oversight

Financial and Administrative Weaknesses Existed in the Middlesex County, NJ, HOME Investment Partnerships Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-06-10.

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

OFFICE
   D OF AUDIT
REGION 2
NEW YORK – NEW JERSEY




                    Middlesex County, NJ


        HOME Investment Partnerships Program




2014-NY-1005                               JUNE 10, 2014
                                                  Issue Date: June 10, 2014

                                                  Audit Report Number: 2014-NY-1005


TO:            Anne Marie Uebbing
               Director, Office of Community Planning and Development, Newark Field Office,
               2FD

               //SIGNED//
FROM:          Edgar Moore
               Regional Inspector General for Audit, New York-New Jersey Region, 2AGA

SUBJECT:       Financial and Administrative Control Weaknesses Existed in Middlesex County,
               NJ’s HOME Investment Partnerships Program


    Enclosed is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General (OIG), final audit report on our review of Middlesex County, NJ’s HOME
Investment Partnerships 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
212-264-4174.
                                             June 10, 2014
                                             Financial and Administrative Weaknesses Existed in the
                                             Middlesex County, NJ, HOME Investment Partnerships
                                             Program


Highlights
Audit Report 2014-NY-1005


 What We Audited and Why                      What We Found

We audited Middlesex County, NJ’s            County officials did not always expend and
HOME Investment Partnerships                 administer HOME program funds in compliance
Program based on a risk analysis that        with program requirements. Specifically, they
considered funding, the U.S.                 lacked support to show that funds were committed in
Department of Housing and Urban              accordance with regulations and expended for
Development’s (HUD) risk score, and          eligible activities, HUD’s and the County’s interest
prior Office of Inspector General audits.    in HOME-assisted properties was protected, and a
The audit objective was to determine         CHDO was properly organized. We attribute these
whether County officials established         deficiencies to County officials’ inadequate financial
and implemented adequate controls            and administrative controls. Consequently,
over their HOME program to ensure            $833,706 was not committed in a timely manner as
that program funds were expended and         required; $24,979 and $220,322 in HOME funds
administered for eligible activities in      were expended for ineligible and unsupported
accordance with HUD regulations.             activities, respectively; HUD’s and the County’s
                                             interest in $980,436 in HOME-assisted properties
                                             was not protected; and the County lacked
 What We Recommend
                                             documentation showing that a CHDO was properly
                                             organized.
We recommend that HUD instruct
County officials to (1) provide support
showing that $833,706 was committed
in a timely manner, (2) reimburse the
County’s HOME program line of credit
from non-Federal funds for $24,979 in
ineligible costs and any unsupported
amount of the allocated costs of
$220,322, (3) record liens or other
appropriate notices of record on
HOME-assisted properties to ensure
that HUD’s and the County’s $980,436
interest in these properties is protected,
and (4) provide support showing that
officials complied with eligibility
requirements at the time of the initial
certification and recertification of its
community housing development
organization (CHDO).
                            TABLE OF CONTENTS

Background and Objective                                                        3

Results of Audit
      Finding 1: There Were Weaknesses in the County’s HOME Program Financial
                 Controls                                                       4
      Finding 2: There Were Weaknesses in the County’s HOME Program
                 Administrative Controls                                        8

Scope and Methodology                                                           12

Internal Controls                                                               14

Appendixes
A.    Schedule of Questioned Costs and Funds To Be Put to Better Use            16
B.    Auditee Comments and OIG’s Evaluation                                     17




                                            2
                             BACKGROUND AND OBJECTIVE
The HOME Investment Partnerships Program, authorized under Title II of the Cranston-
Gonzalez National Affordable Housing Act, as amended, is designed to create affordable
housing opportunities for low-income households. The HOME program is the largest Federal
block grant to State and local governments, through which the U.S. Department of Housing and
Urban Development (HUD) has allocated approximately $2 billion annually in formula grants to
the States and hundreds of localities nationwide. Grantees are required to provide matching
funds of 25 percent from non-Federal sources. HOME program regulations are found at 24 CFR
(Code of Federal Regulations) Part 92. HUD has provided additional program guidance in its
guidebook, entitled “Building Home,” dated March 2008.

