OFFICE OF AUDIT REGION 6 FORT WORTH, TEXAS Jefferson Parish Community Development Jefferson, LA Community Development Block Grant Program 2014-FW-1007 September 30, 2014 Issue Date: September 30, 2014 Audit Report Number: 2014-FW-1007 TO: Cheryl S. Breaux, Director, Office of Community Planning and Development, 6HD //signed// FROM: Gerald R. Kirkland Regional Inspector General for Audit, 6AGA SUBJECT: The Jefferson Parish, LA Department of Community Development Did Not Always Support Expenditures, Comply With Procurement Requirements, or Provide Adequate Oversight of Subrecipients Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General’s (OIG) final results of our review of Jefferson Parish’s Community Development Block Grant (CDBG) 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. September 30, 2014 The Jefferson Parish, LA Department of Community Development Did Not Always Support Expenditures, Comply With Procurement Requirements, or Provide Adequate Oversight of Subrecipients Highlights Audit Report 2014-FW-1007 What We Audited and Why What We Found We audited Jefferson Parish’s The Parish did not always (1) have documentation to Community Development Block Grant support program expenditures, (2) comply with (CDBG) program as part of the Office procurement requirements when procuring contractors for housing rehabilitation, and (3) provide adequate of Inspector General’s annual audit plan to review Community Development oversight for its subrecipients. These conditions funds. The audit objective was to occurred because the Parish (1) did not have updated determine whether the Parish written departmental procedures for its staff, adequate adequately supported and expended its staffing levels, an efficient records management program funds in accordance with system, or complete written departmental procurement Federal requirements. procedures; (2) relied on its subrecipient to maintain documentation to support its project without verifying What We Recommend the adequacy of the documentation; (3) did not ensure that staff was aware of the departmental monitoring policy; and (4) disregarded monitoring and agreement We recommend that the Director of requirements. As a result, the Parish could not support HUD’s New Orleans Office of that more than $1.4 million of program costs were Community Planning and Development eligible, reasonable, or met a national objective. In require the Parish to (1) support or addition, it increased the risk of fraud, waste, and repay its CDBG program $1.4 million abuse. from non-Federal funds, (2) implement written departmental expenditure, procurement, and monitoring procedures, (3) implement a departmental records management system for expenditures and national objective compliance, and (4) implement a departmental process to maintain and update the Parish’s pre- qualified bidder’s list. TABLE OF CONTENTS Background and Objective 3 Results of Audit Finding 1: The Parish Did Not Always Have Documentation To Support Expenditures 4 Finding 2: The Parish Did Not Always Comply with Procurement Requirements 7 Finding 3: The Parish Did Not Always Provide Adequate Oversight for its Subrecipients 10 Scope and Methodology 13 Internal Controls 15 Appendixes A. Schedule of Questioned Costs 17 B. Auditee Comments and OIG’s Evaluation 18 C. Questioned Housing Rehabilitation Contracts 27 2 BACKGROUND AND OBJECTIVE The Community Development Block Grant (CDBG) program was established by Title I of the Housing and Community Development Act of 1974, Public Law 93-383 as amended, 42 United States Code 5301. Under the CDBG program, the U. S. Department of Housing and Urban Development (HUD) provides grants to State and local governments to aid in the development of viable urban communities. Recipients are required to use grant funds to provide decent housing and suitable living environments and to expand economic opportunities, principally for persons of low and moderate income. In addition, each CDBG funded activity must meet one of three national objectives listed below: • Benefit low- and moderate-income persons, • Aid in preventing or eliminating slums or blight, or • Address a need with a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community. The Jefferson Parish Community Development Department administers its program using entitlement grants received from HUD to support the development of viable urban communities through decent housing, and expanding the economic opportunities of persons of low-moderate income. The Parish is the third largest CDBG grant fund recipient in the state of Louisiana. Between October 2011 and September 2013, the Parish received more than $5 million in CDBG funds from HUD. According to the Parish, 100 percent of its funded activities met the low and moderate income national objective. Activities implemented by the Parish included housing rehabilitation, public service, and public facilities and improvements or capital projects. Regarding its housing rehabilitation activities, the Parish conducted procurements for housing rehabilitation and lead abatement contractor services to rehabilitate properties for low-income households. For its public service activities, it used six subrecipients to implement various projects. For public facilities and improvements activities, it used contractors procured by the Parish’s Purchasing Department. Our objective was to determine whether the Parish adequately supported and expended its CDBG funds in accordance with federal requirements. 