OFFICE OF AUDIT REGION 9 CDBG LOS ANGELES, CA Office of Native American Programs Washington, DC Indian Community Development Block Grant Grant Closeout 2014-LA-0006 AUGUST 19, 2014 Issue Date: August 19, 2014 Audit Report Number: 2014-LA-0006 TO: Rodger J. Boyd Deputy Assistant Secretary, Office of Native American Programs, PN //SIGNED// FROM: Tanya E. Schulze Regional Inspector General for Audit, Los Angeles Region, 9DGA SUBJECT: HUD’s ONAP Lacked Adequate Controls Over the ICDBG Closeout Process Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General’s (OIG) final results of our review of HUD’s Office of Native American Programs’ Indian Community Development Block Grant closeout process. 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 213-534-2471. August 19, 2014 HUD’s ONAP Lacked Adequate Controls Over the ICDBG Closeout Process Highlights Audit Report 2014-LA-0006 What We Audited and Why What We Found We audited the U.S. Department of HUD’s ONAP did not have adequate controls over the Housing and Urban Development’s ICDBG closeout process. Specifically, ONAP lacked (HUD) Office of Native American written policies and procedures for management’s Programs’ (ONAP) Indian Community oversight to ensure that closeout data were accurately Development Block Grant (ICDBG) tracked and grants were closed in a timely manner. program grant closeout process based This condition occurred because ONAP did not focus on data received from Southwest on grant closeouts as a priority and did not design ONAP and additional analysis that sufficient oversight procedures to consistently monitor raised concerns regarding ONAP’s grant closeout eligibility. As a result, ONAP did not oversight of the grant closeout process. always initiate timely follow-up action to determine Our objective was to determine whether grant closeout eligibility, and management lacked ONAP had adequate controls to ensure sufficient tracking data to efficiently monitor grant the timely closeout of program grants. closeouts. We reviewed a sample of 58 grants awarded during the What We Recommend audit period from 2007 through 2012 and found that ONAP did not take timely follow-up action to address We recommend that the Deputy indications of closeout eligibility for 18 grants totaling Assistant Secretary for the Office of $13.1 million. At the time of our audit, four of these Native American Programs (1) develop grants totaling nearly $4 million were eligible for and implement policies and procedures closeout yet remained open without timely follow-up for management’s oversight of the action to pursue grant closeout. Further, ONAP’s PTD ICDBG closeout process, resulting in reported erroneous data related to grant closeouts for nearly $4 million in funds being put to 24 of the 58 sample grants totaling $14.8 million. better use; (2) review the Performance Tracking Database (PTD) and identify and correct inaccurate or missing data; and (3) consider enhancing the PTD to track the current status of ONAP follow-up actions for grants that appear to be overdue for closeout. TABLE OF CONTENTS Background and Objective 3 Results of Audit Finding: HUD’s ONAP Lacked Adequate Controls Over the ICDBG 5 Closeout Process Scope and Methodology 10 Internal Controls 12 Appendixes A. Schedule of Funds To Be Put to Better Use 13 B. Auditee Comments and OIG’s Evaluation 14 C. Detailed Results of OIG’s Review 17 D. Criteria 19 2 BACKGROUND AND OBJECTIVE The U.S. Department of Housing and Urban Development’s (HUD) Office of Native American programs (ONAP) administers housing and community development programs for the benefit of American Indians and Alaska Native governments, tribal members, the Department of Hawaiian Home Lands, and Native Hawaiian and other Native American organizations. ONAP’s mission is to increase the supply of safe, decent, and affordable housing to Native American families; strengthen communities by improving living conditions and creating economic opportunities for tribes and Indian housing residents; and ensure fiscal integrity in the operation of the program it administers. Under Section 106 of the Housing and Community Development Act of 1974, 1 percent of the Title I Community Development Block Grant appropriation is allocated for grants to Indian tribes. The Indian Community Development Block Grant (ICDBG) funds are distributed by the area ONAP offices to Indian tribes and Alaska Native villages competitively, based on selection criteria set forth in the notice of funding availability. ICDBG provides single-purpose grants to eligible grantees for housing rehabilitation, land acquisition, community facilities, infrastructure construction, and economic development activities that benefit primarily low- and moderate- income persons. This program is administered by the six ONAP offices, with policy development and oversight provided by the Denver National Program Office of ONAP. Each ONAP office is responsible for a geographic jurisdiction that includes from 26 to more than 200 eligible applicants. ONAP is required to ensure that closeout procedures are