Grantees are allowed flexibility to use HOME funds for a broad range of eligible purposes to
address local housing needs and assist eligible homeowners. A purpose can include many
activities, such as home purchase or rehabilitation financing assistance, building or rehabilitating
housing for rent or ownership, or other reasonable and necessary expenses related to the
development of nonluxury housing, including site acquisition or improvement, demolition of
dilapidated housing to make way for HOME-assisted developments, and payment of relocation
expenses.

HUD awarded Middlesex County more than $2, $1.7, and $1 million in HOME funds for
program years 2010, 2011, and 2012, respectively.1 The County designated the Division of
Housing, Community Development, and Social Services under the Department of Community
Services to administer its HOME program. The County is governed by a seven-member board of
chosen freeholders, who are elected at large in the November general elections to 3-year terms.

The County’s HOME program disbursed more than $4.2 million in HOME funds during program
years 2010 through 2012 to assist different types of housing activities, including first-time home
buyer and rental housing activities. Approximately $1.5 million, or 34.5 percent, was used for
first-time home buyer activities, and approximately $2.3 million, or 55 percent, was used for
rental housing activities. The remaining approximately $400,000 was used for HOME
administration.

The objective of the audit was to determine whether County officials established and
implemented adequate controls over their HOME program to ensure that program funds were
expended and administered for eligible activities in accordance with HUD regulations.




1
    The County’s program year begins on July 1 of each year and ends on June 30 of the next year.

                                                           3
                                  RESULTS OF AUDIT


Finding 1: There Were Weaknesses in the County’s HOME Program
           Financial Controls
County officials lacked support showing that their HOME program funds were always
committed and expended in accordance with HOME program regulations. We attribute this
condition to weaknesses in the County’s financial controls over maintaining documentation to
support the commitment and expenditure of HOME funds, and unfamiliarity with regulations
related to allocating expenses to the benefiting programs. As a result, County officials lacked
adequate documentation to provide assurance that $833,706 in HOME funds was committed and
expended in accordance with regulations, $24,979 was expended for eligible activities, and
$220,322 charged to the HOME program for an employee’s salary was properly allocated.


    The County Lacked
    Documentation to Properly
    Support the Commitment of
    Funds

                 County officials lacked documentation to show that $833,706 in HOME funds
                 was committed in a timely manner in compliance with regulations. Regulations at
                 24 CFR 92.500(d)(1)(B) provide that HOME funds not committed within 24
                 months after the last day of the month in which HUD notifies the participating
                 jurisdiction of HUD’s execution of the HOME Investment Partnerships Program
                 agreement should be recaptured. Regulations at 24 CFR 92.2 provide that HOME
                 funds are committed when the participating jurisdiction executes a legally binding
                 agreement to use a specific amount of HOME funds.

                 County officials reported in HUD’s Integrated Disbursement and Information
                 System (IDIS)2 that they obtained commitments of $88,100 in a timely manner:
                 $7,500 in program year 2008 HOME funds for one activity, $46,100 in program
                 year 2009 HOME funds for six activities, $29,500 in program year 2010 HOME
                 funds for four activities, and $5,000 in program year 2011 HOME funds for one
                 activity. However, these activities were later canceled, and County officials had
                 not updated IDIS to reflect the cancellations and lacked documentation to show
                 that the funds had been recommitted for other eligible activities in a timely
                 manner.

                 In addition, County officials reported in IDIS that $1.1 million in program year
                 2011 HOME funds was committed in a timely manner for five activities.

2
 IDIS is the HUD system through which grantees can draw down their awarded funds and report on what is
accomplished with these funds.

                                                      4
           However, they lacked executed written agreements, as required, to support the
           commitment of $745,606 in activities. We attribute these conditions to
           weaknesses in the County’s financial procedures that did not require it to
           adequately document commitments to support that they were made in a timely
           manner, and that funds for canceled activities were deobligated. As a result, the
           County could not assure HUD that HOME funds were committed within 24
           months as required.

The County Disbursed Funds
for Ineligible Costs


           County officials disbursed HOME funds for ineligible costs. Regulations at 24
           CFR 92.616(i) provide that funds disbursed for first-time home buyer activities
           must be supported by records documenting that the recipient family qualifies as a
           first-time home buyer. However, County officials drew down $23,600 for three
           first-time home buyers who were not income eligible for HOME program
           assistance. We attribute this condition to weaknesses in the County’s verification
           procedures to ensure that applicants for HOME program assistance were eligible.