3 RESULTS OF AUDIT Finding 1: The Parish Did Not Always Have Documentation to Support Expenditures The Parish did not always have documentation to support program expenditures. Specifically, for five payment voucher expenditure files reviewed, the Parish did not always document invoices, time and attendance records, supporting journal entries, or proof that resulting payments were made to its contractors. This occurred because the Parish did not have (1) updated written departmental procedures for its staff, (2) adequate departmental staffing levels and (3) an efficient departmental records management system. As a result, the Parish could not support the use of more than $1 million in CDBG funds. The Parish Could Not Support More Than $1 Million in Expenditures A review of documentation in five payment voucher files, with payments totaling $3,496,145, determined that the Parish did not always maintain support for its payments. Federal regulations required the Parish to adequately document costs and support its accounting records with source documentation. 1 In addition, the Parish’s departmental expenditure policy2 included pay request procedures which required it to (1) support non-payroll expenses with paid invoice or periodic bills for service; and if unavailable, a copy of the canceled check with a written description, and (2) support claims for salaries and wages with copies of attendance, gross pay, pay rate time hours worked, and payroll tax records. However, for the five files reviewed, the Parish did not have complete documentation to support $1,039,105 in payments. See Table 1. Table 1: Unsupported voucher payments Payment voucher Amount paid Unsupported costs 1 $732,200 $268,380 2 469,461 21,227 3 896,671 276,045 4 757,532 242,426 5 640,281 231,027 Total $3,496,145 $1,039,105 1 2 CFR 225 - Appendix A- C (1) (j) and 24 CFR 85.20 (b)(6) 2 The Community Development Department policies. 4 For these payments, the Parish did not have invoices, time and attendance records, supporting journal entries, or documentation showing that payments were made to recipients. In addition, the Parish withdrew funds for retainage from HUD’s Integrated Disbursement and Information System (IDIS) 3 and withheld the retainage from its rehabilitation contractors’ payments. Federal and State regulations required the Parish to remit retainage to contractors after the completion of work. 4 However, as of February 2014, it had been 5 to 23 months since its rehabilitation contractors completed work, but the Parish could not provide evidence that it remitted the retainage. When asked about one of the contractors, the Parish stated that it forgot to pay the contractor. Inadequate Expenditure Policy and Staff, and Inefficient Records Management System The Parish did not have adequate departmental expenditure policies or staff to perform the accounting function, and did not have an efficient departmental records management system. Specifically, the Parish’s departmental expenditure policy did not match its current staffing positions. These policies included descriptions of the staff positions and procedures for processing expenditures but were 15 years 5 old and listed staff positions that no longer existed. For example, the policy included an internal auditor position and indicated that financial management was primarily the responsibility of the internal auditor, accountant supervisor, and the accountant. However, the internal auditor position was not listed on the Parish’s departmental organizational chart, dated February 2014. In addition, the Parish did not have adequate departmental staff to process its accounting transactions. Specifically, from 2005 through 2013, the Parish only had one departmental employee, an accounting supervisor, to process its accounting transactions. According to Parish departmental staff, since 2008, staffing levels have been reduced. Further, past positions no longer existed. Without adequate departmental staff, the Parish could not ensure that its expenditures were adequately reviewed and documented and that payments were processed in compliance with requirements. For example, during our review, the Parish was under a workout plan and was at risk of losing CDBG funding because it was not expending its funding in a timely manner and was not meeting HUD’s required 1.5 percent expenditure timeliness test for the past two grant years. 6 3 IDIS is the draw down and reporting system for the CDBG formula grant program. It allows grantees to request their grant funding from HUD and report on what is accomplished with these funds. 4 HUD’s “Basically CDBG for Entitlements” course training manual, Chapter 16, section 16.1.3 Progress Payments and Louisiana Revised Statute 38:2248. 5 The Community Development Department policies were effective in 1999. 6 24 CFR 570.902 5 Lastly, because the Parish had an inefficient departmental records management system, its payment voucher files were not readily accessible for audit review, as required. 7 Specifically, because the Parish’s departmental accounting supervisor did not maintain auditable documentation, the accounting supervisor had to obtain the documentation from other sources, including the program managers and the Parish’s general Accounting Department. 