oversight

The State of Florida, Tallahassee, FL, Did Not Properly Support the Eligibility of Some Funds Used for the Community Development Block Grant Disaster Recovery Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-07-27.

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

         State of Florida, Tallahassee, FL
         Community Development Block Grant Disaster
                    Recovery Program




Office of Audit, Region 4      Audit Report Number: 2015-AT-1006
Atlanta, GA                                          July 27, 2015
To:          Gary Causey, Director of Community Planning and Development, Jacksonville Field
             Office, 4HD

             //signed//
From:        Nikita N. Irons, Regional Inspector General for Audit, Atlanta Region, 4AGA
Subject:     The State of Florida, Tallahassee, FL, Did Not Properly Support the Eligibility of
             Some Funds Used for the Community Development Block Grant Disaster Recovery
             Program




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of the State of Florida’s Community Development
Block Grant Disaster Recovery 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 404-
331-3369.
                  Audit Report Number: 2015-AT-1006
                  Date: July 27, 2015

                  The State of Florida, Tallahassee, FL, Did Not Support the Eligibility of Some Funds
                  Used for the Community Development Block Grant Disaster Recovery Program




Highlights
What We Audited and Why
We audited the State of Florida’s Community Development Block Grant Disaster Recovery
(CDBG-DR) program because the State was awarded more than $107 million to recover from the
2008 natural disasters and to undertake activities and long-term strategies that focus on reducing
future natural disasters. Further, the U.S. Department of Housing and Urban Development (HUD),
Office of Inspector General, had not audited the State since 2006. Our audit objective was to
determine whether the State administered its CDBG-DR program in accordance with applicable
HUD requirements. Specifically, we wanted to determine whether the State used funds to assist
eligible properties and beneficiaries.

What We Found
The State did not adequately administer its CDBG-DR program in accordance with HUD
requirements because it did not demonstrate whether (1) 93 assisted units with expenditures of more
than $2 million were impacted by the 2008 declared disasters, (2) a property acquired for $63,076
was in a high-risk area, (3) a property met the low- and moderate-income housing national
objective, and (4) 9 beneficiaries with expenditures of $220,589 were income eligible to receive
assistance.

What We Recommend
We recommend that HUD require the State to provide support regarding the eligibility of funds
used or reimburse HUD more than $2 million from non-Federal funds. The State should also
develop policies and procedures to ensure that sufficient eligibility documentation is maintained.
Table of Contents
Background and Objective........................................................................................................... 3

Results of Audit ............................................................................................................................. 4
           Finding 1: The State Did Not Have Sufficient Evidence To Show That Some Units
           Were Eligible To Receive Assistance............................................................................... 4
           Finding 2: The State Did Not Have Documentation To Show That Some
           Beneficiaries Were Income Eligible To Receive Assistance .......................................... 8

Scope and Methodology.............................................................................................................. 10

Internal Controls ......................................................................................................................... 12

Appendixes................................................................................................................................... 13
           A. Schedule of Questioned Costs ................................................................................. 13
           B. Auditee Comments and OIG’s Evaluation ............................................................. 14
           C. Files Questioned for Insufficient Evidence of Impact of Storm ........................... 19




                                                                       2
Background and Objective
From August through September 2008, the State of Florida was impacted by Hurricanes Ike and
Gustav and Tropical Storm Fay. In response to these disasters, both the governor of Florida and
the President of the United States declared a state of emergency in affected communities. As a
result, on September 30, 2008, Congress appropriated $6.5 billion under the Consolidated
Security, Disaster Assistance, and Continuing Appropriations Act of 2009.
Under the Act, the U.S. Department of Housing and Urban Development (HUD) provided two
allocations of Community Development Block Grant Disaster Recovery (CDBG-DR) funds to
the State. The first allocation of more than $81 million was awarded in December 2009 to
recover from the 2008 natural disasters. The second allocation of more than $26 million was
awarded in March 2011 from the CDBG Disaster Recovery Enhancement Fund (DREF) to
undertake activities and long-term strategies that focus on reducing damages from future natural
disasters. The State and HUD anticipate closing the grant activities by December 2015.