           In addition, County officials drew down $1,379, representing $1,125 that was to
           be paid from its Community Development Block Grant program and $254 that
           was to be paid from the Homelessness Prevention and Rapid Re-Housing
           Program stimulus funds, which was ineligible as a HOME program administrative
           cost. We attribute this condition to weaknesses in the County’s procedures for
           reviewing HOME expenditures to ensure that all expenditures complied with
           program regulations. As a result, HUD lacked assurance that HOME funds
           charged to the program were for eligible costs.

The County Lacked
Documentation for the
Allocation of Costs

           County officials lacked documentation supporting the allocation of HOME funds
           for the salary of an employee who worked on both the HOME and Housing
           Choice Voucher programs. Regulations at 2 CFR Part 225, appendix B, section
           8(h)(4), provide that if employees work on multiple activities or more than one
           Federal award, a distribution of their salaries or wages should be supported by
           personnel activity reports or equivalent documentation. However, County
           officials charged the HOME program for the employee’s total salary of $220,322
           expended during the audit period. We attribute this condition to County officials’
           unfamiliarity with regulations related to allocating expenses to the benefiting
           programs. As a result, County officials could not ensure that this employee’s
           salary was properly allocated to the benefiting programs.



                                            5
Conclusion

             County officials lacked support showing that their HOME program funds were
             always committed and expended in accordance with program regulations. As a
             result, they lacked assurance that (1) $833,706 in HOME funds was committed
             and expended in accordance with regulations for eligible costs, (2) $24,979 was
             expended for eligible activities, and (3) $220,322 charged to the HOME program
             for an employee’s salary was properly allocated to the benefiting programs. We
             attribute this condition to weaknesses in the County’s financial controls over
             maintaining documentation to support the commitment and expenditure of HOME
             funds in a timely manner, and unfamiliarity with regulations related to allocating
             expenses to the benefiting programs.

Recommendations

             We recommend that the Director of the Newark, NJ, Office of Community Planning
             and Development instruct County officials to

             1A.    Adjust IDIS to reflect that the 12 activities, for which $88,100 in HOME
                    funds was drawn down, were canceled and provide documentation
                    supporting that the $88,100 was committed to other eligible activities in a
                    timely manner as required. If supporting documentation cannot be provided,
                    the amount should be recaptured in accordance with regulations at 24 CFR
                    92.500(d)(1)(B).

             1B.    Provide documentation supporting that $745,606, drawn down for activities
                    without evidence of executed agreements, was committed in a timely manner
                    as required. If supporting documentation cannot be provided, the amount
                    should be recaptured in accordance with regulations at 24 CFR
                    92.500(d)(1)(B).

             1C.    Strengthen controls over the commitment of HOME funds to provide greater
                    assurance that these funds will be committed in a timely manner, properly
                    supported by executed written agreements, and canceled in IDIS when the
                    funds are not disbursed.

             1D.    Reimburse the County’s HOME program line of credit $24,979 from non-
                    Federal funds for the ineligible first-time home buyer expenses and
                    administrative costs incurred.

             1E.    Strengthen the County’s financial controls to provide greater assurance that
                    costs charged to the HOME program are eligible.




                                              6
1F.   Provide a basis to support a reasonable allocation of the employee’s salary
      costs of $220,322 charged to the HOME program and reimburse the HOME
      program line of credit for any excess costs charged.

1G.   Establish and implement a reasonable basis for the allocation of salary costs
      for employees who work on more than the HOME program to ensure that
      each program bears its fair share of the costs.




                                7
Finding 2: There Were Weaknesses in the County’s HOME Program
           Administrative Controls
County officials did not always comply with HOME program administrative requirements.
Specifically, they lacked support showing that documents were executed to protect HUD’s interest
in HOME-assisted properties, a community housing development organization (CHDO) was
properly organized, and subrecipients were monitored as required. We attribute this condition to
weaknesses in record-keeping procedures. As a result, HUD lacked assurance that its and the
County’s $980,436 interest in properties that were provided HOME assistance was protected, and
that funds were disbursed for eligible activities in accordance with program regulations.


    Activity Files Lacked Required
    Documentation

                  Our review of County files for 3 of 4 rental housing activities and 13 of 25 first-time
                  home buyer activities, for which HOME funds of $980,436 were provided, revealed
                  that the files lacked documentation required by program regulations. We attribute
                  this condition to weaknesses in the County’s administrative procedures designed to
                  ensure that the required documents were reviewed and maintained to support HOME
                  program expenditures. The table below shows the number of files missing required
                  documentation.