8 We made several requests to the Parish’s departmental staff for supporting documentation, which took 3 weeks for it to provide. Further, the documentation provided was incomplete. Conclusion Because the Parish did not have updated written departmental expenditure policies for its current staff positions, adequate departmental staff levels, or an efficient departmental records management system, it spent more than $1 million in program funds that it could not support. Recommendations We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the Parish to 1A. Support or repay its CDBG program $1,039,105 from non-Federal funds for costs that lacked adequate supporting documentation. 1B. Implement updated written departmental procedures to ensure that it has adequate coverage for the processing of its expenditures. 1C. Implement a records management system for expenditures to ensure supporting documentation is maintained and readily accessible for audit. 7 24 CFR 85.42 (e)(1) and 24 CFR 85.42 (b)(1). 8 The Parish has an Accounting Department which processes all payments for the Parish after the Parish reviews the supporting documentation. 6 Finding 2: The Parish Did Not Always Comply with Procurement Requirements The Parish did not always comply with procurement requirements when procuring contractors for housing rehabilitation services. Specifically, a review of six housing rehabilitation contractor procurement files determined that for two, the Parish did not always maintain departmental supporting documentation showing that it (1) conducted a cost or price analysis, (2) performed an independent cost estimate, or (3) ensured full and open competition or justification otherwise. In addition, the Parish did not always maintain (1) departmental records sufficient to detail the significant history of procurement, such as contractor selection or rejection, and the basis for the contract price, and (2) a current departmental pre-qualified bidders list. These conditions occurred because the Parish lacked complete written departmental procurement procedures. As a result, the Parish could not support that $267,497 spent on 16 procured contracts for two contractors were cost reasonable. The Parish Could Not Support $267,497 in Contract Expenditures A review of six housing rehabilitation contractor procurement files, with 43 associated contracts and payments totaling $784,205, determined that the Parish did not always comply with procurement requirements. To support the cost reasonableness of contract payments, Federal regulations required the Parish to maintain documentation showing that it performed independent cost estimates and costs analyses, 9 and ensured full and open competition, or provide justification for not doing so. 10 However, for two contractors, with 16 associated contracts and payments totaling $267,497 (See Appendix B), the Parish did not have departmental independent cost estimates, cost analyses, or justification for the lack of full and open competition. See Table 2. Table 2: Procurement deficiencies Number of Total Contractor Name contracts/type payments Louisiana Services and Contracting 14 (lead abatement) $199,840 Company (LASCO) LASCO 1 (housing rehabilitation) 53,950 Prestige Facility Maintenance 1 (housing rehabilitation) 13,707 Total 16 $267,497 9 24 CFR 85.36(f) 1. 10 24 CFR 85.36(c) 1. 7 According to the Parish, it did not perform a departmental cost estimate for any of the 14 LASCO lead abatement contracts because neither the staff nor its contracted inspector had experience in the lead abatement area and relied on the bid responses that came in for the procurements to establish a basis for contract price. However, of the 14 procured contracts, LASCO was the only contractor to bid on 12, showing no cost reasonableness review had been performed. As related to full and open competition, the Parish’s departmental lead abatement pre-qualified bidders list only included two contractors. When asked, the Parish indicated that LASCO was the only contractor willing to perform lead abatement and the replacement of exterior items, which was often needed for the CDBG housing rehabilitation activities. However, the Parish did not have departmental documentation to justify why it did not ensure full and open competition or seek other contractors in the event that only one bid had been received. 11 In addition to the departmental files lacking adequate documentation to support cost reasonableness, the files also lacked award letters showing contractor selection or rejection, and review that the contractors were not debarred, as required. 12 According to the Parish, it did not conduct departmental debarment reviews. The Parish stated that it maintained a departmental pre-qualified bidder’s list. However, as of March 2014, the Parish had not advertised for prospective housing rehabilitation contractors for its departmental bidders list since December 2010 and could not recall when it last advertised for lead abatement contractors. Therefore, the listing was not current, as required. 13 Incomplete Procurement Procedures The Parish lacked complete written departmental procurement procedures to ensure that it conducted all required steps when procuring its housing rehabilitation contracts. The Parish provided departmental bid letting and opening procedures for the sealed bid procurement method. However, the policies did not have procedures for other procurement methods, requirements for updating its pre-qualified bidder’s listing, procedures for debarment review, maintaining procurement records, or conducting cost or price analyses and independent cost estimates. Conclusion 11 24 CFR 85.36(c)1 12 24 CFR 85.36(b) 9. 13 24 CFR 85.36(c) 4. 