performed after ICDBG activities are completed. Closeout procedures include submission of final financial and performance reports, execution of closeout agreements, and cancellation of remaining grant funds. ONAP uses its 3 Performance Tracking Database (PTD) as a tool to monitor the status of its grants, including grant closeout eligibility. The PTD includes functionality to track planned project completion dates and funding amounts drawn for each grant. ONAP considers untimely grant closeouts as part of its competitive grant award rating process, thereby impacting the rating and future funding of grantees that fail to close out grants in a timely manner. Our objective was to determine whether ONAP had adequate controls to ensure the timely closeout of program grants. 4 RESULTS OF AUDIT Finding: HUD’s ONAP Lacked Adequate Controls Over the ICDBG Closeout Process HUD’s ONAP had not implemented consistent and effective policies and procedures for management’s oversight of the ICDBG closeout process to ensure that grants were tracked and closed in a timely manner. Additionally, ONAP’s PTD was not always reliable and did not track the status of grants that appeared to be overdue for closeout. This condition occurred because ONAP previously did not prioritize grant closeouts and did not design sufficient oversight procedures to consistently monitor grant closeout eligibility. As a result, four of these grants totaling nearly $4 million were eligible for closeout yet remained open because ONAP did not always initiate timely follow-up action to determine grant closeout eligibility and management lacked sufficient tracking data to efficiently monitor grant closeouts. ONAP Lacked Written Policies and Procedures for Management’s Oversight ONAP did not have written policies and procedures establishing minimum requirements for management’s oversight of the ICDBG closeout process. Regulations at 24 CFR (Code of Federal Regulations) 1003.508 1 require that program grants be closed out when the area ONAP determines, in consultation with the grantee, that all costs have been incurred and required grant activities are complete. ONAP’s ICDBG Grants Management Business Process Manual 2 states it is recommended that ONAP area office staff should review grants for closeout eligibility biannually and take the following actions: (1) Initiate closing documents for all grants with 100 percent drawn down. (2) Contact all tribes with grants that are 5 years old or older to determine whether the remaining funds are going to be drawn down or closing documents should be initiated, and (3) Contact all tribes with grants that are less than 5 years old and have a 95 percent or greater drawdown but no account activity within the last year to determine whether the remaining funds are going to be drawn down or closing documents should be initiated. While these policies appeared adequate for staff-level follow-up regarding grant closeout, ONAP did not have written policies and procedures or minimum standards for management’s oversight to ensure that these procedures were 1 See appendix D. 2 Chapter 12 of ICDBG Grants Management Business Process Manual, sections 12.1.1 and 12.3 (appendix D) 5 followed. ONAP managers at the area offices indicated that they periodically performed various procedures to identify grants that were overdue for closeout, such as reviewing PTD reports or reviewing grantees’ annual status reports; however, these procedures were not consistent among the field offices and were not always effective. For example, at least one ONAP area office experienced a significant backlog of overdue grant closeouts, including more than 200 overdue grants. ONAP management had taken steps within the past year to address this backlog yet had not implemented adequate controls to monitor grant closeouts and ensure that this problem did not recur. Our review performed on a sample of current grants, as discussed below, identified persistent discrepancies for some grants that were not addressed, indicating that management’s reviews were not always performed as planned or were not effective. ONAP Did Not Always Close Out Program Grants in a Timely Manner To evaluate whether ONAP provided adequate oversight of the grant closeout process, we selected a targeted sample of 58 program grants awarded for program years 2007 through 2012. 3 For 18 of the 58 grants, a significant period had elapsed after the planned closeout date or final draw date, and ONAP did not have documentation demonstrating that it took timely follow-up action to determine the grant status and pursue closeout. The period without follow-up action for these cases ranged from 181 to 1,438 days and averaged at least 555 days. 4 At the time of our audit, four of these grants totaling nearly $4 million were eligible for closeout yet remained open without timely follow-up action to pursue grant closeout. $600,000 $599,955 Grant: B07SR280260 Grant: B07SR263640 Funds to be put to better use $3,999,955 $600,000 $2,200,000 Grant: B09SR250521 Grant: B10SR040302 3 See Scope and Methodology for a detailed explanation of the sample selection. 