                                        Schedule of files lacking required documentation
                                         Form HUD-
                                         1, mortgage,        Written
                                         mortgage            agreement         Unsigned                           Housing
                                         note, or lien       without all       or undated        Lead-based       quality
                                         or deed             required          written           paint            inspection
                  IDIS activity          restriction3        provisions4       agreements        report5          report
                   Rental housing
                       1304                      X
                       1667                      X                                   X
                       1800                      X

3
 Regulations at 24 CFR 92.508(a)(3)(vii) and (xi) require that each participating jurisdiction establish and maintain
sufficient records to enable HUD to determine whether each home-ownership and rental housing project meets the
affordability requirements of regulations at 24 CFR 92.252 and 92.254 for the required period.
4
  Regulations at 24 CFR 92.504(c)(5)(i) require that funds disbursed for first-time home buyer activities be supported by
a written agreement that conforms to the requirements in regulations at 24 CFR 92.254(a) and specifies the value of the
property and the time by which the housing must be acquired.
5
 Regulations at 24 CFR 92.508(a)(3)(iv) require that records be maintained demonstrating that each project meets the
property standards of 24 CFR 92.251 and the lead-based paint requirement of 24 CFR 92.355.

                                                            8
                             Form HUD-
                             1, mortgage,      Written
                             mortgage          agreement      Unsigned                       Housing
                             note, or lien     without all    or undated      Lead-based     quality
                             or deed           required       written         paint          inspection
          IDIS activity      restriction3      provisions4    agreements      report5        report

           Home buyer
             1594                                   X
             1603                                   X                              X
             1616                                   X                              X              X
             1641                                   X                              X
             1660                                   X                                             X
             1662                   X               X                              X              X
             1669                                   X                              X              X
             1670                   X               X
             1806                   X               X                              X              X
             1818                                   X
             1861                                   X
             1894                                   X                              X
             1930                                   X
             Total                  6               13              1              7              5

          Without the required documents to support the activities, County officials could not
          provide HUD assurance that its and the County’s $980,436 interest in the assisted
          properties would be protected, and that the activities were eligible and carried out in
          compliance with HOME program requirements.

A CHDO Lacked Supporting
Documentation

          The County’s files lacked required documentation showing that one of its three
          CHDOs was properly organized to qualify as a CHDO. Regulations at 24 CFR 92.2
          define a CHDO as a private nonprofit organization that maintains accountability to
          low-income community residents by maintaining at least one-third of its governing
          board’s membership for residents of low-income neighborhoods, other low-income
          community residents, or elected representatives of a low-income neighborhood
          organization. However, neither the initial certification file nor the recertification file
          for one CHDO contained documentation to support that this requirement had been
          met. We attribute this condition to weaknesses in the County’s procedures for
          ensuring that all documentation required for CHDO certification is reviewed and
          maintained. As a result, the County could not assure HUD that HOME funds were
          provided to an eligible CHDO.



                                              9
The County Lacked
Documentation Showing That
Subrecipeints Were Monitored

             County officials lacked documentation showing that their subrecipients were
             monitored as required during program years 2010 through 2012. Regulations at 24
             CFR 92.504(a) provide that the participating jurisdiction is responsible for managing
             the day-to-day operations of its HOME program and that the performance of each
             contractor and subrecipient must be reviewed at least annually. County policy
             provided for the monitoring of all program activities to ensure compliance with
             applicable HUD regulations and requirements, including compliance with
             executed grant agreements and contracts, and the review of subrecipient audits as
             required. Further, inspections of construction and rehabilitation projects were to
             be performed before payment of vouchers, and inspections of social service
             providers were to be performed annually. In addition, rents and tenant incomes
             were to be annually monitored during the period of affordability for HOME-
             assisted projects. However, County officials did not provide records to document
             that the monitoring of subrecipients had been conducted. We attribute this condition
             to weaknesses in the County’s record keeping, which prevented it from maintaining
             documentation showing that activities were monitored as required. As a result, the
             County lacked assurance that its subrecipients performed in accordance with HOME
             program requirements.