8 Because the Parish did not have adequate departmental procurement procedures, it could not support that $267,497 spent on 16 procured contracts for two contractors was cost reasonable. Recommendations We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the Parish to 2A. Support the cost reasonableness of the 16 contracts or repay $267,497 to its CDBG program with non-Federal funds. 2B. Implement written departmental procedures that include all procurement requirements. 2C. Implement written departmental procedures to maintain and update its pre- qualified bidder’s list. 9 Finding 3: The Parish Did Not Always Provide Adequate Oversight for its Subrecipients The Parish did not always provide adequate oversight for its subrecipients. Specifically, the Parish did not always (1) have support showing that it met its national objective for projects carried out by its subrecipients, (2) monitor its subrecipients on a consistent basis, and (3) include all required elements in its subrecipient agreements. This occurred because the Parish (1) relied on its subrecipient to maintain documentation to support its projects without verifying the adequacy of the documentation, (2) did not ensure that departmental staff was aware of the departmental monitoring policy, and (3) disregarded departmental monitoring and agreement requirements. As a result, the Parish could not support that $93,975 in CDBG funds expended on three projects met an eligible national objective and put CDBG funding at an increased risk for fraud, waste, and abuse. The Parish Did Not Always Provide Adequate Oversight The Parish did not always provide adequate oversight for its subrecipients. Federal regulations required the Parish to maintain evidence that each of its activities met one of three national objectives. 14 However, the Parish could not always provide support that departmental activities carried out by its subrecipients met a national objective. Specifically, for three of the four activities reviewed, the subrecipients did not have adequate support that $93,975 was spent to assist low and moderate income participants. As shown in Table 3, the documentation did not support the participants’ income or the number of participants reported to HUD in the Parish’s 2011 and 2012 Comprehensive Annual Performance and Evaluation Report (CAPER) 15. See Table 3. Table 3: Assisted persons reported in CAPER versus documentation Participants Participants Files with Total according to according to participants income Activity funding CAPERs subrecipients’ files documentation New Hope Adopt a School $24,975 43 24 0 Responsibility House Supportive 30,000 17 15 10 Housing Healing Hearts Family 39,000 45 12 9 Counseling Total $93,975 105 51 19 14 CFR 570.200(a) (2). 15 CAPER is a report in which the Parish reports the accomplishments and progress made toward their consolidated plan goals for the prior year. The consolidated plan, which may have a duration of between 3 and 5 years, describes the jurisdiction’s community development priorities and multiyear goals. 10 For example, regarding the Adopt a School activity, the subrecipient could only provide a list of names showing that it assisted 24 of the 43 participants and could not locate any supporting income documentation showing that the participants were low and moderate income. The Parish Did Not Consistently Monitor Subrecipients and its Agreements Lacked Required Elements Although required to monitor and assure compliance with Federal requirements, 16 a review of the Parish’s departmental monitoring activities for 12 subrecipients between October 2011 and September 2013, determined that it had not monitored 5. In addition, the subrecipient agreements for six did not include all required elements, 17 such as a schedule for completing the work, provisions related to all Federal laws and regulations, how program income would be used, and reversion of assets requirements. Parish departmental staff agreed that, although required, it had not monitored some subrecipients consistently. However, although they had no formal monitoring report documented, it had indirectly monitored the subrecipients by reviewing expenditures or performing rehabilitation site visits. The Parish Had Procedural and Internal Control Weaknesses The Parish had departmental procedural and internal control weaknesses. Specifically, Parish departmental staff stated that it relied on its subrecipients to maintain documentation to support that a national objective was met. However, Table 3 above shows that the subrecipient had not maintained sufficient documentation. In addition, although the Parish provided a written departmental monitoring policy, departmental staff was not aware of the policy. Regarding the elements required in the subrecipient agreement, the Parish’s departmental monitoring policy required it to review record-keeping, reporting and financial management, labor standards, fair housing and equal opportunity, acquisition and procurement requirements, and all other contractual requirements, during contract negotiations, to ensure that the subrecipient is informed of its duties and responsibilities under the terms of the agreement. After an agreement is signed, the policy required an annual monitoring review of these requirements. However, the policy did not require these elements be included in the written agreement, which is required by Federal regulations. 16 24 CFR 85.40 (a). 17 24 CFR 570.503(b). 