The State’s Department of Community Affairs administered the CDBG-DR funds until
September 30, 2011, when the Department of Community Affairs was terminated. On October
1, 2011, the responsibility of the CDBG-DR program was transferred to the Department of
Economic Opportunity. The Department assists the governor in working with the legislature,
State agencies, business leaders, and economic development professionals to formulate and
implement policies and strategies that will promote economic opportunities for Floridians. The
Department’s Division of Community Development maintains responsibility for the CDBG-DR
program, along with several other programs, such as CDBG and the Neighborhood Stabilization
Program. The Department administers the CDBG-DR program through subrecipients or local
governments.
The State reports CDBG-DR activities quarterly through HUD’s Disaster Recovery Grant
Reporting (DRGR) system. DRGR allows grantees to request their grant funding from HUD and
report on what is accomplished with these funds. According to DRGR, as of October 31, 2014,
the State disbursed more than $89 million of the total grant, which included more than $15.5
million for housing-related activities.

The audit objective was to determine whether the State administered its CDBG-DR program in
accordance with applicable HUD requirements. Specifically, we determined whether the State
used disaster recovery funds to assist eligible properties and beneficiaries. 1




1
  Our objective did not include the review of duplication of benefits because HUD reviewed this matter in December 2010 with the State
(Department of Community Affairs), and elevated in October 2011 as a finding, noting that the State’s subrecipients failed to take actions to
prevent duplication of benefits. HUD issued a revised corrective action to the State in April 2013, which required sufficient evidence be provided
to support duplication of benefits compliance; the State (Department of Economic Opportunity) provided additional supporting analysis to HUD
in 2013, 2014, and 2015. The State and HUD are addressing this finding and anticipate closing the subrecipient grant activities by December
2015.



                                                                        3
Results of Audit

Finding 1: The State Did Not Have Sufficient Evidence To Show
That Some Units Were Eligible To Receive Assistance

The State did not have sufficient evidence to show that units were eligible to receive assistance.
Specifically, it did not have sufficient evidence to support that (1) 93 units assisted with the first
allocation of CDBG-DR funds were impacted by the applicable 2008 storm, (2) a property
purchased with DREF funds was in a high-risk area, and (3) a property purchased met the
national objective to provide low- to moderate-income housing. These conditions occurred
because (1) the State did not believe it was necessary to show the impact of storm damages when
funds were used for mitigation purposes, (2) its subrecipients believed there was sufficient
evidence to show that properties were eligible for assistance, and (3) the State relied heavily on
subrecipients for activity information. As a result, HUD has no assurance that more than $2
million in CDBG-DR funds was used to assist eligible properties.
Insufficient Proof of Impact by the Federally Declared Disaster
The State did not have sufficient evidence to support that the assisted units were damaged as a
result of the declared storms. Federal Register Notice 74 FR 7244 (February 13, 2009) states
that funds must be used for necessary expenses related to disaster relief; long-term recovery; and
restoration of infrastructure, housing, and economic revitalization in areas affected by natural
disasters that occurred in 2008. We reviewed seven housing-related activities administered by
four subrecipients that had total expenditures of more than $3.2 million. Two of the four
subrecipients reviewed did not provide sufficient evidence to support that more than $2 million
in CDBG-DR funds was used for eligible properties (see table 1 and appendix C for detailed
review).
                              Table 1 – Unsupported evidence of storm impact
                                                                                         Questioned
        DRGR activity name             Description of expense          Number of units
                                                                                           costs
                                   Rehabilitation and mitigation of
                                   an affordable rental housing
     Escambia Co 14B                                                         48          $1,075,000
                                   development that sustained
                                   damages from Hurricane Gustav
                                   Rehabilitation or reconstruction
                                   and mitigation of residential
                                                                             8            $547,317
                                   structures that sustained damages
                                   from Tropical Storm Fay
     St. Lucie Co 14A/ARH*
                                   Installation of hurricane-proof
                                   doors and windows for affordable
                                   rental housing developments to            37           $403,949
                                   solely mitigate future storm
                                   damages
                                                  Total                      93          $2,026,266
     *This activity has two separate projects.