Conclusion

             County officials did not always comply with HOME program administrative
             requirements related to maintaining file documentation, ensuring proper certification
             of a CHDO, and documenting that subrecipients were monitored as required.
             Consequently, they could not ensure that HUD’s interest in HOME-assisted
             properties was protected, a CHDO was properly organized, and subrecipients
             complied with HOME program requirements. We attribute this condition to
             weaknesses in the County’s record-keeping procedures to ensure that all required
             documents were reviewed and maintained in activity and CHDO files to ensure that
             HOME program funds were expended for eligible activities.

Recommendations

             We recommend that the Director of the Newark, NJ, Office of Community Planning
             and Development instruct County officials to

             2A.    Record liens or other appropriate notices of record on the real properties
                    assisted with HOME funds to ensure that HUD’s and the County’s $980,436
                    interest in these properties is adequately protected. If liens are not recorded,
                    County officials should reimburse the County’s HOME line of credit for the
                    $980,436 from non-Federal funds.
                                              10
2B.   Strengthen controls over file maintenance to provide greater assurance that
      HUD’s interest in assisted properties is protected.

2C.   Provide documentation to support that the CHDO in question complied with
      the eligibility requirements at the time of its initial certification and
      recertification. If the CHDO did not, the funds provided to it should be
      recouped and any additional funding should be dependent upon obtaining
      proper certification.

2D.   Strengthen monitoring procedures to ensure that subrecipients are monitored
      at least annually.




                               11
                              SCOPE AND METHODOLOGY
The audit focused on whether County officials established and implemented adequate financial
and administrative controls over the HOME program to ensure that HOME funds were expended
and administered for eligible activities in accordance with HUD regulations. We performed the
audit fieldwork from August 2013 to March 2014 at the County’s office at 75 Bayard Street,
New Brunswick, NJ.

To accomplish our objective, we

        Reviewed relevant HOME program requirements and applicable Federal regulations to
         gain an understanding of HOME program administration requirements.

        Interviewed HUD field office and County staff to gain an understanding of the County’s
         program.

        Obtained an understanding of the County’s management controls and procedures through
         analysis and testing of the County’s responses to management control questionnaires.

        Reviewed the County’s organizational chart for its HOME program and its HOME
         program policies, including home buyer, monitoring, and accounting policies.

        Reviewed the County’s audited financial statements for the fiscal years ending December
         31, 2010, and December 31, 2011, to identify trends and potential irregularities.

        Analyzed reports from IDIS to obtain HOME disbursement data for the audit period. Our
         assessment of the reliability of data included in IDIS reports was limited to the data
         sampled, which were reconciled to County records; therefore, we did not assess systems
         generating the data.

        Analyzed reports from LexisNexis6 to obtain information related to real properties
         assisted with HOME funds.

        Selected a sample of 30 activities funded with $1.7 million during the period July 2010 to
         June 30, 2013, to test compliance with HOME program regulations. The activities
         consisted of 25 first-time home buyers, 4 rental activities, and 1 tenant-based rental
         activity. The results of this sample are limited to the items tested and cannot be projected
         to the universe of HOME-assisted properties.

        Reviewed bank statements for accounts used for the County’s HOME program funds and
         traced payments and deposits listed on the statements to the County’s accounting records
         and IDIS reports for its HOME program.


6
 LexisNexis is a private provider of information that helps users verify a person’s identity, comply with legislation,
and support law enforcement and homeland security initiatives.

                                                          12
The audit generally covered the period July 1, 2010, through June 30, 2013, and was extended as
needed to accomplish the 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 that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               13
                              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:

                     Program operations – Policies and procedures that management has
                      implemented to reasonably ensure that a program meets its objectives.

                     Compliance with laws and regulations – Policies and procedures that
                      management has implemented to reasonably ensure that resource use is
                      consistent with laws and regulations.

                     Safeguarding resources – Policies and procedures that management has
                      implemented to reasonably ensure that resources are safeguarded against
                      waste, loss, and misuse.

                     Validity and reliability of data – Policies and procedures that management
                      has implemented to reasonably ensure that valid and reliable data are
                      obtained, maintained, and fairly disclosed in reports.

               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.


                                                 14
Significant Deficiencies

             Based on our review, we believe that the following items are significant deficiencies:

                   County officials had not implemented adequate internal controls to ensure
                    that resources were always used in compliance with laws and regulations
                    because they lacked documentation to show that HOME funds were
                    committed in a timely manner (see finding 1).