11 Providing adequate oversight to subrecipients and ensuring that subrecipient agreements include all required elements would ensure that subrecipients maintain appropriate documentation, meet one of the national objectives, and follow all requirements. In addition, since the Parish used subrecipients to carry out some of its activities, the Parish should ensure that its staff is aware of its departmental monitoring policies and ensure that it adequately monitors subrecipients. Conclusion As a result of its departmental procedural and control weaknesses, the Parish could not support that $93,975 of CDBG funds spent on three projects met an eligible national objective, and put its CDBG funding at an increased risk for fraud, waste, and abuse. Recommendations We recommend that the Director of HUD’s New Orleans Office of Community Development require the Parish to 3A. Support the data reported in the CAPER regarding the three projects or repay to its CDBG program $93,975 from non-Federal funds. 3B. Implement departmental procedures that ensure that adequate documentation is maintained to support that funds are used to meet a national objective. 3C. Implement written departmental monitoring procedures and controls to ensure that staff periodically monitors subrecipients, to include ensuring that subrecipients maintain adequate records. 3D. Implement written departmental procedures to ensure all required elements are included in subrecipient agreements. 12 SCOPE AND METHODOLOGY We conducted our audit at the Parish’s office in Jefferson, LA, and the HUD Office of Inspector General’s (OIG) office in New Orleans, LA, between February and August 2014. Our audit scope covered the Parish’s CDBG program for the period October 1, 2011, through September 30, 2013. We expanded the scope as necessary to accomplish our audit objective. To accomplish our objective, we • Reviewed relevant laws, regulations, and program guidance. • Reviewed the Parish’s organizational structure and written policies for the program. • Reviewed the Parish’s audit reports, HUD monitoring reports, grant agreements, and action plans. • Interviewed Parish staff. • Reviewed the Parish’s national objectives, financial management system, administrative expenditures, and program income. • Reviewed the Parish’s subrecipient agreements, monitoring documentation, procurement files, and program expenditures. Using a universe of 11 IDIS drawdowns, totaling $5,956,817 as of September 30, 2013, we selected a non-statistical sample of five vouchers with the highest dollar value, totaling $3,496,145, to review at least 50 percent of the funding within the audit scope. We performed a complete expenditure file review for the sampled drawdowns to determine whether the Parish adequately supported and expended its program funds. Through the file reviews, we assessed the reliability of the computer-processed data and determined that the data were generally reliable. Using a universe of 14 housing rehabilitation contractors, with a total of 52 contracts 18 and expenditures totaling $1,004,134 as of September 30, 2013, we selected a non-statistical random sample of 6 contractors with 43 contracts to determine whether the Parish adequately procured its contracts and ensured that its expenditures to those contractors were reasonable and necessary. These contracts were procured directly by the Parish’s Community Development Department. We did not assess any computer-processed data regarding the procurement review because we did not rely heavily on computer data to conduct this review. Using a universe of 13 projects from the 2011 CAPER and 8 projects from the 2012 CAPER, we selected a sample of two projects from each CAPER. We reviewed the support for the data reported in the CAPER for the projects to determine whether the Parish ensured compliance with its national objectives. We did not assess any computer-processed data regarding the national objective compliance review because we did not rely heavily on computer data to conduct this review. 18 Some entities had multiple contracts during the audit period. 13 We reviewed the Parish’s monitoring files and associated agreements for its 12 subrecipients that administered 15 activities to determine whether the Parish monitored them and included all required elements in the associated subrecipient agreements. We did not assess any computer- processed data regarding the monitoring and agreement reviews because we did not rely on it. 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. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. 14 INTERNAL CONTROLS Internal control is a process adopted by those charged with governance and management, designed to provide reasonable assurance about the achievement of the organization’s mission, goals, and objectives with regard to • Effectiveness and efficiency of operations, • Reliability of financial reporting, and • Compliance with applicable laws and regulations. Internal controls comprise the plans, policies, methods, and procedures used to meet the organization’s mission, goals, and objectives. Internal controls include the processes and procedures for planning, organizing, directing, and controlling program operations as well as the systems for measuring, reporting, and monitoring program performance. Relevant Internal Controls We determined that the following internal controls were relevant to our audit objectives: • Effectiveness and efficiency of operations: Policies and procedures in place to reasonably ensure that program activities were conducted in accordance with applicable laws and regulations. Specifically, policies and procedures intended to ensure that the Parish complied with Federal regulations in administering its CDBG program. • Relevance and reliability of information: Policies and procedures in place to reasonably ensure that expenditure and procurement errors were reduced, and that subrecipient oversight was provided. • Compliance with applicable laws, regulations: Policies and procedures in place to reasonably ensure that appropriate expenditure documentation was obtained and maintained, it conducted all required steps when procuring contracts, and it provided adequate oversight to its subrecipients. We assessed the relevant controls identified above. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, the reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or efficiency of operations, (2) misstatements in financial or performance information, or (3) violations of laws and regulations on a timely basis. 15 Significant Deficiencies Based on our review, we believe that the following items are significant deficiencies: • The Parish did not have adequate written departmental accounting procedures and file management systems in place to ensure that the appropriate documentation was obtained and maintained. (Finding 1) • The Parish did not have adequate departmental staffing levels to ensure that the expenditures were adequately reviewed and filed. (Finding 1) • The Parish did not have adequate written departmental procurement procedures to ensure that it conducted all required steps when procuring contracts. (Finding 2) • The Parish did not provide adequate departmental oversight to its subrecipients to ensure that they (1) were monitored consistently, (2) included all required elements in the subrecipient agreements, and maintained documentation to support their projects. (Finding 3) 16 APPENDIXES Appendix A SCHEDULE OF QUESTIONED COSTS Recommendation Unsupported 1/ number 1A $1,039,105 2A 267,497 3A 93,975 Total $1,400,577 1/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program or activity when we cannot determine eligibility at the time of the audit. Unsupported costs require a decision by HUD program officials. This decision, in addition to obtaining supporting documentation, might involve a legal interpretation or clarification of departmental policies and procedures. 17 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments 18 Comment 1 Comment 1 Comment 1 Comment 2 19 Comment 3 Comment 4 Comment 5 Comment 4 Comment 4 20 Comment 4 Comment 6 Comment 6 Comment 6 Comment 3 Comment 6 21 Comment 6 Comment 3 Comment 6 Comment 3 Comment 7 Comment 7 Comment 7 Comment 7 Comment 3 22 Comment 7 23 OIG Evaluation of Auditee Comments Comment 1 The Parish asserted that it (1) did not have departmental staff available to manually search for the documentation, (2) had several other audits during the same timeframe where departmental staff were required to supply documents, (3) cannot independently establish new departmental procedures, but acknowledged that its accounting system may need improvements for the retrieval of documents, and (4) is not an entity of itself and does not duplicate Parish procedures. According to its CDBG grant agreement with HUD, the Parish was required to comply with all applicable laws and regulations in distributing funds provided under the agreement. This included having documentation pertinent to the grant available for audit review. Having a lack of departmental staff and several ongoing audits simultaneously did not relieve the Parish of this responsibility. In addition, as discussed in finding one, during our audit, the Parish provided departmental policies and procedures, which included staff roles and responsibilities and expenditure procedures. Therefore, to assert that the Parish cannot independently establish departmental procedures and that it is not an entity of itself is contradictory to the departmental policy provided during the audit and its statements in the response related to departmental processes it is implementing. Therefore, we stand by our original conclusions and recommendations. Comment 2 The Parish stated that it had been audited at least annually for “regular” accounting purposes, and for more special programs, with the result that there were not any findings regarding its failure to adhere to the requirements of A-133. We audited the Parish’s departmental controls and processes over the CDBG program rather than regular accounting purposes. In addition, OIG conducts independent audits and the conclusions reached by other audit entities may differ due to various factors, including potential differences in the scope of the review. As such, we stand by our original conclusions. Comment 3 With its written response, the Parish provided additional documentation in an effort to support questioned costs related to the (1) five voucher files reviewed, (2) cost reasonableness for two of its contractors as well as bid advertisements and debarment reviews conducted outside of our audit period, and (3) projects administered by its subrecipients required to meet the low-to moderate income national objective. We initially requested documentation in March 2014, and then notified the Parish on multiple occasions thereafter that the documentation had not been provided. Additionally, the documentation is voluminous. Thus, we did not assess its validity or adequacy. The Parish will need to provide the documentation to HUD for its review during the audit resolution process. We did not include the documents in this report, but they are available for review upon request. We did not make any revisions to the report based on the documentation. 