                                                       4
In some instances, funds were awarded to rehabilitate and mitigate future storm damages by
repairing or reconstructing homes to comply with local and State building code standards.
Evidence that the homes had been damaged by the declared 2008 storm was insufficient. To
justify the use of funds, in some cases, the subrecipients had photographs and scope of work or
home inspection reports to demonstrate the need to repair or reconstruct the residential structure
to lessen the risk of future storm damage. Although the files included photographs and
inspection reports, they were dated several years after the storm, and the documentation did not
indicate that the damages were related to the storms. According to the subrecipient agreements 2
and HUD’s Homeowner’s Rehabilitation Program Guidance, the recipient must demonstrate that
the damage or destruction to structure was a direct result of the applicable disaster. Therefore, we
consider the evidence provided insufficient.
In another instance, funds were used to replace windows and exterior doors that were impact
rated and energy efficient. Efforts were exclusively for mitigation or preparedness purposes
generally connected to a future disaster, not to the declared storm.

The State indicated that the lack of documentation may have been due to the high staff turnover
and loss of information that occurred when the program transitioned from the Department of
Community Affairs to the Department of Economic Opportunity. Staff believed that when funds
were used for mitigation purposes it did not need to show that the assisted properties were
impacted by the declared storms. In addition, the State explained that in its application, the
subrecipients stated and provided documentation on how activities were related to the storms. In
most cases, the subrecipients provided newspaper articles and pictures of the area wide
devastation in the aftermath of the storm. Therefore, the State believed that the application was
sufficient to connect the activity to the storm. The State also thought it did not need to
demonstrate that the property assisted suffered actual damages or was affected by the declared
storm since the HUD-approved action plan indicated that disaster recovery funds would be used
for mitigation and preparedness purposes.

Activities funded with 2009 appropriations must clearly demonstrate that funds address a direct
or indirect impact of the declared disaster. However, when disaster funds are used for individual
homeowner rehabilitation activities, the State must demonstrate that the damage or destruction
was a direct result of the disaster 3. In addition, as part of the recovery effort, HUD encourages
the incorporation of preparedness and mitigation measures into eligible rebuilding activities that
address the impacts of the previously covered disaster 4. However, mitigation activities that are
not part of the recovery or rebuilding activity and are generally connected only to a future
disaster are ineligible. Therefore, more than $2 million in CDBG-DR funds will be unsupported




2
  According to the CDBG-DR agreement between the State and the subrecipient, Attachment J: Program and Special Condition Section, “before
expending disaster recovery funds for housing rehabilitation projects, the recipient must receive prior written approval of release of funds and the
file shall document damage by the applicable 2008 storm.”
3
  See: hudexchange.info/cdbg-dr/toolkits “HUD’s Homeowner Rehabilitation Program Guidance
4
  Federal Register Notice 74 FR 7250 (February 13, 2009) encourages construction methods that emphasize high quality, durability, energy
efficiency, sustainability, and mold resistance, including how the State will promote enactment and enforcement of modern building codes and
mitigation of flood risk, where appropriate.


                                                                          5
until the State provides sufficient evidence to HUD to show that the assisted units were impacted
by the 2008 declared natural disasters.
Insufficient Proof That Property Was in a High-Risk Area
The State did not have sufficient evidence to support that a property acquired under activity Leon
Co DREF 01 with $63,076 in CDBG DREF funds was located in a high-risk area. The
subrecipient used DREF funds to acquire four scattered owner-occupied single-family residential
units located in the designated 100-year flood plain. According to Federal Register Notice 74 FR
41148 (August 14, 2009), DREF funds were awarded to invest in efforts that focus on reducing
damages from future natural disasters, such as providing buyout payments to homeowners in a
severe risk for a future disaster. One of the four properties acquired was not located in a 100-
year flood plain or high-flood-risk area; instead, it was located in an area of minimal flood
hazard. The subrecipient’s storm water management coordinator indicated that flood zone
designation did not accurately reflect the flooding experienced by residents but did not provide a
flood hazard analysis to support this claim. Therefore, $63,076 will be unsupported until the
State provides documentation to show that the property was located in a high-risk area.

