oversight

HUD Did Not Adequately Implement or Provide Adequate Oversight To Ensure Compliance With Environmental Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-06-16.

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

  Offices of Housing, Public and Indian
   Housing, and Community Planning
   and Development, Washington, DC

             Implementation of and Compliance With
                  Environmental Requirements




Office of Audit, Region 6        Audit Report Number: 2015-FW-0001
Fort Worth, TX                                         June 16, 2015
To:            Nani A. Coloretti, Deputy Secretary, SD

               Jemine A. Bryon, General Deputy Assistant Secretary,
                                Public and Indian Housing, P

               //signed//
From:          Gerald Kirkland, Regional Inspector General for Audit, 6AGA
Subject:       HUD Did Not Adequately Implement or Provide Adequate Oversight To Ensure
               Compliance With Environmental Requirements

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 implementation and oversight of
compliance with environmental requirements.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at
817-978-9309.
                    Audit Report Number: 2015-FW-0001
                    Date: June 16, 2015

                    HUD Did Not Adequately Implement or Provide Adequate Oversight To
                    Ensure Compliance With Environmental Requirements




Highlights

What We Audited and Why
We audited the U.S. Department of Housing and Urban Development’s (HUD) implementation
and oversight of compliance with environmental requirements as part of the HUD Office of
Inspector General’s annual audit plan to contribute to improving HUD’s execution of and
accountability for its fiscal responsibilities. Our objective was to determine whether HUD,
specifically its Offices of Housing; Public Housing, and Native American Programs within
Public and Indian Housing; and Community Planning and Development, ensured that it
adequately implemented environmental requirements and provided adequate oversight to ensure
compliance with these requirements.

What We Found
HUD did not adequately implement environmental requirements or provide adequate oversight
to ensure compliance with these requirements. For example, Housing and Public Housing did
not adequately monitor or provide training to their staff, grantees, or responsible entities on how
to comply with environmental requirements. Also, HUD did not have an adequate reporting
process for the program areas to ensure that the appropriate headquarters programs were
informed of field offices’ environmental concerns. Further, our review of five Public Housing
field offices found that none of them followed environmental compliance requirements. These
conditions occurred because HUD did not clearly define program area responsibilities. Further,
Public Housing did not understand requirements or did not consider compliance to be a
priority. As a result, HUD may have increased the risk to the health and safety of the public and
failed to prevent or eliminate damage to the environment, and five Public Housing field offices
allowed public housing agencies to spend almost $405 million for activities that either did not
have required environmental reviews or had reviews that were not adequately supported.

What We Recommend
We recommend that HUD (1) comply with and provide adequate oversight to ensure compliance
with environmental requirements, (2) either establish an independent program office with overall
departmental responsibility for developing and enforcing compliance with environmental
policies by all program offices and grantees or establish an agreement that clearly outlines all
program offices’ environmental oversight responsibilities, and (3) clarify the delegation of
authority in Federal Register notices related to its responsibility for implementation and
compliance with environmental requirements.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding: HUD Did Not Adequately Implement or Provide Adequate Oversight To
         Ensure Compliance With Environmental Requirements ............................................. 5

Scope and Methodology .........................................................................................28

Internal Controls ....................................................................................................30

Followup on Prior Audits ......................................................................................31

Appendixes ..............................................................................................................33
         A. Auditee Comments and OIG’s Evaluation ............................................................. 33

         B. Public Housing Field Offices and the Number of Public Housing Agencies in
            Their Jurisdictions .................................................................................................... 44

         C. Funds Spent Without a Proper Environmental Review ........................................ 45

         D. Criteria ....................................................................................................................... 46




                                                                     2
Background and Objective
In January 1970, Congress passed the National Environmental Policy Act of 1969 (NEPA). The
objective of this legislation was to establish a national policy that would encourage productive
and enjoyable harmony between man and his environment and to promote efforts to prevent or
eliminate damage to the environment and biosphere and stimulate the health and welfare of man.
To carry out the policy set forth in NEPA, Congress directed that it is the continuing
responsibility of the Federal Government to improve and coordinate Federal plans, functions,
programs, and resources to the end that the Nation may attain the widest range of beneficial uses
of the environment without degradation, risk to health or safety, or other undesirable and
unintended consequences. Further, Congress authorized and directed all agencies of the Federal
Government to identify and develop methods and procedures to ensure that the agencies complied
with environmental policies, regulations, and public laws of the United States.
To further the purpose and policy of NEPA, the President issued Executive Order 11514,
Protection and Enhancement of Environmental Quality, on March 5, 1970. Based on the
executive order, the heads of Federal agencies are required to continually monitor, evaluate, and
control their agencies’ activities to protect and enhance the quality of the environment. In
addition, Federal agencies are required to review their statutory authority, administrative
regulations, policies, and procedures, including those relating to loans, grants, contracts, leases,
licenses, or permits, to identify any deficiencies or inconsistencies that prohibit or limit full
compliance with the purposes and provisions of NEPA.
The U.S. Department of Housing and Urban Development (HUD) responded to NEPA and
Executive Order 11514 by developing 24 CFR (Code of Federal Regulations) Part 50, Protection
and Enhancement of Environmental Quality, and 24 CFR Part 58, Environmental Review
Procedures for Entities Assuming HUD Environmental Responsibilities. Regulations at 24 CFR
Part 50 direct HUD to carry out the policies of NEPA and other laws and authorities. This
responsibility includes an independent evaluation of the environmental issues, the scope and
content of the environmental compliance finding, and making the environmental determination.
Further, the regulations state that it is the responsibility of all Assistant Secretaries, the General
Counsel, and the HUD approving official to ensure that the requirements are implemented.
Regulations at 24 CFR Part 58 allow State and local governments to assume HUD’s responsibility
for environmental reviews. However, these regulations do not relieve HUD of all environmental
responsibilities. Instead, they require HUD to monitor, inspect, and ensure that environmental
process decisions are carried out during project development and implementation.
The Office of Inspector General’s (OIG) initial assessment of HUD’s implementation of
environmental requirements found that the Office of Native American Programs and Community
Planning and Development had developed processes for implementing and overseeing
compliance with environmental requirements. However, the Offices of Housing and Public




                                                   3
Housing 1 had not developed processes to ensure adequate implementation and oversight of
compliance with environmental requirements. Rather, they depended primarily on Community
Planning and Development’s Office of Environment and Energy to meet their programs’
requirements. Based on OIG’s initial assessment, we advised Housing, Public and Indian
Housing, and Community Planning and Development that program areas should develop a
memorandum of understanding or agreement among them to clarify roles and responsibilities for
ensuring implementation and oversight of compliance with environmental requirements.
Community Planning and Development’s former Deputy Assistant Secretary for Grant Programs
and Housing’s former Acting General Deputy Assistant Secretary agreed with the
recommendation for a memorandum of understanding or agreement. However, the former
General Deputy Assistant Secretary for Public and Indian Housing did not agree with OIG’s
findings or the recommendation to develop a memorandum of understanding or agreement and
stated that Public and Indian Housing had direct oversight and that its offices complied with
requirements, including providing training and conducting monitoring. To validate these claims,
which seemed contrary to OIG’s initial assessment, OIG performed detailed reviews of five
public housing field offices 2 and reported the results in five separate audit reports (see appendix B
for the universe of the Public Housing field offices and the number of public housing agencies in
their jurisdictions).

HUD provided more than $6.7 billion in capital funding to public housing agencies during the
audit period, including almost $3 billion in American Recovery and Reinvestment Act funds in
2009 and a total of more than $3.7 billion in capital funds in 2011 and 2012. For fiscal years
2013 through 2015, HUD provided almost $5.3 billion in Capital Fund grants to public housing
agencies.

Our objective was to determine whether HUD, specifically its Offices of Housing; Public
Housing and Native American Programs within Public and Indian Housing; and Community
Planning and Development, ensured that it adequately implemented environmental requirements
and provided adequate oversight to ensure compliance with these requirements.




1
    When discussing both the Office of Public Housing and the Office of Native American Programs, we use the
    term Public and Indian Housing; when discussing only the Office of Public Housing, we use the term Public
    Housing; and when discussing only Indian housing, we use the term Office of Native American Programs.
2
    Boston, MA, Kansas City, KS, Greensboro, NC, Columbia, SC, and Detroit, MI




                                                        4
Results of Audit

Finding: HUD Did Not Adequately Implement or Provide Adequate
Oversight To Ensure Compliance With Environmental
Requirements
HUD did not adequately implement or provide adequate oversight to ensure compliance with
environmental requirements. For example, Housing and Public Housing did not adequately
monitor or provide training to their staff, grantees, or responsible entities on how to comply with
environmental requirements. 3 Also, HUD did not have an adequate reporting process to ensure
that the appropriate headquarters programs were informed of field offices’ environmental
concerns. Further, none of the five Public Housing field offices reviewed followed environmental
compliance requirements. These conditions occurred because HUD did not clearly define
program area responsibilities. Further, Public Housing did not understand requirements or did not
consider compliance to be a priority. As a result, HUD may have increased the risk to the health
and safety of the public and failed to prevent or eliminate damage to the environment, and five
Public Housing field offices allowed public housing agencies to spend almost $405 million for
activities that either did not have required environmental reviews or had reviews that were not
adequately supported.
Housing and Public Housing Failed To Monitor Field Offices
The program environmental clearance officers for Housing and Public Housing did not provide
adequate oversight to their respective program field offices to ensure compliance with
environmental requirements. This condition occurred because the program environmental
clearance officers did not clearly understand their roles and responsibilities. For example, the
former Housing program environmental clearance officer stated that while he could have
monitored the field offices, he depended on Community Planning and Development’s Office of
Environment and Energy to monitor them. However, his job description included monitoring and
evaluating field office environmental activities and developing a workload measurement reporting
system, which he did not do. The current Housing program environmental clearance officer
stated that she had not monitored field offices.
The Public Housing program environmental clearance officer stated on several occasions that her
role was only to serve as a liaison between headquarters and the field offices related to
requirements and she did not deal with compliance. However, a July 16, 2010, memorandum
from a former Assistant Secretary for Public and Indian Housing to Public and Indian Housing
principal staff stated that the role of the Public Housing program environmental clearance officer
is to provide environmental compliance reviews and serve as a liaison for Public and Indian

3
    Our initial assessment found that the Office of Native American Programs and Community Planning and
    Development performed monitoring and training. We did not perform detailed testing to determine whether the
    monitoring or training was adequate.




                                                        5
Housing. Regulations at 24 CFR 50.10(a) state that it is the responsibility of all Assistant
Secretaries, the General Counsel, and the HUD approving official to ensure that the requirements
are implemented. Further, the regulations 4 state that only the program approving officials can
establish an environmental management and monitoring program as part of the project approval.
Without adequate monitoring, HUD could not ensure that field offices performed environmental
reviews that complied with 24 CFR Part 50.
Housing and Public Housing Did Not Adequately Monitor Responsible Entities
HUD is required 5 to monitor responsible entities, 6 whether the monitoring is in-depth or limited,
and exercise quality control over the environmental activities performed by responsible entities at
least once every 3 years to ensure that they comply with environmental requirements. However,
Housing and Public Housing did not adequately monitor their responsible entities to ensure
compliance with environmental requirements. The former Housing program environmental
clearance officer stated that Housing did not faithfully monitor its risk sharing program because
he believed that there were few environmental reviews and the reviews were not important.
Public Housing did not monitor its responsible entities because it believed that it was the Office
of Environment and Energy’s responsibility. The Deputy Director of the Boston Office of Public
Housing stated that the Boston Office presumed that the responsible entities conducted the
environmental reviews properly. Therefore, it accepted certifications from responsible entities at
face value. Similarly, the Director of the Detroit Office of Public Housing stated that the role of
HUD is to ensure that the responsible entity signs off on the certification, if needed, or that it
signs a letter to HUD advising of findings as appropriate. He further stated that it is not the role
of HUD to second-guess responsible entities.
The Office of Native American Programs and Community Planning and Development developed
monitoring programs that could be used as tools for monitoring by all program areas. For
example, the Office of Native American Programs has an environmental review compliance
monitoring plan that instructs its field office management and staff on how to conduct monitoring
reviews. This plan provides the staff with guidance on pre-visit preparation, onsite review
procedures, steps for addressing each of the environmental levels of review, 7 and summarizing the
results. In addition, the Office of Native American Programs ensures that it conducts onsite
monitoring of its field offices as required. 8 Figure 1 is an excerpt from its monitoring program. It
shows an example of some of the monitoring steps to determine compliance with activities that
are categorically excluded not subject to 24 CFR 58.5.