24 Comment 4 The Parish concurred that it did not have adequate departmental staffing levels and indicated that it hired additional staff. It stated that it has instituted a departmental policy, whereby all supporting documentation is scanned and filed electronically in an effort to ease the retrieval of expenditure support documents. The Parish also stated that it has instituted a process where its departmental staff will make drawdown requests to assure consistency with HUD requirements for drawdowns within 120 days, maintain documentation, and considered other processes and procedures to improve its drawdown process. We acknowledge the Parish’s efforts towards resolving these weaknesses. Comment 5 The Parish disagreed that no accounting procedures were in place and stated that it provided its current procedures with the response. Our report did not conclude that there were no accounting procedures in place, but that the Parish did not have an adequate departmental expenditure policy. In addition, the additional support documentation provided with the response did not include the current procedures. Therefore, we stand by our original conclusion. Comment 6 Regarding its procurement processes, the Parish asserted that the departmental procurement procedures used by its staff was mandated by HUD and received concurrence from the Parish’s Legal and Purchasing Departments. It also stated that it had recently been working to update its in-house process for procurement of the pre-bidder’s list and planned to develop new procedures as well as seek best practices to increase participation from the private market. Based upon these efforts the Parish asserted that it did more than due diligence to increase competition and provide reasonable costs for the services The Parish further explained that the Parish relied on price analyses performed by a certified lead inspector but these inspectors or risk assessors have retired or did not return after the storm. Thus, the staff member presently in charge of housing rehabilitation is anticipated to obtain a lead inspector certification in October of this year. Based upon these comments, the Parish requested that finding 2 be cleared. While we acknowledge the Parish’s efforts, the Parish has not yet (1) revised its departmental procurement policies to ensure all procurement requirements outlined in 24 CFR 85.36 are met, (2) updated its departmental pre-bidder’s list, and (3) obtained specialized departmental staff to conduct cost reasonableness analyses for lead inspections. Therefore, we did not clear the finding and stand by our original conclusions and recommendations. Comment 7 The Parish stated that the Adopt a School program was located in a severely low income neighborhood and was geared toward troubled and at risk youth who were economically, academically, socially, and psychologically disadvantaged. It asserted that it could have met the low-mod criteria by documenting the nature and location of the program as opposed to income verification and the program would have met the requirements. However, based upon (1) conversations with the departmental staff, (2) its 2011 CAPER, and (3) the subrecipient agreement(s) requirements, income verification was the means of determining the low to 25 moderate income status for this program and not its nature and location. Thus, supporting income verification documentation should have been obtained and maintained. In addition, the Parish asserted that it did not disregard departmental monitoring and agreement requirements and that all subrecipients are monitored continuously throughout the year with one onsite visit. It attached copies of the process, monitoring letters and other support documentation with its response. However, this documentation was the same documentation provided during the audit, which was deemed insufficient. In addition, some monitoring letters were outside the scope of the audit. The Parish did not provide any documentation supporting that it did not disregard the subrecipient agreement requirements. Based upon the previously supplied documentation for the other subrecipients, the Parish asserted that it had proven that it had met all of the requirements and requested that finding 3 be cleared. Due to the deficiencies that remain, as explained in the previous paragraphs, we did not clear the finding and stand by our original conclusions and recommendations. 26 Appendix C QUESTIONED HOUSING REHABILITATION CONTRACTS Contract Contract Amount Amount Contractor start date end date awarded questioned 6/27/2013 9/1/2013 $ 37,985 $37,985 3/22/2012 4/21/2012 1,795 1,795 3/22/2012 4/21/2012 7,070 7,070 5/13/2013 7/1/2013 22,270 22,270 4/23/2012 6/26/2012 1,140 1,140 5/13/2013 6/13/2013 975 975 9/24/2012 10/24/2012 34,282 34,282 LASCO (lead abatement contracts) 3/26/2012 4/25/2012 23,178 23,178 9/24/2012 11/23/2012 32,606 32,606 3/1/2013 4/30/2013 1,390 1,390 8/22/2013 10/27/2013 2,195 2,195 4/18/2012 5/24/2012 3,285 2,956 10/11/2013 11/16/2013 2,095 2,095 9/24/2012 10/24/2012 29,903 29,903 LASCO (housing rehabilitation contract) 5/18/2011 11/19/2011 53,950 53,950 Prestige Facility Maintenance Service 2/6/2012 12/22/2012 13,707 13,707 (housing rehabilitation contract) Total $267,826 $267,497 27
The Jefferson Parish, LA Department of Community Development Did Not Always Support Expenditures, Comply With Procurement Requirements, or Provide Adequate Oversight of Subrecipients
Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)