No Evidence To Show That a Property Met the National Objective
The State did not have evidence to show that a property under activity Monroe Co 01/ARH met
the low- to moderate-income housing objective. In 2011, $261,470 in CDBG-DR funds was
used to acquire five properties with the goal of rehabilitating and providing affordable rental
housing. These properties sustained damages in 2008 from Tropical Storm Fay. Although
HUD’s DRGR system shows that the activity had been completed, one of the five properties was
pending rehabilitation and was unoccupied. This vacant property is blighted and deteriorated,
and plans for the property to be discussed with the City’s Historical Architectural Review
Commission were pending. According to 24 CFR (Code of Federal Regulations) 570.483(b)(3),
housing activities are carried out for the purpose of providing or improving permanent residential
structures that, upon completion, will be occupied by low- and moderate- income households.
The activity should not have been closed until the property was rehabilitated and occupied by a
low-to moderate- income household. This condition occurred because the State heavily relied on
the subrecipient to provide information about the activity and closed it once all funds were drawn
for the activity. Due to the State’s limited resources and large workload, it does not confirm the
information until all activities administered by the subrecipients are complete or subrecipient
agreement is expired. Therefore, $14,127 in CDBG-DR funds will be unsupported until the
State provides documents supporting the plans for the vacant unit. If the plans require a change
of national objective, the State must provide supporting documentation to demonstrate
compliance with the new national objective.




                                                6
Conclusion
The State did not have sufficient evidence to show that some units were eligible to receive
assistance. This condition occurred because (1) the State did not believe it was necessary to
show the impact of storm damages when funds were used for mitigation purposes, (2) the
subrecipients believed there was sufficient evidence to show that properties were eligible for
assistance, and (3) the State relied heavily on subrecipients for activity information. As a result,
HUD has no assurance that more than $2 million in CDBG-DR funds was used to assist eligible
properties.

Recommendations
We recommend that the Director of the HUD Jacksonville Office of Community Planning and
Development require the State to
       1A.     Provide documents supporting that the 93 units assisted under activities Escambia
               Co 14B and St. Lucie Co 14A/ARH were impacted by the declared storm or
               reimburse HUD $2,026,266 from non-Federal funds.
       1B.     Provide documentation supporting that acquisition under activity Leon Co DREF
               01 was in a high-risk area or reimburse HUD $63,076 from non-Federal funds.
       1C.     Provide documents supporting plans for meeting the low- and moderate-income
               housing national objective for a vacant unit under activity Monroe Co 01/ARH or
               reimburse HUD $14,127 from non-Federal funds. If the plans require a change of
               national objective, the State should provide supporting documentation to
               demonstrate compliance with the new national objective.
       1D.     Develop and implement written policies and procedures that identify documents
               required to support the impact of applicable storms for future grants.
       1E.     Develop and implement written policies and procedures to ensure that the national
               objective is met before closing an activity in HUD’s DRGR system for future
               grants.




                                                  7
Finding 2: The State Did Not Have Documentation To Show That
Some Beneficiaries Were Income Eligible To Receive Assistance
The State did not have sufficient documentation to show that nine tenants for activity Leon Co
14A were income eligible to receive assistance. This condition occurred because the
subrecipient misinterpreted the regulation by not assessing the income eligibility of the tenant
that resided in the property. As a result, there was no assurance that $220,589 in CDBG-DR
funds was spent for eligible beneficiaries.
Income Eligibility Not Supported for One Activity
The State did not have documentation to support the eligibility of beneficiaries for activity Leon
Co 14A. This activity involved the repairing of 13 residential housing units. The subrecipient
explained that 9 of the 13 residential units provided affordable rental housing to low- and
moderate- income households. The subrecipient provided income documentation for all 13
households. However, it did not have the income documentation for the initial tenants, who
resided in nine rental units listed in table 2. According to 24 CFR 570.483(b)(3), an activity is
considered meeting the low- and moderate-income housing national objective if it can
demonstrate that upon completion of providing or improving permanent residential structures are
occupied by low- and moderate-income households, whether owner – or renter –occupied.
                                                        Property             Amount
                                                          no. 5             disbursed
                                                           1                     $15,748
                                                           2                     $27,940
                                                           3                     $24,920
                                                           4                     $18,903
                                                           5                     $16,930
                                                           6                     $70,901
                                                           7                       $3,511
                                                           8                     $16,690
                                                           9                     $25,046
                                                            Total               $220,589