4
    24 CFR 50.22
5
    24 CFR 58.77(d)
6
    Regulations at 24 CFR 58.2(a)(7)(ii)(B) define the responsible entity for public housing agencies as the unit of
    general local government, within which the project is located, that exercises land use responsibility.
7
    Environmental levels of review are categories that determine the extent of review needed for the activities or
    projects and include exempt activities, categorically excluded not subject to section 58.5, categorically excluded
    subject to section 58.5, environmental assessments, and environmental impact statements.
8
    24 CFR 58.77(d)




                                                           6
Figure 1




Community Planning and Development has a comprehensive planning and development
monitoring handbook 9 that contains guidance for monitoring all of its programs. Its
environmental monitoring objectives include

    •   Determining whether the responsible entity complied with the procedures and
        requirements of 24 CFR Part 58.
    •   Examining whether the responsible entity adequately assessed the project’s impact on the
        environment and the environment’s impact on the project.
    •   Providing technical assistance to the responsible entity to remedy problems identified and
        reduce or eliminate incidences of noncompliance in the future.
Both the Office of Native American Programs and Community Planning and Development
provided examples of environmental monitoring programs to Public Housing. However, Public
Housing did not use them or develop its own monitoring program.




9
    HUD Handbook 6509.2, REV-6




                                                 7
Housing and Public Housing Did Not Provide Adequate Training
Housing and Public Housing did not provide adequate training to their staff, grantees, or
responsible entities on how to comply with environmental requirements. Instead, they incorrectly
believed that the Office of Environment and Energy was required to provide training to their
respective program areas. While the Office of Environment and Energy’s regional environmental
officers provided environmental training, the training primarily focused on Community Planning
and Development programs, which have environmental reviews performed under 24 CFR Part 58
by the grantees. However, Housing’s environmental requirements are predominantly related to
24 CFR Part 50, which means that HUD was required to perform the reviews. Some Public
Housing field offices had reviews performed by
responsible entities under 24 CFR Part 58, while
others performed them under 24 CFR Part 50.          HUD did not ensure that all of its
While the environmental requirements of 24           program areas’ management or staff
CFR Parts 58 and 50 are the same, the process        was trained to perform 24 CFR Part 50
for the environmental review varies depending        environmental reviews.
on whether the reviews are performed by a
responsible entity or HUD.
Although the former Housing program environmental clearance officer’s responsibilities included
developing training materials and training Housing staff involved in implementing environmental
requirements, he did not develop materials or provide training. He further stated that the
appraisers who perform the environmental reviews under 24 CFR Part 50 for Housing had
received no training in the last 7 to 8 years and that the Office of Environment and Energy was
responsible for all environmental training provided to program areas.
After we issued our draft audit report, HUD provided a list of training sessions, showing that
during our audit period, training for Housing staff was limited to two training sessions on the
environmental review process for Sections 202 and 811 programs and two sessions as part of new
employee orientations. In addition, after we began our audit, the current Housing program
environmental clearance officer 10 provided environmental training to some field office staff and
Housing stakeholders. In addition, following our review of the Greensboro and Columbia Public
Housing field offices, some of the staff members responsible for environmental compliance
attended training provided by the Office of Environment and Energy. HUD did not provide
evidence of who attended the various training sessions.
The Office of Native American Programs and Community Planning and Development
implemented training programs for their grantees. The Office of Native American Programs hired
a contractor that provided annual environmental training to grantees. After we started our review,
the Office of Environment and Energy implemented internal processes to improve its Community
Planning and Development training program and further define its training curriculum and
requirements so they would relate to all applicable programs. Specifically, it set training
requirements for its staff and incorporated information relevant to other program areas into its
training. It also increased its training efforts by providing more training to grantees and HUD

10
     The current program environmental clearance officer was appointed in July 2013.




                                                          8
field office staff and recently developed training for Housing and Public Housing field office staff
that performs 24 CFR Part 50 environmental reviews. While the Office of Environment and
Energy had improved its training program, it is restricted in the amount of training that it can
provide because it has limited resources and does not receive any resources or assistance from the
other programs. Proper training of HUD staff could increase its ability to identify errors and
noncompliance. Further, training of public housing agency staff and Housing stakeholders could
reduce errors and noncompliance.
HUD Had an Inadequate Reporting Process for Environmental Issues but Was Making
Improvements
HUD did not have an established reporting process for its program areas to ensure that the
appropriate headquarters programs were informed of field offices’ environmental concerns.
Neither Housing’s nor Public Housing’s program environmental clearance officers received
reports from field office staff showing oversight of environmental compliance. While the Office
of Native American Programs held biweekly meetings with staff and monthly meetings with team
leaders, it did not have formal written records showing the issues discussed or the actions taken.
Only Community Planning and Development required a regular monthly written report. A formal
reporting process could improve HUD’s oversight.
The Office of Environment and Energy was piloting a recently developed electronic data system,
HUD’s Environmental Review Online System (HEROS), which is part of HUD’s transformation
of information technology systems. HEROS will convert HUD’s paper-based environmental
review process to a comprehensive online system that shows the user the entire environmental
process, including compliance with related laws and authorities. It will allow HUD to collect data
on environmental reviews performed by all program areas for 24 CFR Parts 50 and 58
compliance. The Office of Environment and Energy had also implemented an internal process
within HEROS to track findings, which will allow the program areas to focus training on
recurring issues.

Public Housing Failed To Ensure Environmental Compliance
Our audits of five Public Housing field offices not only identified deficient training, monitoring,
and reporting, but also determined that the field offices did not follow 24 CFR Part 50 or 58 to
determine compliance with environmental requirements. This condition occurred because the
field offices did not (1) maintain sufficient internal control records, (2) have adequate standard
operating procedures, and (3) ensure that funds transferred from capital funds to operating funds
met environmental requirements. As a result, the five Public Housing field offices allowed public
housing agencies to spend almost $405 million for activities that either did not have required
environmental reviews or had reviews that were not adequately supported.

The five field offices did not ensure or adequately address compliance with environmental
requirements. The field offices and responsible entities frequently marked compliance factors as
“not applicable” when they documented and supported compliance with the requirements at 24
CFR 50.4, 58.5, and 58.6. The field offices and responsible entities should have provided details
that fully explained how each project complied with the environmental factors and maintained
documentation to support that determination. Figure 2, obtained from the Office of Environment
and Energy’s environmental review training publication, shows how some documents are


                                                  9
typically marked as “not applicable,” 11 while figure 3 shows how the documents should be
marked.
Figure 2




11
     In figure 2, the “N/A = Not Acceptable” was inserted by the personnel providing training to show that stating
     “Not Applicable (N/A)” on the form is not an acceptable answer.




                                                           10
Figure 3




The Five Field Offices Did Not Have Adequate Controls
The five field offices did not meet the minimum internal control requirements of Public and
Indian Housing’s field office environmental review guidance. The guidance 12 required, at a
minimum, maintaining tracking logs that detailed who performed the environmental reviews,
whether the request for release of funds and certification 13 was received and cleared, and whether
HUD performed the environmental reviews directly. The guidance further required maintaining a
separate environmental file for each housing agency.
     Boston
     The Boston Office of Public Housing Deputy Director said that the Boston Office had one
     combined log that was most likely incomplete and not current. He also said that separate
     environmental review files were not necessary and the office did not maintain them.



12
     Section 6: Role of the Field Office - Internal Controls
13
     The request for release of funds and certification, form HUD-7015.15, is used by the responsible entities and
     recipients when requesting the release of and the authority to use funds. The responsible entity certifies on the
     form that it has fully carried out its responsibilities for environmental review decision making and action
     pertaining to the activities identified on the form and that it has assumed responsibility for, has complied with,
     and will continue to comply with environmental requirements.




                                                             11
   Kansas City
   The Kansas City Office’s tracking log did not include the date the request for release of funds
   and certification was received, the date the environmental review was completed by the
   responsible entity, and the date the review was signed by the responsible entity’s certifying
   official. The date of the Kansas City Office’s required 15-day waiting period, the release of
   funds date, the year of the grant, and the grant number were also not included. Further,
   several staff members maintained their own personal logs, which were also incomplete and
   did not meet the requirements.
   Detroit
   The Detroit Office’s tracking log for fiscal years 2001 through 2012 contained only the public
   housing agency’s name and either a date or the word “exempt” under each year. The tracking
   logs did not include required items such as the grant number, the responsible entity, the date
   the environmental review was completed, or the date of the Detroit Office’s required 15-day
   waiting period.
   Columbia
   The Columbia Office’s tracking log was incomplete because it was maintained for Public
   Housing Capital Fund grants completed under 24 CFR Part 50 only and did not contain a list
   of the project or grant number, the fund year, or the engineer who performed the review.
   Mitigation actions required, the date the review was completed, the date it was signed, and the
   date the letter was sent to the housing agency approving use of the funds were also not in the
   Columbia Office’s tracking log.

   Greensboro
   The Greensboro Office’s tracking log was incomplete because it was maintained for new
   construction or demolition and disposition projects only. It did not include Capital Fund
   grants. The tracking log also did not contain the project or grant numbers, the fund years, the
   names of officials who performed the reviews, any mitigation actions required, the dates the
   reviews were signed, and the dates the letters were sent to the housing agencies approving use
   of the funds. The Greensboro Office also did not maintain a list of responsible entities that
   HUD determined would or would not perform environmental reviews on its behalf.

Three of the Field Offices Either Did Not Have or Had Inadequate Standard Operating
Procedures
The Columbia, Kansas City, and Greensboro field offices did not have standard operating
procedures that complied with 24 CFR Part 50. Standard operating procedures are written field
office procedures for conducting environmental reviews of capital funds. The Columbia Office
did not develop its own in-house standard operating procedures. Instead, according to the
Columbia Office’s Public Housing Director, the Columbia Office relied on the policies and
procedures in 24 CFR Parts 50 and 58 and the 2009 Public and Indian Housing field office
environmental review guidance. However, these criteria do not provide the detailed steps to be
taken to ensure compliance. The Kansas City Office’s procedures directed its staff to use
information on the questionnaire provided by the housing agency’s executive director to satisfy
the requirements and to complete part A of the environmental assessment and compliance
findings for the related laws form by marking “not applicable” to most compliance factors listed


                                                 12
at 24 CFR 50.4. The questionnaire addressed only 3 of the 14 compliance factors and directed the
staff to “not recreate the wheel” but, rather, “use historical data from previous reviews as much as
possible.” The procedures also directed the staff that if the question related to historical
preservation was answered “no” by the housing agencies, no further action would be required.
The Greensboro Office’s approved procedures were dated April 10, 2009, but the staff followed
unapproved procedures, dated May 27, 2009. Neither of the procedures met the requirements of
24 CFR Part 50.