4 We calculated the number of days without follow-up or corrective action as of November 7, 2013, the date we obtained the PTD from ONAP. Therefore, the deficiencies persisted for at least the period reported and may have persisted longer than reported. 6 ONAP’s PTD Was Not Always Reliable ONAP’s PTD included erroneous or missing data related to grant closeouts and, therefore, was limited in its ability to serve as an effective control. The PTD included inaccurate data that had persisted for years, despite the planned periodic reviews by ONAP area office management. For example, of the 58 grants selected for our audit sample, 24 grants totaling more than $14.8 million included inaccurate PTD closeout or target closeout dates. For these cases, the inaccurate data remained uncorrected for an average of 758 days.3 Eleven of the grants had incorrect target closeout dates, six grants were already closed yet the closeout date had not been entered into the PTD , and seven grants reported blank target closeout dates. Grants containing inaccurate PTD data 12 10 8 24 grants remained 6 11 inaccurate in PTD for an 4 7 average of 758 days 6 2 0 Incorrect Blank target Date grant target closeout date closed was closeout date in PTD not updated in PTD in PTD Further, 28 additional grants 5 not included in the audit sample with grant amounts totaling $15.7 million reported blank target closeout dates in the PTD. Additionally, ONAP’s PTD reporting functions were not always reliable. We reviewed five PTD reports related to grant closeout oversight that were included as part of the standard database interface and were available for use by ONAP managers. The reports included a total of 686 duplicate records, 62 inaccurate records, 2 missing records, and 223 nonessential records. This condition occurred because the queries used to generate the reports were not properly designed. For example, in some cases fields were incorrectly calculated and records were not correctly grouped when attempting to summarize records for single grants. ONAP could enhance the usefulness of its reports and increase the efficiency of 5 The 28 grants were identified within the universe of grants reviewed for the audit sample. As stated in the scope and methodology section, this included a total of 272 open grants totaling more than $208.8 million. 7 its controls over grant closeouts by correcting the deficiencies within the PTD reports related to the ICDBG closeout process. ONAP’s PTD Did Not Track the Status of Grants That Appeared To Be Overdue for Closeout The PTD did not include sufficient information that ONAP headquarters, ONAP area office management, or auditors could use to readily determine which grants were overdue for closeout and whether appropriate follow-up action was being pursued for these cases. For example, the PTD did not include a field indicating whether ONAP had taken action to determine the grants’ closeout eligibility. Our review of the PTD identified a significant number of grants that exhibited indications of closeout eligibility; however, the PTD did not include information to document the status of these grants and whether ONAP had taken action to address the possible overdue grant closeout. For example, 49 grants remained open more than 90 days past the target closeout date, 36 open grants reported blank target closeout dates, 30 grants remained open after more than 5 years, and 35 grants remained open yet had been 100 percent drawn down for at least 6 months. Grants exhibiting closeout eligibility 60 50 40 30 49 Grants 20 36 30 35 10 0 Remained open Open grants Remained open Remained open more than 90 days reported a blank more than 5 years yet had been beyond target target closeout 100% drawn down closeout date date for at least 6 months Because the PTD did not indicate whether ONAP had taken follow-up action to address the indications of closeout eligibility for these cases, ONAP management could not readily determine whether appropriate follow-up action had been taken. Including a field in the PTD to track the most recent ONAP follow-up action for grants that appear to be overdue for closeout would increase the efficiency of management’s oversight of the grant closeout process. This information would 8 reduce the amount of manual research required to determine whether timely follow-up action had been taken to address indications of overdue closeout. Conclusion ONAP lacked adequate controls over the ICDBG closeout process, including written policies and procedures for managment oversight and reliable, relevant, and accurate PTD data. This condition occurred because ONAP previously did not prioritze grant closeouts and did not design sufficient oversight procedures to consistently monitor grant closeout eligibility. As a result, ONAP did not always initiate timely follow-up action to determine grant closeout eligibility, and management lacked sufficient tracking data to efficiently monitor grant closeouts. Recommendations We recommend that HUD’s Deputy Assistant Secretary for the Office of the Native American Programs 1A. Develop and implement policies and procedures establishing minimum standards for management oversight of the ICDBG closeout process, resulting in $3,999,995 being put to better use, ensuring that unexpended or ineligible funding amounts for future grants are determined and recaptured within required timeframes. 