This occurred because the subrecipient misunderstood the regulations by assessing the eligibility
of the owners of the properties instead of the tenants that occupied the properties upon
completion of rehabilitating the properties. The subrecipient required the owners to provide
affordable rental housing to low- and moderate- income household; nonetheless, the subrecipient
considered the beneficiary to be the owner not the tenant.

The State monitored this subrecipient and found no issues with eligibility, but these 9 units were
not reviewed. The State agreed that the subrecipient should have maintained documents
supporting the eligibility of the tenant and not the owner.




5
    Property addresses were previously provided to the State and HUD.


                                                                        8
In an effort to address this finding, the subrecipient attempted to obtain documentation
supporting the eligibility of the initial tenants that occupied these units, but was not successful.
The subrecipient provided survey forms that did not comply with HUD’s State CDBG guide
book, Chapter 3 Low-Moderate Income Housing requirements because the forms did not include
the tenants’ income, the subrecipient’s computation, and supporting documentation. Without
proper documentation to confirm the subrecipient’s assessment, we could not determine whether
the tenants’ income qualified for assistance. In addition, the income eligibility information
provided for six tenants was based on current income. According to 24 CFR 570.483(b)(3), a
housing activity is an eligible activity for the purpose of providing or improving permanent
residential structures that, upon completion, will be occupied by low and moderate income
households. Therefore, it is necessary for the subrecipient to obtain and document the tenants’
income eligibility at the time the assistance was initially awarded. Hence, current income
information does not provide support of income eligibility at the time the assistance was
awarded.

Conclusion
The State did not always comply with CDBG-DR requirements because it did not have
documentation supporting that nine tenants were income eligible for activity Leon Co 14A. This
condition occurred because the subrecipient misinterpreted the regulation by not assessing the
income eligibility of the tenant that resided in the property. As a result, $220,589 in CDBG-DR
funds was unsupported for nine housing units, and HUD has no assurance that the tenants were
eligible to receive assistance.

Recommendations
We recommend that the Director of the HUD Jacksonville Office of Community Planning and
Development require the State to
       2A.     Provide supporting documentation to show that nine tenants were income eligible
               for assistance under activity Leon Co 14A or reimburse its program $220,589
               from non-Federal funds.




                                                  9
Scope and Methodology
We performed our review from November 2014 through April 2015 at the State’s Department of
Economic Opportunity located at 107 East Madison Street, Caldwell Building, Tallahassee, FL,
and other sites as necessary. Our review covered the period December 21, 2009, through
October 31, 2014, and was expanded as needed to achieve our objective.

To accomplish our objective, we

      •     Reviewed applicable laws and regulations;
      •     Reviewed applicable State policies and procedures;
      •     Reviewed HUD’s monitoring, independent public accountant, and DRGR reports;
      •     Reviewed the subrecipient’s financial records, program activity files, and other
            supporting documentation;
      •     Interviewed HUD, State, and subrecipient staff; and
      •     Performed site visits to ensure the existence of activities.

During the period December 21, 2009, through October 31, 2014, the State disbursed more than
$15.8 million in CDBG-DR funds for housing-related activities. Based on high dollar
disbursement amounts, three subrecipients were selected, and six housing-related activities were
chosen. From these six activities, we reviewed the income eligibility of 42 beneficiaries and
property eligibility of 43 units with a total disbursement of more than $1.4 million, or 8.9 percent
of total housing-related disbursements.