The Five Field Offices Did Not Ensure That Funds Transferred to a Public Housing Agency
Operating Account Met Environmental Requirements Before They Were Used
The field offices did not ensure that public housing agencies met environmental requirements
before operating funds were used. This condition occurred because field office staff generally
believed there was no requirement or guidance requiring them to question how the agencies used
operating funds. However, Public and Indian Housing field office environmental review
guidance 14 states that housing agencies should provide a description of operating costs to either
HUD or the responsible entity to allow completion of the environmental review. Further, 24 CFR
990.116 provides that the environmental review procedures of NEPA and the implementing
regulations at 24 CFR Parts 50 and 58 are applicable to the Public Housing Operating Fund
program.

Responsibility for determining whether operating funds meet environmental requirements is
determined by the type and nature of the projects or activities for which the costs were incurred
and not on the characterization of funds, such as capital or operating. If the funds transferred to
the operating accounts are to be used for capital improvements, either Public and Indian Housing
or the responsible entity must review the expenditures to ensure that a proper level of
environmental review is performed. Operating costs, such as maintenance, security, operations,
utilities, furnishings, equipment, supplies, staff training and recruitment, and other incidental
costs, are categorically excluded not subject to 24 CFR 58.5 laws and authorities.

Responsibilities for Each Program Area Were Not Clearly Defined
Regulations at 24 CFR 50.10 reflect a shared responsibility among Community Planning and
Development and other program areas for the implementation of environmental requirements.
While Community Planning and Development has an overall departmental responsibility for
policies and procedures that implement NEPA and the related laws and authorities, the
regulations also place the responsibility on the Assistant Secretaries to ensure implementation of
the environmental requirements for each of their program areas. Public and Indian Housing stated
on several occasions that implementation and compliance monitoring were delegated to
Community Planning and Development in accordance with Federal Register Notice 38853. 15
However, according to the Notice’s summary, its purpose was for the Assistant Secretary for
Community Planning and Development to redelegate to the Deputy Assistant Secretaries and


14
     Section 5, Program Requirements – Capital Fund Program (Special Note)
15
     Re-delegation of Authority to the Deputy Assistant Secretaries in the Office of Community Planning and
     Development, Volume 77, Number 126, dated June 29, 2012




                                                          13
other specified HUD officials all powers and authorities necessary to carry out Community
Planning and Development programs except those powers and authorities specifically excluded.
Public and Indian Housing also interpreted Federal Register Notice 31972 16 as placing the
responsibility for implementation and compliance solely on Community Planning and
Development. The Notice’s summary appears to update, clarify, and consolidate into one notice
the authority delegated by the HUD Secretary to the Assistant Secretary for Community Planning
and Development, the General Deputy Assistant Secretary for Community Planning and
Development, and the Deputy Assistant Secretary for Special Needs Programs those program (the
Neighborhood Stabilization Program, Community Development Block Grant Disaster Recovery
grants, and homeless assistance programs) authorities under Community Planning and
Development delegations. Neither of the Notices delegated authority for Community Planning
and Development to conduct compliance monitoring of other program area environmental
reviews.

Each program area except Community Planning and Development had its own program
environmental clearance officer, 17 whose purpose was to ensure that his or her respective program
area met environmental requirements. However, none of the program areas had provided current
program environmental clearance officers official job descriptions detailing their roles and
responsibilities related to the position. In addition, each program environmental clearance officer
held another official job title, which included responsibilities unrelated to oversight of the
environmental process. For example, the
Public Housing program environmental
clearance officer performed other duties             Assistant Secretaries did not clearly
related to her official title of program             outline their program environmental
analyst, which had nothing to do with                clearance officers’ roles and
environmental activities, and recently took          responsibilities.
on additional duties unrelated to
environmental activities. She stated that her
new responsibilities made it difficult to handle the responsibilities related to environmental
activities and she did not want to monitor compliance with environmental requirements.

Although the current Housing program environmental clearance officer’s official title was
management analyst, she was also responsible for environmental clearance officer duties. She
stated that since she took over the environmental clearance officer duties in July 2013, there had
been no changes to the environmental review process within Housing. The former Housing
program environmental clearance officer’s official job description stated that the environmental
clearance officer was responsible for implementing Housing’s environmental procedures. Each
program area should develop a formal job description for its program environmental clearance
officer.



16
     Consolidated Delegation of Authority for the Office of Community Planning and Development, Volume 77,
     Number 104, dated May 30, 2012
17
     The Office of Environment and Energy serves as the departmental environmental clearance officer.




                                                        14
The Office of Native American Programs and Community Planning and Development developed
monitoring, training, and reporting processes for their program areas to reduce the risk of
noncompliance. The Office of Native American Programs’ Director of Grants Evaluation stated
that her office was responsible for monitoring and training field office staff, responsible entities,
and Indian housing agencies. Public Housing, on the other hand, stated that it was not responsible
for monitoring and training. However, both the Office of Native American Programs and Public
Housing are directed by the Assistant Secretary for Public and Indian Housing and have the same
responsibilities for monitoring, training, and reporting. Similarly, Housing depended on the
Office of Environment and Energy to ensure that its programs met environmental compliance
requirements. The requirements 18 state that the environmental review is a process for complying
with NEPA and other laws and authorities and that HUD must comply with all environmental
requirements, guidelines, and statutory obligations. Each program Assistant Secretary is
responsible for ensuring that his or her program meets these requirements. Community Planning
and Development has no authority over other program areas to require their grantees to comply
with requirements or take actions against them if they do not.

To demonstrate this lack of clarity, the Acting Assistant Secretary for Public and Indian Housing,
in response to the management decisions on the Boston Office audit report, recommended
concurring and closing the recommendations by referring the issues to the Office of Environment
and Energy for implementation of corrective actions. However, the Director of the Office of
Environment and Energy stated that Community Planning and Development did not agree with
Public and Indian Housing’s proposed actions. The Director did not believe that the Office of
Environment and Energy was responsible for all monitoring of responsible entities because each
Assistant Secretary has a responsibility under the requirements of 24 CFR 50.10(a). Further, the
Director of the Office of Environment and Energy stated that Public and Indian Housing was
responsible for monitoring and training those responsible for environmental compliance. In
addition, Community Planning and Development’s Deputy Assistant Secretary for Grant
Programs, who oversees the Office of Environment and Energy, stated that the core disagreement
with Public and Indian Housing was over who is responsible for implementing and monitoring
and who is responsible for paying for it. Public and Indian Housing did not want to acknowledge
its responsibility for implementing and ensuring compliance with environmental requirements.

The lack of clarity regarding responsibilities must be resolved to ensure proper implementation
and oversight of compliance with environmental requirements. Public and Indian Housing agreed
that HUD needed to revisit the delegation of authority because there was disagreement across the
program areas on the intent of the requirements and the delegation of responsibilities. In addition,
Community Planning and Development stated that there had been discussions among the program
areas regarding the delegation of authority published in the Federal Register notices and agreed
that responsibilities needed to be clarified because other program areas interpreted the notices to
mean that Community Planning and Development had full responsibility for monitoring
compliance. HUD needs to clarify each Assistant Secretary’s responsibilities. If HUD
determines that all responsibility for compliance and training lies with the Office of Environment

18
     24 CFR 50.2(a) and 50.4 and 24 CFR 58.5 and 58.30(a)




                                                        15
and Energy, a realignment that places that office under the Deputy Secretary’s office could be
beneficial. The realignment would provide the Office of Environment and Energy with the ability
to implement an integrated approach to policy development, program delivery, technical
assistance, training, monitoring, and evaluation and could significantly enhance HUD’s overall
ability to address environmental compliance across program areas.

Public Housing Did Not Understand Requirements or Did Not Consider Compliance To Be
a Priority
Some Public Housing field office management and staff personnel either did not understand
environmental compliance requirements or did not consider compliance to be a priority. For
example, one field office staff member stated that 24 CFR Part 50 environmental reviews worked
better than 24 CFR Part 58 reviews for the field office but the field office had too much other
work and could not spend a lot of time on environmental reviews. Further, some Public Housing
field office staff members believed that public housing agencies generally should not be required
to meet the environmental requirements because all of their Capital Fund grant activities are either
routine, preventive, or deferred maintenance. These staff members did not understand the
difference between maintenance and repairs, renovation, and modernization improvements
regarding environmental compliance. Also, many Public Housing staff members believed that the
definition of “maintenance” under public housing program guidance was the same as the
definition of “maintenance” for environmental reviews. However, the guidance on categorizing
an activity as maintenance for environmental compliance provides its own definition and is not
meant to define maintenance for other program area purposes. For example, many Public
Housing staff members believed that a roof replacement constituted maintenance and did not
require an in-depth environmental review. However, a roof replacement under environmental
guidance is considered an activity that prolongs the building’s useful life and is subject to
environmental compliance.

According to guidance 19 issued by the Office of Environment and Energy, maintenance keeps a
building in good order and in ordinary, efficient operating condition and includes such activities
as trimming trees and shrubs, fixing gutters or floors, replacing broken windows, fixing leaks, or
replacing kitchen appliances that are not attached to the building. Repairs and improvements add
to the value of the building, appreciably prolong its useful life, or adapt it to new uses and include
such activities as installing roofs; windows; or heating, ventilation, and air conditioning systems.
To further demonstrate Public Housing’s lack of concern with compliance, in response to our
audit report on the Boston field office, Public Housing stated that it did not believe the public
housing agencies should repay ineligible costs. Public Housing believed that if the agencies had
to repay the ineligible costs, it would likely harm local partnerships between the agencies and the
responsible entities. Therefore, following the issuance of the report, Public and Indian Housing’s
former Assistant Secretary sent a memorandum, dated April 29, 2014, to the Inspector General,
requesting that his office consider this matter before the release of any additional audits on


19
     Guidance for Categorizing an Activity as Maintenance for Compliance With HUD’s Environmental Regulations,
     24 CFR Parts 50 and 58, dated March 28, 2006




                                                       16
environmental concerns identified with Public Housing field offices, public housing agencies, and
the responsible entities.

HUD’s Failure To Meet Environmental Compliance Could Have Placed the Public and the
Environment at Risk
HUD’s lack of adequate implementation and oversight of compliance with environmental
requirements may have increased the risk to the health and safety of public housing residents,
housing, and community developments and may have failed to prevent or eliminate damage to the
environment. HUD was required to analyze the environmental effects, including human health,
economic, and social effects of actions
affecting low-income and minority
communities. 20 Further, all property proposed HUD must pay particular attention to
for use in HUD programs must be free of          any proposed site on or near such
hazardous materials, contamination, toxic        areas as dumps, landfills, industrial
chemicals and gasses, and radioactive            sites, or other locations that contain
substances when a hazard could affect the        hazardous waste.
health and safety of occupants or conflict
with the intended use of the property. 21
The following examples illustrate what happens when environmental issues are not properly
identified or addressed. These examples emphasize the need to ensure that HUD’s environmental
review process is functioning properly.

     Public Housing Allowed the Development of Housing Units on a Former Municipal
     Landfill
     In the early 1960s, the Newark, DE, Housing Authority purchased a site and constructed an
     affordable residential housing development, which it operated from 1967 until January of
     2008. The Environmental Protection Agency identified a public health concern at the site in
     1983. Despite the health concern, the Authority continued to operate the housing units until
     2007 when HUD authorized the Authority to vacate the property. After the site was vacated,
     the Authority attempted to sell the property, which was listed as a certified brownfield, 22 at an
     auction in March 2008. However, no bid was submitted.

     Since it was unable to sell the property, in October 2008, the Authority entered into a
     voluntary cleanup program agreement to demolish the existing buildings and remediate
     contamination of the site. The Authority planned to build 56 units once the cleanup was
     completed. On December 6, 2006, HUD’s Philadelphia Public Housing Director approved the
     environmental review for disposition of the property. The environmental review had a
     condition that HUD’s approval for disposition did not mean that it was committing to future
     development or other use of the property. Despite the condition, the Authority proceeded

20
     Executive Order 12898, issued February 11, 1994
21
     24 CFR 50.3(i)(1)-(3)
22
     Brownfield sites are defined as real property, the expansion, redevelopment, or reuse of which may be
     complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.