1B. Review PTD closeout and target closeout dates for open grants and correct inaccurate or missing data. 1C. Evaluate management’s need for PTD reports and correct deficiencies within applicable PTD reports, including missing, duplicate, or inaccurate records to ensure adequate information is available for management’s oversight of the grant closeout process. 1D. Consider adding a field in the PTD to indicate the status of ONAP follow- up actions for grants that appear to be overdue for closeout. 9 SCOPE AND METHODOLOGY We reviewed the ONAP’s ICDBG program closeout process based on information received from the Southwest ONAP indicating that ONAP may not have been closing out grants within required timeframes. Our review generally covered ONAP procedures related to the ICDBG closeout process during the period January 2007 through November 2013. We performed our audit from November 2013 to June 2014 at the Office of Inspector General (OIG) Phoenix Office of Audit. However, we contacted ONAP officials and ONAP field offices remotely via teleconference. To accomplish our objective, we: • Reviewed applicable ONAP regulations, including 24 CFR Part 1003 6 and the ICDBG Grants Management Business Process Manual (October 2011); 7 • Interviewed ONAP management at each of the six ONAP field offices; • Obtained and analyzed a copy of ONAP’s PTD ; and • Selected and reviewed a targeted sample of 58 grants to evaluate ONAP’s control over the ICDBG closeout process. During our audit period, 523 program grants totaling more than $372.9 million were funded. For our review of ONAP’s grant closeout process, we limited the sample universe to grants reported as open as of November 7, 2013, the date we obtained the PTD for review. The sample universe included 272 open grants totaling more than $208.8 million. The 58 sample items were selected based upon indications within the PTD that the grant could be overdue for closeout. For example, grants were selected with consideration given to the percentage of funds drawn; the timing of reported draws, and the time elapsed since reported target closeout dates. The sample selection process was not designed to identify all possible overdue grant closeouts, and in some cases, grants may have been overdue yet were not selected for the sample. The sample results demonstrate examples of noncompliance that resulted from the control deficiencies identified in the audit finding yet cannot be projected to estimate an error or compliance rate for the population of grants. We relied on data maintained by ONAP in its PTD to identify grants funded during the audit period and the associated grant amounts. We determined that the computer-processed data used were sufficiently reliable for our purposes. To assess the reliability of data within the PTD, we selected and reviewed a random sample of 15 grants (and 145 associated individual draws) from the audit sample and verified that the reported draw data matched information obtained directly from HUD’s Line of Credit Control System. We also interviewed ONAP staff familiar with the design and operation. PTD data for each of the sample selections were validated as part of the 6 See appendix D. 7 See appendix D. 10 sample review process by reviewing documents supplied by ONAP. Although we determined that the data were sufficiently reliable for identifying grants and associated draw amounts during the audit, we note in the audit report that our sample testing identified inaccurate or missing dates within the . This audit report includes a recommendation that ONAP correct these data for management control purposes. We conducted the audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective(s). We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. 11 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 Control We determined that the following internal control was relevant to our audit objective: • Control over the ICDBG closeout process. We assessed the relevant control 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. Significant Deficiency Based on our review, we believe that the following item is a significant deficiency: • ONAP lacked adequate controls over the ICDBG closeout process (finding). 