                   County officials had not implemented adequate internal controls to ensure
                    that resources were always safeguarded against waste, loss, and misuse
                    because HOME funds were used for unsupported and ineligible costs (see
                    finding 1).

                   County officials had not implemented adequate internal controls to ensure
                    that valid and reliable data were always obtained, maintained, and fairly
                    disclosed in reports because financial information included in the County’s
                    accounting records did not reconcile to IDIS (see finding 1).

                   County officials had not implemented adequate internal controls to always
                    ensure the achievement of program objectives because HOME activities
                    were not always administered in compliance with program requirements and
                    Federal regulations (see finding 2).




                                              15
                                      APPENDIXES

Appendix A

              SCHEDULE OF QUESTIONED COSTS
             AND FUNDS TO BE PUT TO BETTER USE

 Recommendation                          Unsupported       Funds to be put
                      Ineligible 1/
     number                                  2/            to better use 3/

      1A                                                       $88,100
      1B                                   $745,606
      1D                $24,979
      1F                                   $220,322
      2A                                                      $980,436


                        $24,979            $965,928         $1,068,536



1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.

3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     that are specifically identified. In this case, if the County provides documentation
     showing that the commitment of the $88,100 was obtained in a timely manner, HUD can
     be assured that the funds were put to better use, and if liens are recorded on the assisted
     properties, HUD’s interest in the properties, which were provided $980,436 in HOME
     funding, will be protected.




                                             16
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 3




Comment 4



Comment 5




Comment 6




Comment 5




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 7



Comment 5




Comment 8




Comment 5




                         19
                         OIG Evaluation of Auditee Comments

Comment 1   County officials stated that they will adjust IDIS to report that the subject
            activities were cancelled, and that they can provide documentation that the funds
            associated with these activities were subsequently committed to additional
            activities in a timely manner. This documentation needs to be provided to the
            HUD field office for verification as part of the audit resolution process. If
            documentation cannot be provided, the amount should be recaptured in
            accordance with regulations at 24 CFR 92.500(d)(1)(B).

Comment 2   County officials stated that a written agreement was executed for 1 of the 5
            activities prior to committing funds in IDIS. County officials further contend that,
            while agreements for the other 4 activities had not been fully executed before
            committing the funds, the agreement for one was executed prior to the funds’
            commitment deadline. During the audit resolution process with HUD, County
            officials will need to provide documentation that written agreements were
            executed and funds were committed prior to the funds’ commitment deadline. If
            documentation cannot be provided, the amount should be recaptured in
            accordance with regulations at 24 CFR 92.500(d)(1)(B).

Comment 3   County officials’ proposed action that no commitment of funds will be made in
            IDIS without an executed written agreement and documentation from HOME
            fund recipient that all necessary financing has been secured, is responsive to the
            recommendation.

Comment 4   County officials stated that they will provide documentation that the three
            households that received HOME assistance were income eligible at the time
            assistance was provided. If the documentation is not provided, the County needs
            to reimburse its HOME line of credit from non-Federal funds.

Comment 5   County officials agreed to take action that is responsive to the recommendation.

Comment 6   County officials stated that the salary of one employee, who works approximately
            90 percent of the time on the HOME program, was charged 100 percent to the
            HOME program, and that the HOME program was not charged for any of the
            salary of three other employees who worked some of their time on the HOME
            program. County officials further contend that the salaries of these three
            employees which could be allocated to the HOME program exceeded the salary
            allocated for the one employee questioned in the finding. However, during the
            audit County officials did not provide documentation to support any salary
            allocation for the three employees. Therefore, during the audit resolution process
            with HUD, County officials will need to provide documentation and obtain HUD
            approval for the allocation of these employees’ salaries to the HOME program.

Comment 7   County officials stated that they will provide documentation that the proper liens
            have been recorded to secure HOME funding for the projects identified. This

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            documentation needs to be provided to the HUD field office for verification as
            part of audit resolution process. If liens are not recorded, County officials should
            reimburse the HOME line of credit from non-Federal funds.

Comment 8   County officials stated that they will provide documentation to support the
            eligibility of the CHDO. This documentation needs to be provided to the HUD
            field office for verification as part of the audit resolution process. If
            documentation is not provided to support the CHDO’s eligibility, the funds
            provided to the CHDO should be recaptured and any additional funding should be
            dependent upon demonstrating eligibility.




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