                                                           17
     with planning, designing, and obtaining local government approval for redevelopment without
     HUD performing another environmental review. Rather than disapproving the redevelopment
     plan, HUD’s Philadelphia Public Housing field office performed an environmental review
     after the fact in April 2014. However, its review was incomplete and did not adequately
     address all of the environmental compliance factors. Further, possible alternatives to ensure
     the best possible uses of the property, such as location of the buildings, were not considered.
     As a result, the Authority was developing a property that had been documented as a former
     wastewater treatment facility and municipal landfill with soil contamination that included
     semivolatile organic compounds, polychlorinated biphenyls (PCB), 23 and lead. In addition,
     the site had elevated methane 24 concentrations that exceeded environmental standards. To
     address the potential human health risks the landfill could cause, the Authority was required
     by the State of Delaware to

         •   Install and operate foundation vents on each building for the methane gas;
         •   Continuously inspect the site to ensure the integrity of the remediation; and
         •   Record an environmental covenant that prohibits digging, excavating, constructing, or
             any other land-disturbing activity and provides that no groundwater may be withdrawn
             from any well on the property.

     The Authority was proceeding with its planned development and anticipated moving in
     residents in the fall of 2015.

     Public Housing Was Aware That Residents Were Living in a Contaminated Public Housing
     Development
     Altgeld Gardens, also called “The Toxic Doughnut,” is a 1945 public housing development
     located in an industrial area on Chicago’s far south side near many manufacturing plants,
     former steel mills, waste dumps, landfills, and the polluted Little Calumet River. The known
     toxins and pollutants affecting the Altgeld Gardens area include arsenic, mercury, ammonia
     gas, lead, PCBs, polycyclic aromatic hydrocarbons (PAH), 25 and heavy metals. This
     contamination included PCBs that had been dumped in a storage yard on the Altgeld Gardens
     property that were not found to be a hazard until the mid-1980s. In 2003, residents at Altgeld
     Gardens won a lawsuit against the Chicago Housing Authority because the Authority failed to
     provide a safe and healthy environment for residents. The Environmental Protection Agency
     and the Authority cleaned up the identified PCBs once the hazard became known. This


23
     PCBs are man-made organic chemicals known as chlorinated hydrocarbons. PCBs were manufactured in the
     United States until banned in 1979. PCBs were used in hundreds of industrial and commercial applications,
     including electrical and hydraulic equipment. PCBs have been shown to cause cancer, as well as a variety of
     other adverse health effects on the immune system, reproductive system, nervous system, and endocrine system.
24
     Methane is produced by decay and decomposition of organic matter in oxygen-poor conditions. Under certain
     conditions, the mixture of air and methane can be flammable or explosive.
25
     PAHs are a group of chemicals that are formed during the incomplete burning of coal, oil, gas, wood, garbage, or
     other organic substances, such as tobacco. There are more than 100 different PAHs. They are found throughout
     the environment in the air, water, and soil. Studies show that individuals exposed by breathing or skin contact
     for long periods to mixtures that contain PAHs and other compounds can develop cancer.




                                                           18
     cleanup focused on those areas with the highest levels of contamination and those that were
     the most dangerous, such as areas with identified PCBs. However, according to a HUD
     regional environmental officer, the Environmental Protection Agency stated there is a very
     good possibility that additional environmental issues with PCBs still exist on the property.
     Further, according to the regional environmental officer, an overall review of the entire site
     for environmental clearance would be the best solution to ensure that the property is cleared
     and free of hazards. A complete environmental site assessment would produce a clear picture
     of the property and show all contaminated locations.

     After the settlement in 2003, the Authority planned to move the residents out of Altgeld
     Gardens and demolish the development. However, because the property was historic, it was
     subject to Section 106 of the National Historic Preservation Act of 1966, which requires
     consideration of preservation alternatives and a public process for decision making. Thus, the
     Authority decided to renovate the property without moving the residents. The property
     consists of more than 190 acres and more than 3,000 residents. It includes its own schools,
     onsite social services, and medical facilities.

     Since there had not been a complete phase I or II environmental site assessment 26 of the
     property, HUD performed the reviews in segments as the Authority renovated the property.
     By performing the reviews in segments, HUD’s Public Housing field office avoided a
     requirement that the Office of Environment and Energy’s regional environmental officer
     review and approve the environmental record when 200 or more units are renovated.

     As part of the renovations, the Authority planned to build a childcare center and an office-
     community building. However, as shown in a November 2010 site map (see figure 4), a phase
     II environmental site assessment identified arsenic and mercury hazards in the soil. The map
     identifies the planned project site, but it shows only a small portion of the property.




26
     A phase I site assessment is a review of environmental records maintained by the property owner and regulatory
     agencies that shows the past and current uses of the site and inspection of the site by an environmental
     professional. The review concludes with a report that identifies existing and potential sources of contamination
     on the property and determines whether a further investigation is required. A phase II site assessment is
     conducted if a phase I assessment identifies potential contamination of the site and includes sampling and
     laboratory analysis to confirm the presence of hazardous materials. A phase II assessment determines whether a
     remedial work plan is required to address contamination on a property.




                                                           19
Figure 4




Before HUD approved the environmental review in December 2011, the Authority developed
a remediation plan with the State of Illinois Environmental Protection Agency to clean up the
site. However, the remediation had not occurred, and the project had not been developed.
The Authority planned to address the remediation agreement when it redeveloped and
rehabilitated the buildings located on the contaminated site. In the meantime, residents
continue to be subjected to potential harm from the contaminated site.

A Housing Authority Planned a Redevelopment Housing Project on Recently Acquired
Contaminated Property
Jordan Downs Housing is a 700-unit public housing apartment complex, consisting of
dilapidated two-story buildings in Los Angeles, CA, that is owned and managed by the
Housing Authority of the City of Los Angeles. The Authority proposed a $1 billion project to
redevelop the Jordan Downs housing project, to include building 1,800 new homes, stores,
and a park (see figures 5 and 6).




                                             20
Figure 5




Figure 6




           21
In January, 2007, the Authority and the City obtained an appraisal of a 21-acre property,
called the factory site, next to Jordan Downs for the expanded redevelopment. The appraisal
disclosed that there were known environmental contaminants on the site. However, the
appraiser—citing a lack of expertise in environmental issues—valued the property at $31.2
million under the assumption that the site was free of contaminants. The appraiser also
concluded that the highest and best use of the site was for industrial development. Despite the
information provided by the appraiser, in March 2008, the Authority purchased the site on an
“as is” basis with full disclosure that the property had known environmental contaminants.
Further, the Authority agreed to hold the investor harmless for any hazardous materials at the
site. The Authority entered into a voluntary agreement with the State of California to clean up
the purchased factory site to the State’s satisfaction.

The Authority did not perform environmental due diligence before it purchased the property,
knowing that it was environmentally contaminated. It purchased the property using about
$15.5 million in administrative fees earned from its Section 8 special allocation program and
$15.7 million in proceeds from a Federal National Mortgage Association line of credit.

A phase II environmental site assessment was not completed until April 2010, 2 years after
the Authority purchased the property. The assessment revealed PCBs, metals such as lead and
arsenic, and extractable petroleum hydrocarbons that exceeded acceptable levels (see figures 7
and 8).

Figure 7




                                             22
     Figure 8




     The Authority violated requirements 27 when it committed funds to the project before HUD’s
     approval of the environmental review request for release of funds and certification. The
     environmental review was not completed until March 2014, and the responsible entity did not
     submit the request for release of funds and certification to HUD for approval until after July 2,
     2014. Further, a report by HUD’s Real Estate Assessment Center noted that, given the issues
     identified, the Authority’s redevelopment of Jordan Downs presented significant risks to
     HUD.

     Complications with the factory site had caused delays and increased the potential
     predevelopment costs 28 to a level that far exceeded the Authority’s available non-HUD
     funding resources. The Authority’s budget noted that at least $15 million would be required
     to remediate or mitigate the contamination. In addition, the budget indicated that the
     Authority would use Federal and State funding sources to pay for the remediation. Despite
     mounting cleanup costs, the Authority continued to move forward with the redevelopment
     project. In March 2014, HUD denied the Authority’s request for a $30 million Choice


27
     24 CFR 58.22(a)
28
     Predevelopment costs include environmental remediation, structure demolition, litigation, debt service, master
     developer, and other predevelopment expenses.




                                                           23
     Neighborhood Initiative Implementation Grant. However, HUD reserved authority for 70
     rental assistance demonstration units at Jordan Downs. The Authority applied to secure the
     rental assistance demonstration allocation to finance a component of the first phase of the
     redevelopment plan. HUD should strongly reconsider its funding commitment related to the
     Jordan Downs redevelopment and deny further HUD funding.

     Housing Failed To Complete an Environmental Review Before a Nursing Home Expansion
     An owner of a nursing home with a Federal Housing Administration-insured loan expanded
     its facility and acquired adjacent land for the expansion without Housing’s knowledge or
     authorization and without a 24 CFR Part 50 environmental review. Housing should have
     completed the environmental review before the owner expanded the facility, including
     acquiring the additional land, to ensure that environmental requirements were met and that no
     contaminants existed that could affect the health and safety of the residents. A Housing
     official stated that had the owner properly notified HUD of plans to expand the facility,
     including acquiring the adjacent land, Housing would have performed an environmental
     review. She further stated that when Housing learned of the expansion as part of a Section
     223(a)(7) refinancing loan application, it required the environmental review to be completed
     before approving the firm commitment. Upon closing for the loan, a new regulatory
     agreement was recorded. The Housing official also stated that in the future, Housing will
     provide additional training on environmental requirements for its staff and guidance to
     property owners to minimize the possibility of future occurrences.
Community Planning and Development’s Monitoring Determined That the State of Texas
Failed To Perform a Required Process
During a compliance monitoring, the Office of Environment and Energy found that the State of
Texas failed to perform the required floodplain management analysis for an emergency shelter.
To address corrective actions, Community
Planning and Development required the
State to review all of its projects funded with
                                                      HUD’s monitoring can be effective to
disaster recovery funds to determine whether ensure environmental compliance.
other projects failed to meet the floodplain
management analysis. The State’s review
found that it failed to perform the required environmental review “eight-step process” 29 for 19
“critical action” projects before it released Community Planning and Development funds. A critical
action30 is any activity for which even a slight chance of flooding would be too great because such
flooding might result in loss of life, injury to persons, or damage to property. It includes activities
that create, maintain, or extend the useful life of structures or facilities that provide essential and
irreplaceable emergency services that may become lost or inoperative during flood and storm events,
such as emergency operations centers. In addition, the regulations31 prohibit the use of HUD funds


29
     24 CFR 55.20 – “Eight-step process” is the common name for the decision-making process for compliance with
     floodplain management, including public notices and an examination of practicable alternatives.
30
     24 CFR 55.2(b)(2)(i)
31
     24 CFR 55.1(c) and 55.2(b)(2)(ii)




                                                        24
to build in floodways 32 or coastal high-hazard areas.33 Eleven of the nineteen critical action projects
were fire stations, which are often used as emergency shelters during a disaster. One fire station in
Tiki Island, TX, was built 6 feet below the 100-year flood plain in a coastal high-hazard area that is
subject to high-velocity waters from hurricanes and tsunamis. Community Planning and
Development requested that the State repay almost $700,000 for the Tiki Island fire station, but the
State resisted. The remaining eight critical action projects were police stations, community centers,
or city offices. Further, construction had already started or was complete on 11 of the 19 projects.
As a result, the State could not raise the projects to required elevations.