12 APPENDIXES Appendix A SCHEDULE OF FUNDS TO BE PUT TO BETTER USE Recommendation Funds to be put number to better use 1/ 1A $3,999,955 1/ Recommendations that funds be put to better use are estimates of amounts that could be used more efficiently if an OIG recommendation is implemented. These amounts include reductions in outlays, DE obligation of funds, withdrawal of interest, costs not incurred by implementing recommended improvements, avoidance of unnecessary expenditures noted in prewar reviews, and any other savings that are specifically identified. In this instance, the estimated funds to be put to better use for recommendation 1A represent grant amounts associated with the four sample grants totaling $3,999,955 8 that were eligible for closeout yet remained open at the time of our audit without timely follow-up action to pursue grant closeout. Because ONAP did not take timely action to determine the status of these grants, HUD lacked appropriate and timely assurance that funds awarded for the projects were accounted for and expended for eligible purposes. By implementing the audit recommendations, HUD will ensure that unexpended or ineligible funding amounts for future grants are determined and recaptured within required timeframes. Further, implementing the recommendations will ensure that untimely grant closeouts are identified in a timely manner and appropriately factored into the grant award ranking process to prevent the expenditure of future grant funds for grantees that would be excluded if not for the untimely consideration the grantees’ closeout performance history. 8 See appendix C. 13 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments Comment 1 Comment 2 14 15 OIG Evaluation of Auditee Comments Comment 1 ONAP disagrees with the report’s implied conclusion that if grant close out was not delayed then any unexpended or ineligible funding could be reallocated to another project/grantee. Although ONAP is correct in its assessment regarding the reallocation of funds, the audit report does not reference nor imply that the reallocation of the ICDBG grant funds with cases that were not delayed could be allocated to another project/grantee. Recapture of funds by the Treasury and subsequent reallocation would still constitute funds to be put to better use, even if the reallocation was to another Agency or HUD program. As stated in appendix A, the estimated funds to be put to better use represent grants that were eligible for closeout yet remained open at the time of our audit without timely follow-up action to pursue grant closeout. Because timely action to determine the status was not taken, HUD lacked appropriate and timely assurance that the funds were accounted for and expended for eligible purposes. By implementing the audit recommendations, HUD will ensure that unexpended or ineligible funding amounts for future grants are determined and recaptured within required timeframes. Further, implementing the recommendations will ensure that untimely grant closeouts are identified in a timely manner and appropriately factored into the grant award ranking process to prevent the expenditure of future grant funds for grantees that would be excluded if not for the untimely consideration the grantees’ closeout performance history. Comment 2 ONAP disagrees with the conclusion that PTD errors or omissions in any way precluded timely follow up or the efficient monitoring of grant closeouts. In its response, ONAP detailed specific financial reports that are utilized to review grantee expenditures. While we agree these reports are useful, they do not focus and address the target closeout dates, which was the focus of the audit finding. As explained in the audit report regarding review procedures, OIG was aware that the managers at the area ONAP offices periodically reviewed the SF-425 Federal Financial Report, LOCCS and Annual Status and Evaluation Report. However, our review disclosed that management’s monitoring reviews were not always effective because emphasis was not placed on the target closeout date. We determined there were no controls in place to consistently monitor ICDBG grant closeout date requirements and readily identify expired target close out dates. Since ONAP relies on the PTD to monitor ICDBG target closeout dates, the PTD should maintain accurate data. If adequate monitoring is not performed, ONAP offices may not have accurate data in the PTD that is critical to the ICDBG program closeout process, ensuring compliance with applicable laws and regulations. HUD needs this information in order to make informed judgments regarding a grantee’s capacity to carry out approved activities. 16 Appendix C DETAILED RESULTS OF OIG’S REVIEW Grant amounts No timely follow-up Grantee - Grant for grants to determine status PTD inaccurate grant number year eligible for or closeout eligibility closeout Eastern Woodlands ONAP B07SR280260 2007 X $600,000 B08SR370566 2008 X B09SR271876 2009 X B08SR272666 2008 X X B09SR231390 2009 X B10SR272666 2010 X X B07SR263640 2007 X X $599,955 B08SR263078 2008 X X B09SR554910 2009 X X B07SR232452 2007 X B10SR265044 2010 X B12SR265044 2012 X B10SR365716 2010 X B09SR250521 2009 X X $600,000 Northwest ONAP B10SR530697 2010 B10SR531270 2010 X B07SR531832 2007 B09SR531490 2009 X Northern Plains ONAP B08SR300188 2008 X B11SR300646 2011 B10SR460434 2010 X B10SR461340 2010 X B08SR461448 2008 X B08SR380001 2008 X X B09SR491276 2009 X B10SR491276 2010 Alaska ONAP B10SR020015 2010 B10SR020056 2010 B10SR020009 2010 B08SR020032 2008 17 Grant amounts No timely follow-up Grantee - Grant for grants to determine status