Twelve of the forty-three units reviewed were from activity Escambia Co 14B, which used
CDBG-DR funds to rehabilitate and mitigate a 48-unit rental complex. According to the
subrecipient and review, there was insufficient evidence to show that the rental complex as a
whole was impacted by the declared natural disaster. Therefore, we expanded our questioned
cost from the 12 units reviewed to all 48 units funded with CDBG-DR funds totaling to more
than $1 million.

We selected an additional housing-related activity based on high dollar disbursement from
another subrecipient with 46 assisted units and disbursements of more than $1 million to
determine whether the units were eligible for assistance. 6

We did not perform a 100 percent selection. The results of this audit apply only to the items
reviewed and cannot be projected to the universe of activities.




6
  In total, we reviewed seven housing-related activities from four subrecipients that had total disbursements of more than $3.2 million, or 20.6
percent of the total housing-related disbursements.


                                                                         10
We determined that the computer-processed data generated by the Department of Economic
Opportunity and its subrecipients were not used to materially support our audit findings,
conclusions, and recommendations. Therefore, we did not assess the reliability of these
computer-processed data.

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

•   Controls over program operations.
•   Controls over relevance and reliable information.
•   Controls over compliance with laws and 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.
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:

    •   The State did not have sufficient evidence to show that some units were eligible to
        receive assistance (see finding 1).




                                                  12
Appendixes

Appendix A
                             Schedule of Questioned Costs
                          Recommendation          Unsupported
                              number
                                 1A                  $2,026,266
                                 1B                      63,076
                                 1C                      14,127
                                 2A                     220,589
                                Totals               $2,324,058

    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.




                                             13
Appendix B
             Auditee Comments and OIG’s Evaluation


Ref to OIG    Auditee Comments
Evaluation




                               14
Comment 1




Comment 2




Comment 3




            15
Comment 4




Comment 3




Comment 5




            16
                         OIG Evaluation of Auditee Comments


Comment 1   The State indicated that it was working with Escambia and St. Lucie Counties to
            identify additional supporting documents applicable to the damages sustained
            from the declared storms.

            We acknowledge the State’s effort to obtain documents that support the damages
            from the declared storms for activities Escambia Co 14B and St. Lucie Co
            14A/ARH. The Office of Community Planning and Development is responsible
            for verifying whether the actions for recommendation 1A are addressed
            sufficiently.

Comment 2   The State requested additional information from the subrecipient and will work
            with the HUD Jacksonville Field Office to determine why the property they
            acquired was in a high-risk flood area.

            We acknowledge the State’s effort in working with HUD to understand flood
            designations, and obtaining the documents to support that the property acquired
            from its subrecipient was in a high-risk flood area. The Office of Community
            Planning and Development is responsible for verifying whether the actions for
            recommendation 1B are addressed sufficiently.

Comment 3   The State is working with the subrecipient to determine whether the acquired
            property will meet the national objective and, if not, the funds must be returned.
            While the State agreed that HUD’s Disaster Recovery Grant Reporting (DRGR)
            system shows the activity was completed, this only represents the status for
            activity funds drawdown. The State clarified that the activity is still underway
            and the State will continue to monitor the activity’s progress to ensure that the
            required national objective is achieved.

            According to the DRGR Quarterly Performance Report Module –Draft User
            Guide, May 9, 2011, version, section 6.4, an activity is considered complete once
            all required beneficiary, performance, and financial information has been entered
            on the activity. If the subrecipient agreement is still open and activities are still
            underway, the “Completed” activity status currently shown in DRGR is incorrect.
            The activity status in DRGR should be changed to “Underway” and the activity
            progress narrative section should be updated to show accurate activity
            information. We encourage the State to implement recommendation 1E and
            continue monitoring the subrecipient’s progress in completing the proposed
            accomplishments to ensure compliance with the national objective.