Community Planning and Development’s monitoring of the State’s compliance with environmental
requirements prevented the remaining eight projects from being developed in violation of the
floodplain management requirements.

The Five Public Housing Field Offices Spent Almost $405 Million Without Proper or
Adequately Documented Environmental Reviews
Three 34 of our five reports on Public Housing field offices—Boston, MA, Kansas City, KS, and
Detroit, MI—identified that these field offices did not ensure compliance with environmental
requirements of 24 CFR Part 58, resulting in more than $140 million in questioned costs that must
be repaid or supported. Of this amount, public housing agencies spent more than $6.8 million
before an environmental review was completed. The regulations 35 state that a recipient may not
commit HUD assistance for any activity or project until the responsible entity has documented its
environmental determination and HUD has approved the recipient’s request for release of funds
and certification. If a project or activity is exempt or is categorically excluded not subject to 24
CFR 58.5, a request for release of funds and certification is not required, and the recipient may
begin the activity immediately after the responsible entity has documented this determination as
required.

In addition, under 24 CFR Part 50, which directs HUD to be the responsible party to carry out the
policies of NEPA and other laws and authorities, three of the five field offices—Kansas City, KS,
Greensboro, NC, and Columbia, SC—allowed public housing agencies to spend more than $264
million without a properly completed environmental review by the respective Public Housing
field offices. Since HUD failed to follow environmental requirements at 24 CFR Part 50, we did
not recommend that the housing agencies repay these funds (see appendix C for a summary of the
funding reported in the five previous reports).




32
     Regulations at 24 CFR 55.2(b)(2)(ii)(4) define floodways as that portion of the floodplain that is effective in
     carrying flow where the flood hazard is generally the greatest and water depths and velocities are the highest.
33
     Regulations at 24 CFR 55.2(b)(1) define coastal high-hazard area as the area subject to high-velocity waters,
     including but not limited to hurricane wave wash or tsunamis.
34
     The Boston and Detroit environmental reviews were performed under 24 CFR Part 58. All of the Greensboro
     and Columbia reviews were performed by HUD under 24 CFR Part 50. Kansas City reviews were both 24 CFR
     Parts 58 and 50.
35
     24 CFR 58.22(a) and (b)




                                                           25
Conclusion
HUD did not clearly define program area responsibilities, and Public Housing did not understand
requirements or did not consider compliance to be a priority. As a result, HUD may have
increased the risk to the health and safety of the public and failed to prevent or eliminate damage
to the environment, and five Public Housing field offices allowed public housing agencies to
spend almost $405 million for activities that either did not have required environmental reviews
or had reviews that were not adequately supported. For fiscal years 2013 through 2015, HUD
provided almost $5.3 billion in Capital Fund grants to public housing agencies across the Nation.
If HUD does not correct the systemic conditions noted in the previous five reports, it cannot
ensure that public housing agencies will spend their Capital Fund grants in compliance with
environmental regulations. HUD should establish an independent program office that is
responsible for overall departmental compliance, clarify the roles and responsibilities of the
Assistant Secretaries, properly train its staff and others on environmental compliance
requirements, and implement other actions to correct the deficiencies identified.

Recommendations
We recommend that the Deputy Secretary of the U.S. Department of Housing and Urban
Development
       1A.     Ensure that HUD follows and complies with 24 CFR Part 50, Protection and
               Enhancement of Environmental Quality, and provides adequate oversight to ensure
               compliance with 24 CFR Part 58, Environmental Review Procedures for Entities
               Assuming HUD Environmental Responsibilities.
       1B.     Establish an independent program office, the director of which is assigned the
               overall departmental responsibility for environmental policies and procedures as
               well as the supervisory and enforcement authority to ensure compliance by all
               HUD program offices and grantees.
       1C.     Clarify the delegation of authority issued in the Federal Register related to
               environmental responsibility and the implementation of requirements.
If an independent program office is not established, the Deputy Secretary should ensure that the
Assistant Secretaries for Housing, Public and Indian Housing, and Community Planning and
Development
       1D.     Establish an agreement that clearly outlines each program office’s responsibilities
               for oversight of environmental requirements and resource supplements.
       1E.     Adopt a quality control monitoring program that includes a review of all program
               area field offices as required by Executive Order 11514.
       1F.     Develop and implement a monitoring program that all program area field offices
               can use to monitor grantees and responsible entities under 24 CFR Part 58.
       1G.     Develop training programs that meet the needs of all program areas, including 24
               CFR Parts 50 and 58.



                                                  26
       1H.    Develop and implement reporting requirements, which ensure that written records
              are maintained and the appropriate headquarters personnel are notified of
              environmental concerns.
       1I.    Ensure that each program area has a dedicated program environmental clearance
              officer with an official job description that outlines his or her roles and
              responsibilities as required by 24 CFR Part 50.
We recommend that the General Deputy Assistant Secretary for Public and Indian Housing
       1J.    Require all Public and Indian Housing field offices to review and implement the
              internal control requirements in Public and Indian Housing’s field office
              environmental review guidance.
       1K.    Develop and implement standard operating procedures to ensure that all Public and
              Indian Housing field offices perform environmental reviews that comply with 24
              CFR Parts 50 and 58.
       1L.    Issue guidance to all Public and Indian Housing field offices to ensure that
              operating funds are reviewed for environmental compliance with 24 CFR 990.116.




                                               27
Scope and Methodology
We conducted our audit between April 2012 and December 2014 at various HUD Offices of
Housing, Public and Indian Housing, and Community Planning and Development in Washington,
DC, Boston, MA, Kansas City, KS, Columbia, SC, Greensboro, NC, and Detroit, MI, and our
offices in Albuquerque, NM, and Houston, TX. Our audit originally covered the 2009 Recovery
Act grant from March 18, 2009, to March 17, 2010, and fiscal years 2011 and 2012 Capital Fund
grants from October 1, 2010, to September 30, 2012. We expanded the scope as necessary to
determine the impacts of environmental concerns at various sites.

To accomplish our objective, we performed the following:

   •   Reviewed applicable public laws and executive orders that provide the requirements for
       environmental compliance;
   •   Reviewed Federal regulations and Federal Register notices related to the environmental
       review process;
   •   Reviewed HUD’s handbooks and guidance on environmental compliance;
   •   Reviewed various HUD job descriptions related to environmental oversight;
   •   Conducted interviews with staff from the Offices of Housing, Public Housing, Native
       American Programs, Grant Programs, Environment and Energy, and Lead Hazard Control
       and Healthy Homes;
   •   Analyzed Public and Indian Housing’s, Community Planning and Development’s, and
       Housing’s environmental review processes;
   •   Reviewed the organizational charts of various HUD offices to determine the chain of
       command for environmental decisions;
   •   Analyzed environmental monitoring programs developed by the Offices of Environment
       and Energy and Native American Programs;
   •   Reviewed written reports related to environmental concerns issued to management;
   •   Analyzed HUD program areas’ communications and responses to the development and
       implementation of environmental guidance, policies, and procedures;
   •   Obtained financial information on Capital Fund grants for the 2009 Recovery Act and
       2011, 2012, and 2014 Capital Fund grants; and
   •   Observed the Office of Environment and Energy’s Region 6 training program for
       environmental review processes and meeting the requirements of 24 CFR Part 58.

Based on our risk assessment, we selected 5 of 46 Public Housing field offices—Boston, Kansas
City, Columbia, Greensboro, and Detroit—using information that we obtained on funding levels,
historic value, industry uses, and the environmental process used.

We did not use or rely on computer-processed data to support our conclusions.




                                                28
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objective.




                                                 29
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 to ensure that public laws, executive orders, and regulations are properly
    implemented by all program areas responsible for the environmental review process,
    including
       o Controls to ensure that each program area monitors its respective offices for
         environmental compliance,
       o Controls to ensure that each program area receives adequate training on the
         environmental review process, and
       o Controls to ensure that each program area implements a system for reporting
         environmental concerns to the appropriate headquarters office for adequate resolution.
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:

•   HUD did not adequately implement or provide adequate oversight to ensure compliance with
    environmental requirements (finding).




                                                  30
Followup on Prior Audits
Office of Public Housing, Boston, MA, Public Housing Capital Fund and American
Recovery and Reinvestment Act of 2009 Environmental Reviews, 2014-FW-0001

All of the report recommendations, 1A through 1L, were open at the time of this report. The
recommendations include requiring three housing agencies to (1) repay HUD, for transmission to
the U.S. Treasury, more than $4.8 million and provide support for or repay more than $34 million
in 2009 Recovery Act funds and (2) provide support for or repay HUD more than $46 million in
Public Housing Capital Fund grant funds. The report also recommended that the Director of the
Boston Office of Public Housing take available actions against three housing agencies and their
responsible entities. The full report can be found at the following link:

http://www.hudoig.gov/sites/default/files/documents/2014-FW-0001.pdf

On March 17, 2015, OIG agreed with HUD’s proposed revised management decisions for all of
the report recommendations. The final action target date for completing the corrective actions is
October 1, 2016.

Office of Public Housing, Kansas City, KS, Public Housing Capital Fund and American
Recovery and Reinvestment Act of 2009 Environmental Reviews, 2014-FW-0002

All of the report recommendations, 1A through 1I, were open at the time of this report. The
recommendations include requiring two housing agencies to repay HUD, for transmission to the
U.S. Treasury, more than $1 million and support or repay almost $19 million. The report also
recommended that the Director of the Kansas City Office of Public Housing take available actions
against two housing agencies and their responsible entities. The full report can be found at the
following link:

http://www.hudoig.gov/sites/default/files/documents/2014-FW-0002_0.pdf

On March 17, 2015, OIG agreed with HUD’s proposed revised management decisions for all of
the report recommendations. The final action target date for completing the corrective actions is
October 1, 2016.

Office of Public Housing, Greensboro, NC, Public Housing Capital Fund and American
Recovery and Reinvestment Act of 2009 Environmental Reviews, 2014-FW-0004

The following recommendation was still open at the time of this report:

1A. The Director of the Greensboro Office of Public Housing implement policies and procedures
to ensure that the housing agencies follow public notification requirements set forth in either 24
CFR Part 58 or 24 CFR Part 50.


                                                 31
On December 11, 2014, the Director of the Greensboro Office of Public Housing agreed to
implement policies and procedures to ensure that housing agencies follow public notification
requirements. Final actions have not been completed. The full report can be found at the
following link:

http://www.hudoig.gov/sites/default/files/documents/2014-FW-0004.pdf

Office of Public Housing, Detroit, MI, Public Housing Capital Fund and American
Recovery and Reinvestment Act of 2009 Environmental Reviews, 2014-FW-0005

All of the report recommendations, 1A through 1M, were open at the time of this report. The
recommendations include requiring three housing commissions to repay HUD, for transmission to
the U.S. Treasury, almost $1 million and support or repay more than $33 million. The report also
recommended that the Director of the Detroit Office of Public Housing take available actions
against the three housing commissions and their responsible entities. The full report can be found
at the following link:

http://www.hudoig.gov/sites/default/files/documents/2014-FW-0005.pdf

On March 17, 2015, OIG agreed with HUD’s proposed revised management decisions for all of
the report recommendations. The final action target date for completing the corrective actions is
October 1, 2016.