PTD inaccurate grant number year eligible for or closeout eligibility closeout Southern Plains ONAP B08SR400578 2008 B11SR400586 2011 B08SR400596 2008 B12SR201708 2012 X B10SR400724 2010 B10SR400724 2010 Southwest ONAP B10SR040302 2010 X $2,200,000 B10SR350531 2010 X B08SR063428 2008 X X B08SR350445 2008 X B07SR062180 2007 X B07SR350522 2007 B07SR062779 2007 B07SR350306 2007 X B08SR060356 2008 B08SR350318 2008 X X B09SR350124 2009 X B07SR062474 2007 B08SR040281 2008 B07SR040281 2007 B10SR060350 2010 B08SR350294 2008 X B07SR040218 2007 B09SR042509 2009 B10SR061864 2010 B08SR040224 2008 B07SR040224 2007 B08SR040008 2008 B10SR060003 2010 X Totals 18 24 $3,999,955 18 Appendix D CRITERIA 24 CFR 1003.301, Selection Process (a) Threshold requirement. An applicant that has an outstanding ICDBG obligation to HUD that is in arrears, or one that has not agreed to a repayment schedule will be disqualified from the competition. 24 CFR 1003.508, Grant Closeout Procedures (a) Criteria for closeout. A grant will be closed out when the Area ONAP determines, in consultation with the grantee, that the following criteria have been met: (1) All costs to be paid with ICDBG funds have been incurred, with the exception of closeout costs (e.g., audit costs) and costs resulting from contingent liabilities described in the closeout agreement pursuant to paragraph (c) of this section. Contingent liabilities include, but are not limited to, third-party claims against the grantee, as well as related administrative costs. (2) With respect to activities which are financed by means of escrow accounts, loan guarantees, or similar mechanisms, the work to be assisted with ICDBG funds has actually been completed. (3) Other responsibilities of the grantee under the grant agreement and applicable laws and regulations appear to have been carried out satisfactorily or there is no further Federal interest in keeping the grant agreement open for the purpose of securing performance. (b) Closeout actions. (1) Within 90 days of the date it is determined that the criteria for closeout have been met, the grantee shall submit to the Area ONAP a copy of the final status and evaluation report described in §1003.506(a) and a completed Financial Status Report (SF [standard form]-269). If acceptable reports are not submitted, an audit of the grantee’s program activities may be conducted by HUD. (2) Based on the information provided in the status report and other relevant information, the grantee, in consultation with the Area ONAP, will prepare a closeout agreement in accordance with paragraph (c) of this section. (3) The Area ONAP will cancel any unused portion of the awarded grant, as shown in the signed grant closeout agreement. Any unused grant funds disbursed from the U.S. Treasury which are in the possession of the grantee shall be refunded to HUD. (4) Any costs paid with ICDBG funds which were not audited previously shall be subject to coverage in the grantee’s next single audit performed in accordance with 24 CFR part 44. The grantee may be required to repay HUD any disallowed costs based on the results of the audit, or on additional HUD reviews provided for in the closeout agreement. 19 (c) Closeout agreement. Any obligations remaining as of the date of the closeout shall be covered by the terms of a closeout agreement. The agreement shall be prepared by the grantee in consultation with the Area ONAP. The agreement shall identify the grant being closed out, and include provisions with respect to the following: (1) Identification of any closeout costs or contingent liabilities subject to payment with ICDBG funds after the closeout agreement is signed; (2) Identification of any unused grant funds to be canceled by HUD; (3) Identification of any program income on deposit in financial institutions at the time the closeout agreement is signed; (4) Description of the grantee’s responsibility after closeout for: (i) Compliance with all program requirements, certifications and assurances in using program income on deposit at the time the closeout agreement is signed and in using any other remaining ICDBG funds available for closeout costs and contingent liabilities; (ii) Use of real property assisted with ICDBG funds in accordance with the principles described in §1003.504; and (iii) Ensuring that flood insurance coverage for affected property owners is maintained for the mandatory period; (5) Other provisions appropriate to any special circumstances of the grant closeout, in modification of or in addition to the obligations in paragraphs (c)(1) through (4) of this section. The agreement shall authorize monitoring by HUD, and shall provide that findings of noncompliance may be taken into account by HUD as unsatisfactory performance of the grantee in the consideration of any future grant award under this part. (d) Termination of grant for convenience. Grant assistance provided under this part may be terminated for convenience in whole or in part before the completion of the assisted activities, in accordance with the provisions of 24 CFR 85.44. The grantee shall not