Comment 4   Currently, the State is working with HUD to finalize an updated policies and
            procedures manual for the CDBG-Disaster Recovery program. The State will
            incorporate additional language and processes in the manual to address the OIG’s



                                              17
            recommendations. The State anticipates a revised version of the manual to be
            completed by August 31, 2015.

            We acknowledge the State’s efforts in working with HUD’s technical assistance
            provider to update and revise its policies and procedures for its CDBD-Disaster
            Recovery program. The Office of Community Planning and Development is
            responsible for reviewing and verifying whether the actions for recommendation
            1D are addressed sufficiently.

Comment 5   The State explained that the subrecipient has committed to expedite additional
            eligibility income verification reviews for the nine tenants that occupied
            affordable rental housing program projects after the rehabilitation was performed.
            The State anticipates submitting supporting documents to HUD by July 31, 2015.

            We appreciate the State’s effort to obtain the information to support the income
            eligibility for activity Leon Co 14A. The Office of Community Planning and
            Development is responsible for reviewing and verifying whether the actions for
            recommendation 2A are addressed sufficiently.




                                             18
Appendix C
                  Files Questioned for Insufficient Evidence of Impact of Storm


Escambia Co 14B – Sanchez Court Apartments
Activity description:       Rehabilitation and mitigation of the Sanchez Courts complex. This rental housing
                            development was damaged originally in 2004 by Hurricane Ivan and further impacted
                            in 2008 by Hurricane Gustav.
Questioned costs:           $1,075,000
Number of units:            48
Review assessment:           The State did not have sufficient evidence to show that the rental complex was
                             directly impacted by Hurricane Gustav as required by the subrecipient agreement.
                            • There was no home inspection or damage assessment report indicating that the
                                 housing development was impacted by the storm.
                             • No Federal Emergency Management Agency (FEMA) assistance or insurance
                                 claim was filed.
                             • The subrecipient provided four photographs of the rental complex taken in the year
                                 that the storm occurred. However, pictures did not determine whether damages
                                 were a result of the storm.
                             • The subrecipient had other photographs dated several years after the storm.
                             • The subrecipient provided invoices, specifications, drawings, and pictures of the
                                 housing development, but this documentation did not support that damages were a
                                 result of the storm.

St. Lucie Co 14A/ARH – Rehabilitation or Reconstruction of Residential Structures
Project description:    Rehabilitation or reconstruction and mitigation of residential structures that sustained
                        damages from Tropical Storm Fay
Questioned costs:       $547,317
Number of units:        8
Review assessment:      The State did not have sufficient evidence to show that properties were directly impacted
                        by Tropical Storm Fay as required by the subrecipient agreement. The following
                        properties did not receive or have evidence to show that owner filed a claim with FEMA,
                        the Small Business Administration, or an insurance company. In addition, the home
                        inspection report did not certify that damages to the residential structures occurred as a
                        result of the disaster.
                                                          Property no.        Amount
                                                               1              $88,015
                                                               2              $46,684
                                                               3              $77,350
                                                               4              $75,184

                                                               5               $70,791

                                                               6               $74,792

                                                              7                $38,262
                                                              8                $76,239
                                                             Total            $547,317




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St. Lucie Co 14A/ARH – Garden Terrace and Garden Terrace Annex Communities
Project description:   Installation of hurricane-proof doors and windows at Garden Terrace and Garden
                       Terrace Annex Communities to mitigate future storm damages
Questioned costs:      $403,949
Number of units:       37
Review assessment:      The State did not have evidence to show that these rental housing developments were
                        damaged or affected by Tropical Storm Fay because funds were used solely for
                        mitigation purposes. The first allocation of CDBG-DR funds was used for this
                        project. According to Federal Register Notice 74 FR 7244, funds must be used for
                        necessary expenses related to disaster relief; long-term recovery; and restoration of
                        infrastructure, housing, and economic revitalization in areas affected by natural
                        disasters that occurred in 2008. Therefore, mitigation or preparedness activities that
                        are not part of the recovery or rebuilding activity and are generally connected only to
                        a future disaster are ineligible.




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