                                                 32
Appendixes

Appendix A
                         Auditee Comments and OIG’s Evaluation


Ref to OIG
Evaluation                 Auditee Comments




             MEMORANDUM FOR:                   Gerald Kirkland, Regional Inspector General for Audit, 6AGA

             FROM:                             Nani A. Coloretti, Deputy Secretary, SS

             SUBJECT:                          HUD Comments on the Office of Inspector General Draft Audit
                                               Report “Offices of Housing, Public and Indian Housing, and
                                               Community Planning and Development, Washington DC –
                                               Implementation of and Compliance With Environmental
                                               Requirements”

                      Thank you for the opportunity to comment on the draft findings and recommendations
             contained in the above-referenced audit report of the Office of Inspector General (OIG), which
             you provided on March 16, 2015. The U.S. Department of Housing and Urban Development
             (HUD or Department) is committed to ensuring full and effective compliance with all statutory
             requirements, and the Department welcomes the partnership with OIG to ensure effective
             implementation of and compliance with federal environmental requirements. The Offices of
             Public and Indian Housing (PIH), Community Planning and Development (CPD) and Housing
             reviewed the draft report.

Comment 1              The Department concurs with all of the recommendations outlined in the draft report,
             with the exception that the Department does not favor the establishment of an independent
             environmental office, and looks forward to developing appropriate management decisions, in
             partnership with OIG and commensurate with available resources, to ensure satisfactory
Comment 2    implementation. Also of note, the above-referenced audit mostly reflects the findings of earlier
             audits that OIG conducted at five PIH field offices. 1

                       Additionally, based on feedback from the three program offices, the Department seeks to
             clarify some factual inaccuracies contained in the draft, as well as conclusions that appear, based
             on the data presented in the report, to be unsupported. With respect to the latter, we would
             welcome your additional insights but, barring presentation of further data, respectfully request
             that you revise those particular conclusions.

                       For ease of reference, set out below are the relevant pages and titles of the corresponding
             sections that contain the draft report language that the Department disputes, either because it-
             ________________________
             1
               The five PIH field offices included Boston, Massachusetts (Audit Report 2014-FW-0001); Kansas City, Kansas
             (Audit Report 2014-FW-0002); Columbia, South Carolina (Audit Report 2014-FW-0003); Greensboro, North
             Carolina (Audit Report 2014-FW-0004); and Detroit, Michigan (Audit Report 2014-FW-0005).

                                                                      1
                                                           33
            inaccurately states the relevant facts or otherwise constitutes a misstatement. By referencing the
            section titles as crafted by OIG, the Department does not intend to suggest agreement with the
            stated conclusion.

            Pages 3-4: “Background and Objective”

                      In the draft audit report, OIG states that “… the Offices of Housing and Public Housing2
Comment 3   had not developed processes to ensure adequate implementation and oversight of compliance
            with environmental requirements. Rather, they depended primarily on Community Planning and
            Development’s Office of Environment and Energy to meet their programs’ requirements.”
            (Pages 3-4) The Department does not dispute that the program offices have relied heavily on the
            subject matter experts in the Office of Environment and Energy (OEE) to ensure compliance
            with environmental requirements. Indeed, in light of limited resources appropriated for this
            purpose and the structure of environmental staff in these offices, cross-office collaboration
            should be encouraged as a sensible and efficient way to achieve oversight and compliance
            objectives.

                      That said, the regulatory requirements and other authorities that govern compliance with
Comment 4   environmental requirements admittedly lack clarity and undoubtedly have contributed to the
            underdeveloped processes that exist in Housing and Public Housing. Under 24 CFR § 50.10(b),
            which sets forth basic environmental responsibility, the Assistant Secretary for CPD “is assigned
            the overall Departmental responsibility for environmental policies and procedures for
            compliance with NEPA [National Environmental Policy Act] and the related laws and
            authorities.” However, under 24 CFR § 50.10(a), it is also “the responsibility of all Assistant
            Secretaries… to assure that the requirements of this part are implemented.” The seemingly
            overlapping responsibilities, in the absence of further clarifying guidance, have resulted in
            challenges with respect to HUD’s compliance strategy.

                       While each program office has primary responsibility for ensuring compliance with the
Comment 5   regulations of its programs, that work overlaps with the work of OEE, which has primary
            responsibility for departmental oversight of environmental requirements. For example, PIH’s
            Office of Native American Programs (ONAP) has monitored Indian tribes and tribally
            designated housing entities for environmental compliance; and OEE’s Regional Environmental
            Officers are often actively involved in this monitoring process and serve as subject matter
            experts for ONAP. The Department acknowledges that the regulatory scheme has led to some
            confusion among the program offices regarding respective responsibilities, but the program
            offices are endeavoring in good faith, under constrained resources, to ensure compliance with the
            environmental requirements across a myriad of programs.

            Pages 5-28: “HUD Did Not Adequately Implement or Provide Adequate Oversight To
                        Ensure Compliance With Environmental Requirements”


            ________________________
            2
             In keeping with the language used by the OIG, when discussing both the Office of Public Housing and the Office
            of Native American Programs, we use the term Public and Indian Housing or PIH. When discussing only the Office
            of Public Housing, we use the term Public Housing. When discussing only the Office of Native American
            Programs, we use the term ONAP.



                                                                    2




                                                          34
Comment 6             While HUD believes that, as a general matter, it has complied with relevant statutory and
            regulatory requirements, it welcomes OIG’s perspective on how to improve compliance with
            environmental regulations. HUD’s program offices are committed to working in collaboration to
            improve implementation and oversight to ensure compliance with environmental requirements.
            For example, PIH and OEE are undertaking a comprehensive mapping process for all PIH
            programs to lay out the environmental review process with clear identification of roles and
            responsibilities for all parties involved in the process. This mapping process will lead to the
            development of Departmental guidance (Handbooks and Notices) on environmental compliance
            for PIH programs.

            Pages 6-7: “Housing and Public Housing Did Not Adequately Monitor Responsible
                       Entities”

                       OIG maintains that “Housing and Public Housing did not adequately monitor their
Comment 7   responsible entities to ensure compliance with environmental requirements.” (Page 6) While the
            Department shares OIG’s concerns regarding Responsible Entities’3 compliance with
            environmental requirements, the program offices do not always have the authority to impose
            corrective actions or sanctions. Specifically, while HUD has responsibility under the relevant
            regulations to monitor the environmental activities of Responsible Entities that are program
            recipients and has the authority to direct the correction of deficiencies, the Department’s
            authority is more circumscribed with respect to Responsible Entities that are not program
            recipients. For a state or local government (which is not a HUD-funded entity for purposes of
            the environmental requirements) that performs the environmental review of a local Public
            Housing Agency project (which is HUD-funded), HUD has no remedies available in program
            regulations to mandate that the Responsible Entity correct any environmental deficiencies and
            there is no agreement or contract between the Responsible Entity and HUD through which the
            Department otherwise might compel corrective action. For example, Public Housing would have
            no sanction authority for a Responsible Entity that incorrectly certified a review of a Public
            Housing Agency project, except to require more monitoring or training, reject the use of the
            Responsible Entity to conduct future environmental reviews based on performance, or suspend
            or terminate the Responsible Entity’s assumption of environmental review responsibility.4

                       Moreover, even if the program offices were obliged to undertake more aggressive
Comment 8   oversight of the Responsible Entities and had authority to do so, their capacity to do so is limited.
            Currently, OEE uses a risk assessment tool to rate the over 1,200 entitlement communities that it
            actively monitors. It also monitors approximately 100 Responsible Entities (not including the
            non-entitlement community Responsible Entities under Public Housing’s program) each year. In
Comment 9   the absence of significant additional resources, neither OEE nor Housing or Public Housing is
            able to increase these monitoring activities appreciably. However, HUD will strive to provide
            reasonable assurance that environmental compliance requirements are being met.


            ________________________
            3
              “Responsible Entities” are defined at 24 CFR §58.2(a)(7). Their responsibilities are set out in §58.4. What entity
            qualifies as a responsible entity is program-specific; however, generally speaking, responsible entities are states and
            units of general local government with land use responsibility that assume the responsibility for environmental
            review, decision-making, and action that would otherwise apply to HUD under the National Environmental Policy
            Act of 1969 (NEPA) and other provisions of law that further the purposes of NEPA.
            4
              See 24 CFR § 58.77(d)(i)-(iv).

                                                                         3




                                                            35
             Page 8: “Housing and Public Housing Did Not Provide Training”

                       OIG maintains that “Housing and Public Housing did not provide training to their staff,
Comment 3    grantees, or responsible entities on how to comply with environmental requirements.” (Page 8)
             Public Housing relied primarily on OEE for training, and, in a climate of very limited resources
             and in the interest of maximizing efficiency, that sort of cross-training seems appropriate and
             reasonable. Housing also relies on OEE for training on cross-cutting requirements, and works to
Comment 10   collaborate with OEE on that training. In addition, Housing provided significant training on
             compliance with environmental requirements, principally program-specific requirements, to
             HUD staff, contractors, and lenders.

                        OEE-Sponsored Training. OEE offers comprehensive environmental training, but, as
Comment 11   OIG notes, the office is restricted in the amount of training it can provide due to limited
             resources. In FY 2014, OEE conducted 64 formal trainings and trained over 2,495 individuals
             (550 HUD staff and 1,945 grantees, tribes, and consultants). OEE works directly with program
             offices to deliver specific training. In addition, OEE web-based training is available to all HUD
             staff on the Department’s intranet, and CPD is devoting approximately $1.5 million in OneCPD5
             resources to develop an online Learning Management System (LMS) to supplement in-person
             training. LMS is designed in a modular format that allows users to review the material linearly
             as a course of study or to search for specific concepts as a refresher or job aid. The Department
             anticipates that LMS will be deployed in the winter of this year on HUD’s website to all grantees
             and partners.

                        PIH-Sponsored Training. Much of Public Housing’s environmental training in the field
Comment 12   has been performed by OEE’s Regional Environmental Officers in an effort to ensure
             consistency of environmental reviews at the regional level. However, on March 11, 2009, PIH
             presented an environmental review training via live broadcast to all PIH field offices and PIH
             headquarters staff. HUD has provided OIG with documentation to support this training. In
             addition, in September 2014, 10 PIH staff participated in a 3-day training course presented by
             OEE. OEE will continue to include PHAs and PIH staff in each of their regional trainings during
             FY 2015, and PIH and OEE are collaborating on the delivery of comprehensive Part 58 training
             targeted to grantees in three of the field offices which were the subject of OIG’s recent regional
             environmental review audits, namely Boston, Detroit, and Kansas City. The training workshop
             conducted in those cities will be used as a model for future training in other locations throughout
             the country targeting PHAs, Responsible Entities, and field office staff.

Comment 10             Housing-Sponsored Training. The Department disagrees with OIG’s conclusion that
             Housing did not provide training to its staff, grantees, or Responsible Entities. During the audit
             period of March 1, 2009 to September 30, 2012, Housing provided training regarding its
             environmental requirements, including (1) training on the site selection and environmental
             review process for the Section 202 and 811 programs (September 2009 and August 2011); (2)


             ________________________
             5
               “OneCPD” is a comprehensive demand-response, flexible model for delivering technical assistance to HUD
             customers. CPD used its OneCPD funds to develop a core curriculum for environmental reviews. OneCPD has
             recently been expanded to Community Compass, which brings together technical assistance investments from across
             HUD program offices, including but not limited to CPD, Housing, and PIH.



                                                                     4




                                                         36
             OEE Field Environmental Training Conference (September 2009); and (3) new employee
             orientation training (December 2009 and June 2012) that incorporated discussion of Housing’s
             environmental responsibilities. HUD has provided OIG with documentation to support these
             trainings. In addition, for several years before and after the OIG audit period, Housing provided
             numerous program-specific trainings, including trainings on the environmental review process,
             site contamination investigation, general contamination analysis and radon policy, the
             environmental requirements under the Multifamily Accelerated Processing Guide, as well as
             additional new employee orientation trainings. These trainings have included HUD staff,
             contractors, and lenders. HUD submitted documentation in support of these trainings to OIG.
             Recently, Housing has been working with OEE to facilitate better Housing staff attendance at
             OEE Part 50 trainings and to develop program-specific environmental trainings.