incur new obligations for the terminated portions after the effective date, and shall cancel as many outstanding obligations as possible. HUD shall allow full credit to the grantee for those portions of obligations which could not be canceled and which had been properly incurred by the grantee in carrying out the activities before the termination. The closeout policies contained in this section shall apply in such cases, except where the approved grant is terminated in its entirety. Responsibility for the environmental review to be performed under 24 CFR part 50 or 24 CFR part 58, as applicable, shall be determined as part of the closeout process. (e) Termination for cause. In cases in which HUD terminates the grantee’s grant under the authority of subpart H of this part, or under the terms of the grant agreement, the closeout policies contained in this section shall apply, except where the approved grant is canceled in its entirety. The provisions in 24 CFR 85.43(c) on the effects of termination shall also apply. HUD shall determine whether an environmental review is required, and if so, HUD shall perform it in accordance with 24 CFR part 50. 20 ICDBG Grants Management Business Process Manual 12.1.1 Documents Required The GMS [Grants Management System] must receive the following documents from the tribe, within 90 days of completion of grant activities (or when the criteria have been met). • The final Federal Financial Report (SF-425); • The final Status and Evaluation Report • In addition, the GMS should review the closeout documents for completeness to determine whether: • The documents are signed by the appropriate official(s); • The dollar amounts reflected on form SF-425 are consistent with the latest approved Cost Summary, the final Status and Evaluation Report, the Closeout Agreement, and Line of Credit Control System (LOCCS); and • Other resource contributions identified in the approved application are included on form SF-425. If any of the required documents is not submitted on time, the GMS should follow-up with the tribe by telephone and/or mail. The GMS should also contact the tribe and request corrected documents if any deficiencies are found. 12.1.2 Unused Balances The GMS should print the grant’s LOCCS Q08 screen to determine if all funds have been drawn down. If there is a balance, the Area ONAP must cancel any unused portion of the awarded grant, as agreed to in the signed grant Closeout Agreement. Any unused grant funds disbursed from the U.S. Treasury that are in the possession of the recipient must be refunded to HUD. Any costs paid with ICDBG funds that were not audited previously shall be subject to coverage in the grantee’s next Single Audit performed in accordance with Section 44. The recipient may be required to repay HUD any disallowed costs based on the results of the audit, or on additional HUD reviews provided for in the Closeout Agreement. Area ONAPs must also de-obligate any remaining ICDBG funds in the grant in accordance with the Administrative Control of Funds Plan. 12.2 Closeout Agreement If the documents submitted by the grantee demonstrate that the regulatory criteria for closeout have been met, the GMS should prepare for Area Administrator signature, a letter informing the grantee of such. The ICDBG regulation requires grantees to agree to certain final tasks and obligations resulting from the federal grant. A sample Closeout Agreement (which should be printed by the grantee on tribal letterhead) should be included with the Initiation of Closeout Letter to the grantee. The agreement must clearly identify the grant being closed out, and include provisions with respect to the following: • Any obligations remaining as of the date of the closeout; • Identification of any closeout costs or contingent liabilities subject to payment with ICDBG funds after the Closeout Agreement is signed; • Identification of any unused grant funds to be cancelled by HUD; 21 • Identification of any program income on deposit in financial institutions at the time the Closeout Agreement is signed; • Description of the recipients responsibility after closeout; • Compliance with all program requirements, certifications and assurances in using program income on deposit at the time the closeout agreement is signed and in using other remaining ICDBG funds available for closeout costs and contingent liabilities; • Use of real property assisted with ICDBG funds in accordance with the principles described in §1003.504; and • Ensuring that flood insurance coverage for affected property owners is maintained for the mandatory period; • Other provisions appropriate to any special circumstances of the grant closeout; • Authorize monitoring by HUD; and • Provide that findings of non-compliance may be taken into account by HUD as unsatisfactory performance of the recipient in the consideration of any future grant award. 22
HUD's ONAP Lacked Adequate Controls Over the ICDBG Closeout Process
Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-08-19.
Below is a raw (and likely hideous) rendition of the original report. (PDF)