oversight

The City of Joplin, MO, Complied With CDBG Disaster Recovery Regulations

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-01-29.

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

OFFICE
   [TypeOF  AUDIT
         text]
REGION 7
KANSAS CITY, KS




                    The City of Joplin, MO

               CDBG Disaster Recovery Program




2014-KC-1002                                    January 29, 2014
                                                        Issue Date: January 29, 2014

                                                        Audit Report Number: 2014-KC-1002




TO:            Dana Buckner, Director, Office of Community Planning and Development,
               Kansas City, KS, 7AD

               //signed//
FROM:          Ronald J. Hosking, Regional Inspector General for Audit, 7AGA


SUBJECT:       The City of Joplin, MO, Complied With CDBG Disaster Recovery Regulations


    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our audit of the City of Joplin, MO.

    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
913-551-5870.
                                               January 29, 2014
                                               The City of Joplin, MO, Complied With CDBG Disaster
                                               Recovery Regulations




Highlights
Audit Report 2014-KC-1002


 What We Audited and Why                        What We Found

We selected the City of Joplin, MO’s           The City complied with CDBG Disaster Recovery
Community Development Block Grant              regulations. It generally performed contracting
(CDBG) Disaster Recovery program for           activities, obligated and expended its disaster funds,
audit because the City was awarded             and conducted other initial program actions in
more than $45 million in CDBG                  accordance with applicable regulations. This was a
Disaster Recovery funds in April 2012          limited audit since the City had procured only two
and an additional $113 million in May          Disaster Recovery-related items, obligated only
2013. In addition, we had not audited          $50,000, and expended only $20,280 of its $45.2
the City’s activities for at least 10 years.   million in Disaster Recovery funds at the time of our
Our audit objective was to determine           audit. We audited 100 percent of the City’s
whether the City complied with CDBG            obligations and 49 percent of its expenditures. This is
Disaster Recovery regulations.                 the first in a series of audits that we plan to conduct on
                                               the City’s CDBG Disaster Recovery program.
 What We Recommend

There are no recommendations.




                                                       
                          TABLE OF CONTENTS

Background and Objective                                                   3

Results of Audit
      Finding: The City Complied With CDBG Disaster Recovery Regulations   4

Scope and Methodology                                                      6

Internal Controls                                                          8

Appendix
A.    Auditee Comments                                                     9




                                          2
                       BACKGROUND AND OBJECTIVE

Joplin, MO, is located in southern Jasper County and northern Newton County in the
southwestern corner of Missouri. On May 22, 2011, an EF-5 tornado, ½ to ¾ mile wide, touched
down at the edge of the city limits. According to the enhanced fujita (EF) scale, an EF-5 tornado
is the most intense and destructive tornado and ranks the highest in the EF scale category. The
tornado traveled on the ground throughout Joplin to the eastern city limits and continued into the
Duquesne, MO, and rural Jasper and Newton Counties. The tornadic winds were estimated at
more than 200 miles per hour, and 161 people lost their lives.

The storm damaged or destroyed an estimated 7,500 residential dwellings in Joplin. Of the 7,500
dwellings, approximately 4,000 homes were destroyed, displacing an estimated 9,200 people.
Approximately 553 businesses were destroyed or severely damaged, with 4,500-5,000
employees affected. Approximately 3,000 employees remained employed in some capacity, and
500 businesses have since reopened or are in the process of reopening. More than 13 Federal
agencies supported critical emergency needs and functions for Jasper and Newton Counties. In
addition, more than 176,869 citizen volunteers from across the country provided more than 1.1
million hours of community service by helping with cleanup, repairs, and home construction.

Section 239 of the U.S. Department of Housing and Urban Development (HUD) Act of 2012
(Public Law 112-55) provided up to $400 million, to remain available until expended, in
Community Development Block Grant (CDBG) funds for necessary expenses related to disaster
relief, long-term recovery, restoration of infrastructure and housing, and economic revitalization
in the most impacted and distressed areas resulting from a major disaster. HUD awarded more
than $45.2 million to the City of Joplin with the stipulation that all funds be spent within its
jurisdiction.

Further, the Disaster Relief Appropriations Act of 2013 (Public Law 113-2) provided $16 billion,
to remain available until September 30, 2017, in CDBG funds for necessary expenses related to
disaster relief, long-term recovery, restoration of infrastructure and housing, and economic
revitalization in the most impacted and distressed areas resulting from Hurricane Sandy and
other eligible events in calendar years 2011, 2012, and 2013.  The City was awarded more than
$113.2 million, with the stipulation that the City expend all funds in the portions of Jasper and
Newton Counties located within the City’s jurisdiction.

HUD signed the $45.2 million Funding Approval/Agreement (form HUD-7082) for the City on
September 15, 2012, and the City signed it on October 16, 2012. At the time of our audit, HUD
and the City had not executed a Funding Approval/Agreement for the $113.2 million CDBG
Disaster Recovery grant.

Our audit objective was to determine whether the City complied with CDBG Disaster Recovery
regulations.




                                                3
                                RESULTS OF AUDIT

Finding: The City Complied With CDBG Disaster Recovery
Regulations
The City complied with CDBG Disaster Recovery regulations. It generally performed
contracting activities, obligated and expended its disaster funds, and conducted other initial
program actions in accordance with applicable regulations. This was a limited audit since the
City had procured only two Disaster Recovery-related items and obligated and expended only a
small amount of its Disaster Recovery funds at the time of our audit.


