterion 17
Regulations at 24 CFR 58.43(c) state that the responsible entity must consider the comments and
make modifications, if appropriate, in response to the comments before it completes its
environmental certification and before the recipient submits its request for release of funds and
certification.
Criterion 18
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 19
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 20
Regulations at 24 CFR 58.72(b) state that HUD (or the State) may disapprove a certification and
request for release of funds if it has knowledge that the responsible entity or other participants in
the development process have not complied with the items in section 58.75 or that the request for
release of funds and certification are inaccurate.
Criterion 21
Regulations at 24 CFR 58.73 state that HUD (or the State) will not approve a request for release
of funds and certification for any project before 15 calendar days have elapsed from the time of
receipt of the request for release of funds and the certification or from the time specified in the
notice published under section 58.70, whichever is later. Any person or agency may object to a
recipient’s request for release of funds and the related certification. However, the objections
must meet the conditions and procedures set forth in subpart H of this part. HUD (or the State)
may refuse the request for release of funds and certification on any grounds set forth in section
58.75. All decisions by HUD (or the State) regarding the request for release of funds and the
certification will be final.
Criterion 22
Regulations at 24 CFR 58.75(a) state, “the certification was not in fact executed by the
responsible entity’s Certifying Officer.”
Criterion 23
Regulations at 24 CFR 58.77(a) state that HUD’s approval of the certification will be deemed to
satisfy the responsibilities of the HUD Secretary under NEPA and related provisions of law cited
in section 58.5 if those responsibilities relate to the release of funds as authorized by the
applicable provisions of law cited in section 58.1(b).
39
Criterion 24
Regulations at 24 CFR 58.77(d) state that at least once every 3 years, HUD intends to conduct
indepth 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 indepth monitoring of these environmental activities or by other means, HUD
becomes aware of environmental deficiencies, HUD may take one or more actions, including
requiring attendance by staff of the responsible entity at HUD-sponsored or -approved training.
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 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.21 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 27
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.
21
State historic preservation officer/tribal historic preservation officer
40
Criterion 28
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 who HUD has determined will or will not perform the
environmental review on behalf of the Department. 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 Funds certifications that have been received and
clearance provided;
A list of environmental reviews that have been conducted by the Office of Public
Housing for each program requiring environmental clearance; and
Separate environmental clearance files for each public housing agency.”
41
Improvements Are Needed Over Environmental Reviews of Public Housing and Recovery Act Funds in the Detroit Office
Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-09-24.
Below is a raw (and likely hideous) rendition of the original report. (PDF)