             Pages 15-16: “Public Housing Did Not Understand Requirements or Did Not Consider
                          Compliance To Be a Priority”

                         OIG concludes in its draft report that Public Housing did not understand the
Comment 13   environmental requirements or did not prioritize compliance with those requirements and, as
             support for that finding, the draft report states: “To further demonstrate Public Housing’s lack of
             concern with compliance, in response to our audit report on the Boston field office, Public
             Housing stated that it did not believe the public housing agencies should repay ineligible costs.”
             (Page 16) This statement inaccurately describes PIH’s position. PIH has taken the position that
             repayment of ineligible costs should not be the sole remedy for all cases where an environmental
             review was inadequately performed. For example, it may be appropriate for a grantee to receive
             additional training as the “sanction” when the Responsible Entity did not conduct the reviews in
             accordance with requirements, rather than require repayment of funds. Additional remedies
             could include verification or a re-review and remediation. Far from evidencing a lack of
             commitment, PIH’s position reflects an enforcement approach that levies sanctions based upon
Comment 14   the extent and circumstances for non-compliance and whether harm has occurred. Similarly,
             CPD does not always require repayment when funds are committed before certification. Instead,
             CPD considers factors such as whether there is unmitigated adverse environmental impact and
             the grantee’s compliance track record. HUD believes this approach should be followed even for
             activities that violate a statutory or regulatory provision.

             Pages 27-28: Recommendations

                        The Department is committed to ensuring full and effective compliance with statutory
Comment 1    requirements and, toward that end, appreciates the recommendations by OIG to ensure the
             effective implementation of and compliance with environmental requirements. With one caveat
             (the Department does not favor the establishment of an independent environmental program
             office), the Department concurs with all other OIG’s recommendations. We look forward to
             working with OIG to develop appropriate management decisions to implement the
             recommendations, to the extent feasible given the Department’s existing resources.




                                                               5




                                                     37
                          OIG Evaluation of Auditee Comments

Comment 1   We acknowledge that HUD has chosen not to establish an independent
            environmental office but to implement the alternative recommendations provided
            in the report. We will work with HUD during the management decision process to
            resolve the recommendations.

Comment 2   HUD stated that the audit mostly reflected findings of earlier audits that the OIG
            conducted at five Public and Indian Housing field offices. The five field office
            audits included Boston, MA, Kansas City, KS, Columbia, SC, Greensboro, NC,
            and Detroit, MI.

            We disagree with this statement. The finding in the audit reflects information
            obtained from each of the programs reviewed. For example, the finding section
            related to monitoring of responsible entities discusses issues found with both
            Housing and Public Housing. In addition, it provides best practices found within
            the Office of Native American Programs and Community Planning and
            Development. Each section of the report reflects a similar format. We included a
            brief analysis of our findings from the five Public and Indian Housing field office
            reports to show the systemic noncompliance issues identified in our reviews and to
            repeat the importance of ensuring that the objective of NEPA to promote or
            eliminate the potential harm to citizens and the environment is met throughout all
            of the programs. In addition, in the five Public and Indian Housing reports, we
            stated that we would include recommendations in the nationwide report to address
            systemic conditions and causes that we found in those audits.

Comment 3   HUD stated that Housing and Public Housing relied heavily on the Office of
            Environment and Energy to ensure that its programs complied with environmental
            requirements. It further stated that in light of limited resources appropriated for
            the purpose of ensuring adequate implementation and oversight of compliance and
            due to the structure of the subject-matter experts being located within the Office of
            Environment and Energy, cross-office collaboration is a sensible and an efficient
            way to achieve the necessary oversight and compliance objectives.

            HUD further stated that Housing and Public Housing relied primarily on the Office
            of Environment and Energy for their programs’ training and that in a climate of
            very limited resources and in the interest of maximizing efficiency, this sort of
            cross-training also seemed appropriate and reasonable.

            We do not dispute that cross-office collaboration is a sensible and efficient way to
            operate; however, our review found that Housing and Public Housing did not
            provide any cross-office collaboration resources but placed all of the responsibility
            on the Office of Environment and Energy. Since HUD mentions the availability of
            very limited resources, it should take into account that the Office of Environment
            and Energy is funded solely from Community Planning and Development’s budget



                                               38
            to implement the environmental requirements for Community Planning and
            Development programs. A cross-office collaboration should include the provision
            of resources from Housing and Public Housing if they rely on the Office of
            Environment and Energy to meet their programs’ responsibilities and provide
            training.

Comment 4   HUD stated that regulatory requirements and other authorities that govern
            compliance with environmental requirements admittedly lack clarity and
            undoubtedly have contributed to the underdeveloped processes that exist in
            Housing and Public Housing. HUD referenced 24 CFR 50.10(b), which states that
            the Assistant Secretary for Community Planning and Development is assigned
            overall departmental responsibility for environmental regulations, while 24 CFR
            50.10(a) states that it is the responsibility of all Assistant Secretaries to assure that
            environmental regulations are implemented. HUD also stated that the seemingly
            overlapping responsibilities, in the absence of further clarifying guidance, have
            resulted in challenges with respect to HUD’s compliance strategy.

            HUD further stated that while each program office has primary responsibility for
            ensuring compliance with the regulations of its programs, that work overlaps with
            the work of the Office of Environment and Energy, which has primary
            responsibility for departmental oversight of environmental requirements.

            We agree that the overlapping responsibilities, in the absence of further clarifying
            guidance, contributed to HUD’s inability to comply with requirements. To address
            this condition, we made recommendations that HUD take certain actions, including
            establishing an agreement that clearly outlines each program office’s
            responsibilities for oversight of environmental requirements and resource
            supplements.

            We appreciate HUD’s acknowledgment that each program office has primary
            responsibility for ensuring implementation and compliance with the environmental
            regulations, compared to the previous position it held that all environmental
            oversight was the responsibility of the Office of Environment and Energy.

Comment 5   HUD acknowledged that the regulatory scheme led to some confusion among the
            program offices regarding respective responsibilities but that the program offices
            are endeavoring in good faith, under constrained resources, to ensure compliance
            with the environmental requirements. HUD provided an example of how the
            Office of Native American Programs monitors its Indian tribes and tribally
            designated housing entities for environmental compliance but seeks assistance
            from the subject-matter experts in the Office of Environment and Energy when
            necessary.

            Although HUD acknowledged that each program office is responsible for
            implementation and compliance with the environmental requirements, we repeat



                                                 39
            that Housing and Public Housing did not have a monitoring program in place and
            depended on the Office of Environment and Energy to meet their programs’
            requirements. It would seem reasonable that Housing and Public Housing could
            implement programs similar to that of the Office of Native American Programs,
            whereby they would also perform their own monitoring reviews with assistance
            from the Office of Environment and Energy.

Comment 6   We acknowledge that HUD is taking steps to improve the Public and Indian
            Housing environmental review process. However, Housing should also improve
            its process.

Comment 7   HUD stated that it only has responsibility under the relevant regulations to monitor
            the environmental activities of responsible entities that are recipients of HUD
            funding and the authority to direct correction of deficiencies related to these same
            funds. HUD further stated that its authority is more circumscribed with respect to
            responsible entities that are not the program recipient, such as public housing
            agencies. HUD stated that it does not have remedies available in program
            regulations to mandate that the responsible entities correct any environmental
            deficiencies and there are no agreements or contracts between the responsible
            entities and HUD that HUD could use to compel such corrective actions. HUD
            stated that its only recourse is to require more monitoring or training, reject the use
            of the responsible entity to conduct future environmental reviews based on the
            responsible entity’s performance, or suspend or terminate a responsible entity’s
            assumption of environmental review responsibility.

            We disagree that HUD does not have any authority to direct correction of
            deficiencies found in environmental reviews performed by responsible entities for
            program recipients. As stated in 24 CFR 58.72(c), in cases in which HUD has
            approved a certification and request for release of funds but subsequently learns
            that the recipient violated section 58.22 or the recipient or responsible entity
            otherwise failed to comply with a clearly applicable environmental authority, HUD
            must impose appropriate remedies and sanctions in accord with the law and
            regulations for the program under which the violation was found. For poorly
            performing responsible entities, HUD could suspend or terminate them and
            perform the reviews under 24 CFR Part 50.

Comment 8   HUD stated that even if the program offices were obliged to undertake more
            aggressive oversight of the responsible entities and had authority to do so, their
            capacity is limited. HUD further stated that the Office of Environment and Energy
            used a risk assessment tool to rate more than 1,200 entitlement communities that it
            actively monitors in addition to approximately 100 responsible entities that are not
            entitlement communities each year.

            We acknowledge that the Office of Environment and Energy recently incorporated
            the other programs into its risk assessment due to our audit. However, given that



                                                40
              the Office of Native American Programs monitored its grantees, Housing and
              Public Housing could also monitor their grantees if they devoted the resources.

Comment 9     HUD stated that in the absence of significant additional resources, neither the
              Office of Environment and Energy nor Housing and Public Housing are able to
              increase these monitoring activities appreciably. HUD further stated that it will
              strive to provide reasonable assurance that environmental compliance requirements
              are met.

              We understand that resources are a valuable commodity; however, HUD has a
              fiduciary duty to provide the resources necessary to ensure that environmental
              requirements are met and that NEPA’s objective is achieved.

Comment 10 HUD disagreed with our conclusion that Housing did not provide training to its
           staff, grantees, or responsible entities. HUD further stated that Housing provided
           significant training on compliance with environmental requirements, principally
           program-specific requirements, to HUD staff, contractors, and lenders.
           Specifically, Housing had provided during the audit period of March 1, 2009, to
           September 30, 2012, trainings on the site selection and environment process for
           Sections 202 and 811 programs and new employee orientation training. Housing
           also noted an Office of Environment and Energy Field Environmental Training
           Conference that was attended by Housing. HUD stated that it had provided
           supporting documentation to OIG.

              HUD provided a list of trainings and some PowerPoint presentations that Housing
              performed. However, the training provided during our audit period was limited to
              two trainings on the environmental review process for Sections 202 and 811
              programs and two trainings for new employee orientation. The documentation for
              both types of training provided to us was limited and did not include any type of
              sign-in or attendance sheets to show who or how many people attended. In
              addition, the Office of Environment and Energy Field Environmental Training
              Conference that Housing attended did not have documentation showing what
              topics were included in the training. Further, we question whether a new employee
              orientation would provide the needed detailed training that the environmental
              review process entails. We revised the finding to show that Housing provided
              limited training.

Comment 11 HUD stated that the Office of Environment and Energy offers comprehensive
           environmental training but is restricted in the amount of training it can provide due
           to limited resources. HUD stated that in fiscal year 2014, the Office of
           Environment and Energy conducted 64 formal trainings and trained 550 HUD
           staff, and 1,945 grantees, tribes, and consultants. Further, the Office of
           Environment and Energy works directly with program offices to deliver specific
           training and provides Web-based training that is available to all HUD staff. In
           addition, Community Planning and Development is devoting approximately $1.5



                                                41
              million to develop an online Learning Management System to supplement in-
              person training. HUD anticipates that the system will be deployed in the winter of
              this year on HUD’s Web site to all grantees and partners.

              We acknowledge that the Office of Environment and Energy has provided training
              and that it was restricted in the amount of training provided due to limited
              resources it received from the Community Planning and Development program
              office. We further acknowledge that in fiscal year 2014, the Office of
              Environment and Energy conducted more than 64 formal trainings that included
              HUD staff, grantees, tribes, and consultants; however, this training was after our
              audit period.

Comment 12 HUD stated that while most of Public Housing’s environmental training was
           performed by the Office of Environment and Energy, Public and Indian Housing
           presented an environmental review training via live broadcast on March 11, 2009,
           to all Public and Indian Housing field offices and headquarters staff. HUD further
           stated that it provided us with documentation to support this training. In addition,
           HUD stated that in September 2014, 10 PIH staff participated in a 3-day training
           course presented by the Office of Environment and Energy.