 Contracting Activities
 Complied With Regulations

              The City had completed one procurement for its Disaster Recovery grant
              administrator. It issued the request for proposal on November 8, 2012, and
              received six proposals. On April 15, 2013, the Joplin City Council authorized the
              city manager to execute the agreement for more than $1.5 million, and the city
              manager signed the contract on April 23, 2013. The City performed this
              procurement in accordance with applicable policies and procedures.

              The City completed one procurement for moving two temporary housing units.
              That procurement was also performed properly.

              The City had not entered the obligations and expenditures for these two
              procurement activities into HUD’s Disaster Recovery Grant Reporting (DRGR)
              system at the time of our audit, as they were initially paid for using the City’s
              revolving funds. However, the City planned to seek reimbursement for these
              activities from Disaster Recovery funds.

 The City Had Obligated and
 Expended a Small Amount
 From the Grant

              Although the total Disaster Recovery grant amount was $45.2 million, the City
              had entered obligations of only $50,000 and disbursements of only $20,280 into
              DRGR at the time of our audit. We audited those obligations and found that they
              were proper.

              The City expended administrative funds on payroll, training, and public notices in
              the local newspaper. The expenses were eligible and properly supported.



                                               4
                                                 
The City Properly Managed
Other Initial Activities


           The City’s approved action plan for the first round of disaster funding allocated
           under Public Law 112-55 identified nine separate activities that the City planned
           to complete using its disaster funds. The activities were all eligible. The City
           also used the correct national objectives for each of the proposed activities.

           The Joplin Homebuyers Assistance Program is intended to assist home buyers
           with downpayments and closing costs, as well as helping homeowners build
           equity in their homes. At the time of our audit, only one applicant had closed on a
           home. The applicant met all of the program criteria; the residence was located in
           the tornado zone, the household annual income did not exceed 120 percent of the
           area median income, and the amount of assistance ($26,576) was more than
           $1,000 but less than $30,000. In addition, the declaration of deed restriction and
           covenant had been properly executed for a period of 10 years.

           The City conducted various environmental reviews for the Joplin Homebuyers
           Assistance Program, the temporary housing unit relocation, land acquisition, and
           Trails construction projects. The City prepared the proper environmental review
           documentation for each of these projects.

Recommendations

           There are no recommendations.




                                            5
                                             
                        SCOPE AND METHODOLOGY

We performed onsite work between September and November 2013 at City Hall, located at 602
South Main Street, Joplin, MO. Our audit period generally covered April 1, 2012, through
September 30, 2013; however, we expanded the scope as necessary because some Joplin
Homebuyers Assistance Program documentation, contractor progress reports, accounting
records, and various environmental review documents relevant to the City’s CDBG Disaster
Recovery program were not finalized until October 2013. This is the first in a series of audits
that we plan to conduct on the City’s CDBG Disaster Recovery program.

To accomplish our objective, we

      Interviewed pertinent HUD, City, and CDBG Disaster Recovery grant administrator staff;
      Reviewed Public Laws 112-55 and 113-2, the Stafford Act, applicable portions of the
       Code of Federal Regulations, Federal Register notices, and Office of Management and
       Budget circulars;
      Reviewed applicable HUD handbooks and Community and Planning Development
       notices, the City’s CDBG Disaster Recovery policies and CDBG program manual, and
       the City’s purchasing and procurement policies and procedures;
      Reviewed the grant agreement executed between HUD and the City;
      Analyzed and reviewed contracts executed between the City and contractors;
      Obtained HUD’s limited monitoring review of the City’s CDBG Disaster Recovery
       program;
      Reviewed the City’s audited financial statements; and
      Reviewed Joplin City Council meeting minutes and agendas.

Our audit focused on contracting activities, obligations and expenditures, and program
implementation. Our audit was limited to only two procurement actions. These were the City’s
procurement for its CDBG Disaster Recovery grant administrator and the movement of two
temporary housing units. The City had obligated only $50,000 and expended only $20,280 from
the first CDBG Disaster Recovery grant, all of which was for administrative activities only. We
audited 100 percent of the City’s obligations from this grant.

For the City’s expenditures, we selected a sample of 3 of the City’s 11 CDBG Disaster Recovery
expenditures. In our sample, due to the potential for high risk, we selected the two largest
monthly expenses the City incurred in 2012 and 2013. We selected an additional sample item
due to high payroll expenditures. The cumulative dollar amount of the expenditures tested was
more than $10,000 of the total $20,280 (49 percent) in expenditures reported in DRGR at the
time of our audit.

For program implementation, we reviewed the City’s action plans, the Joplin Homebuyers
Assistance Program, and the City’s environmental reviews and associated documentation.

We primarily used data from the City’s files to meet our audit objective. In addition, we used
DRGR as support, corroborated by other evidence, for the City’s obligation and expenditure of

                                               6
                                                 
CDBG Disaster Recovery funds. We determined that the DRGR data were sufficiently reliable
to meet our objective.

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 the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objective.
 




                                               7
                                                 
                              INTERNAL CONTROLS

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

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

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


 Relevant Internal Controls

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

                  Controls over compliance with CDGB Disaster Recovery regulations.

               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.

               We evaluated internal controls related to the audit objective in accordance with
               generally accepted government auditing standards. Our evaluation of internal
               controls was not designed to provide assurance regarding the effectiveness of the
               internal control structure as a whole. Accordingly, we do not express an opinion on
               the effectiveness of the City’s internal control.

 Separate Communication of
 Minor Deficiencies

               We reported minor deficiencies to the auditee in a separate management
               memorandum.


                                                 8
                                                   
Appendix A

                             AUDITEE COMMENTS

Auditee Comments
The auditee elected not to provide written comments.




                                              9