              HUD also stated that the Office of Environment and Energy will continue to
              include public housing agencies and Public and Indian Housing staff in each of
              their regional trainings during fiscal year 2015, and Public and Indian Housing and
              the Office of Environment and Energy are collaborating on the delivery of
              comprehensive Part 58 training targeted to grantees in three of the field offices
              which were the subject of OIG’s recent regional environmental review audits,
              namely Boston, Detroit, and Kansas City. The training workshop conducted in
              those cities will be used as a model for future training in other locations throughout
              the country targeting public housing agencies, responsible entities, and field office
              staff.

              The March 11, 2009, and September 2014 training HUD noted is outside our audit
              period, and we only reviewed training provided during our audit period. The
              documentation HUD provided for the March 2009 training included a screen shot
              of a webcast training available to HUD personnel, titled PIH Environmental
              Review Training; however, HUD did not provide information regarding who had
              taken the training. We are encouraged that HUD plans to provide training to
              public housing agencies, its staff, and grantees.

Comment 13 HUD commented that we inaccurately described Public and Indian Housing’s
           position regarding repayment of ineligible costs. HUD stated that Public and
           Indian Housing has taken the position that repayment of ineligible costs should not
           be the sole remedy for all cases when an environmental review was inadequately
           performed. HUD believes that it may be just as appropriate for a grantee to
           receive additional training as the “sanction” when environmental reviews were not



                                                 42
              performed in accordance with requirements, rather than require the repayment of
              funds. HUD stated that Public and Indian Housing’s position reflects an
              enforcement approach that levies sanctions based upon the extent and
              circumstances for noncompliance and whether harm has occurred.

              We disagree that there are other sanctions available when ineligible costs have
              occurred due to a regulatory violation. According to 24 CFR 58.22, neither a
              recipient nor any participant in the development process may commit HUD
              assistance, even if a project is exempt or categorically excluded, until the
              environmental review has been completed and signed by the responsible entity.
              Federal regulations at 2 CFR 200.31 define disallowed costs to mean those charges
              to a Federal award that are determined to be unallowable in accordance with the
              applicable Federal statutes, regulations, or the terms and conditions of the Federal
              award. Further, 2 CFR 215.73 states any funds paid to a recipient in excess of the
              amount to which the recipient is finally determined to be entitled under the terms
              and conditions of the award constitute a debt to the Federal Government.

              HUD set a precedent in response to a previous OIG audit recommendation. The
              former Assistant Secretary for Public and Indian Housing concurred that Recovery
              Act funds spent on construction activities were ineligible because the housing
              agency obligated and spent the funds before the environmental clearance had been
              completed. The former Assistant Secretary required the housing agency to repay
              the ineligible amount.

Comment 14 HUD commented in regard to repayment of ineligible funds that Community
           Planning and Development does not always require repayment when funds are
           committed before certification. Instead, Community Planning and Development
           will consider such factors as whether there is an unmitigated adverse
           environmental impact and the grantee’s compliance record. HUD believes it
           should follow this approach for activities that violate a statutory or regulatory
           provision.

              While Community Planning and Development may have the ability to offer
              alternatives, OIG auditors are directed by 2 CFR 200.516, which states that the
              auditor must report as audit findings in a schedule of findings and questioned costs
              material noncompliance with the provisions of Federal statutes, regulations, or the
              terms and conditions of Federal awards related to a major program. Further, 2
              CFR 200.84 defines a questioned cost as a cost that is questioned by the auditor
              because of an audit finding, which resulted from a violation of a statute, regulation,
              or the terms and conditions of a Federal award. Finally, HUD’s ability to offer
              alternatives is limited. For example, Public Law 112-55, Department of Housing
              and Urban Development 2012 Appropriations Act, dated November 18, 2011,
              identified sections that do not allow the HUD Secretary to provide a waiver related
              to fair housing, nondiscrimination, labor standards, and the environment.




                                                 43
Appendix B


   Public Housing Field Offices and the Number of Public Housing Agencies in Their
                                     Jurisdictions
                                                  Number of public      Number of
             Number of public     Field office
                                                  housing agencies     public housing
  Region    housing agencies in      OIG
                                                  under field office     agencies
                  region           reviewed
                                                    jurisdiction         reviewed
    1               170             Boston               219                 3
    2               164
    3               170
                                  Greensboro-
    4               796                                126 - 43           126 - 41
                                   Columbia
    5               534             Detroit              129                 3
    6               703
    7               346           Kansas City            228                11
    8               119
    9                74
   10                58
  Totals           3,134                                 745                184




                                             44
Appendix C


                       Funds Spent Without a Proper Environmental Review
                                               Ineligible      Unsupported           Expended       Excluded
     Field office       Grant amount 36
                                                   1/              2/                   3/             4/
 Boston                     $    85,642,077    $ 4,882,983       $ 80,759,094
 Detroit                         35,076,863        877,360         33,829,239                       $ 370,264
 Kansas City                     27,401,572      1,039,797         18,970,236        $ 7,391,539
 Columbia                        76,494,705                                           76,494,705
 Greensboro                     180,725,889                                          180,725,889
       Totals               $ 405,341,106      $ 6,800,140      $ 133,558,569       $ 264,612,133   $ 370,264

 Total grant amount less excluded 4/: $404,970,842


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. These ineligible costs were due to a violation of 24 CFR 58.22.
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. These unsupported costs were due to a violation of
         24 CFR 58.38.
3/       Expended costs are those costs that could not be charged as ineligible or unsupported by
         the auditor but that the auditor believes did not meet Federal requirements. These costs
         were due to violations of 24 CFR Part 50 as HUD failed to follow environmental review
         requirements when it performed the environmental reviews for the housing agencies.
4/       Excluded costs are those costs that had been forfeited due to another OIG issue separate
         from this audit ($40,383) or funds that had not been obligated or spent by the housing
         agency and were considered eligible funds at the time of the audit since an environmental
         review could be properly completed before the deadline for obligation of the funds
         ($329,881).




36
     Grant amount includes the 2009 Recovery Act and 2011 and 2012 capital funds.




                                                        45
Appendix D

                                         Criteria
                      National Environmental Policy Act of 1969
           NEPA            The purpose of NEPA is to declare a national policy that will
                           encourage productive and enjoyable harmony between man
                           and his environment. To carry out this policy, set forth in
                           NEPA, it is the continuing responsibility of the Federal
                           Government to use all practicable means, consistent with other
                           essential considerations of national policy, to improve and
                           coordinate Federal plans, functions, programs, and resources
                           to the end that the Nation may attain the widest range of
                           beneficial uses of the environment without degradation, risk to
                           health or safety, or other undesirable and unintended
                           consequences.
                                     Executive orders
  Executive Order 11514 Section 2(a) states that the heads of Federal agencies must
                           “Monitor, evaluate, and control on a continuing basis their
                           agencies’ activities so as to protect and enhance the quality of
                           the environment. Agencies shall develop programs and
                           measures to protect and enhance environmental quality and
                           shall assess progress in meeting the specific objectives of such
                           activities.”
  Executive Order 12898 Section 1-101, Agency Responsibilities, states that to the
                           greatest extent practicable and permitted by law and consistent
                           with the principles set forth in the report on the National
                           Performance Review, each Federal agency must make
                           achieving environmental justice part of its mission by
                           identifying and addressing, as appropriate, disproportionately
                           high and adverse human health or environmental effects of its
                           programs, policies, and activities on minority populations and
                           low-income populations in the United States and its territories
                           and possessions, the District of Columbia, the Commonwealth
                           of Puerto Rico, and the Commonwealth of the Mariana
                           Islands.
                                     Federal Register
  Notice 31972, Volume     Section A, Authority Delegated, states, “Except as provided
  77, Number 104, dated in Section B, the Secretary of HUD delegates to the Assistant
  May 30, 2012             Secretary for Community Planning and Development, the
                           General Deputy Assistant Secretary for Community Planning
                           and Development, and the Deputy Assistant Secretary for
                           Special Needs Programs the authority of the Secretary with
                           respect to the programs and matters listed below in this



                                              46
                         Section A. Only the Assistant Secretary is delegated the
                         authority to issue or waive regulations.”
                             21. Overall departmental responsibility for compliance
                             with NEPA and the related laws and authorities cited in 24
                             CFR 50.4, including (with regard to the Assistant
                             Secretary for Community Planning and Development) the
                             authority to issue and to waive or approve exceptions or
                             establish criteria for exceptions from provisions of 24 CFR
                             Parts 50, 51, 55, and 58.
Notice 38853, Volume     Section A.1, General Redelegation of Authority-Deputy
77, Number 126, dated Assistant Secretary for Grant Programs, states that except
June 29, 2012            for those authorities specifically excluded, the Assistant
                         Secretary redelegates to the Deputy Assistant Secretary for
                         Grant Programs all powers and authorities of the Assistant
                         Secretary necessary to carry out the following CPD programs
                         and matters:
                             h. Environment - overall departmental responsibility for
                             compliance with NEPA and the related laws and
                             authorities cited in 24 CFR 50.4.
               Protection and enhancement of environmental quality
24 CFR Part 50           Section 50.2(a) states, “The definitions for most of the key
                         terms or phrases contained in this part appear in 40 CFR Part
                         1508 and in the authorities cited in [section] 50.4,” to include
                         the following definitions:
                             • Environmental review means a process for complying
                             with NEPA (through an environmental assessment or
                             environmental impact statement) or with the laws and
                             authorities cited in section 50.4.
                             • HUD approving official means the HUD official
                             authorized to make the approval decision for any proposed
                             policy or project subject to this part.
                             • Project means an activity or a group of integrally
                             related activities undertaken directly by HUD or proposed
                             for HUD assistance or insurance.

                           Section 50.3(i)(1) states, “It is HUD policy that all property
                           proposed for use in HUD programs be free of hazardous
                           materials, contamination, toxic chemicals and gasses, and
                           radioactive substances, where a hazard could affect the health
                           and safety of occupants or conflict with the intended
                           utilization of the property.”

                           Section 50.3(i)(2) states, “HUD environmental review of
                           multifamily and non-residential properties shall include



                                            47
                 evaluation of previous uses of the site and other evidence of
                 contamination on or near the site, to assure that occupants of
                 proposed sites are not adversely affected by the hazards listed
                 in paragraph (i)(1) of this section.”

                 Section 50.3(i)(3) states, “Particular attention should be given
                 to any proposed site on or in the general proximity of such
                 areas as dumps, landfills, industrial sites or other locations that
                 contain hazardous wastes.”

                 Section 50.4 states, “HUD and/or applicants must comply,
                 where applicable, with all environmental requirements,
                 guidelines and statutory obligations under the following
                 authorities and HUD standards:”
                     • Historic properties;
                     • Flood insurance, floodplain management, and wetland
                     protection;
                     • Coastal areas protection and management;
                     • Water quality and sole-source aquifers;
                     • Endangered species;
                     • Wild and scenic rivers;
                     • Air quality;
                     • Solid waste management;
                     • Farmlands protection;
                     • Noise abatement and control;
                     • Explosive and flammable operations;
                     • Airport hazards (clear zones and accident potential
                     zones); and
                     • Environmental justice.

                 Section 50.10(a) states, “It is the responsibility of all Assistant
                 Secretaries, the General Counsel, and the HUD approving
                 official to assure that the requirements of this part are
                 implemented.”

                 Section 50.22 states that an environmental management and
                 monitoring program must be established before project
                 approval when it is deemed necessary by the HUD approving
                 official. The program must be part of the approval document.
                      Floodplain management
24 CFR Part 55   Section 55.1(c) states that except with respect to actions listed
                 in section 55.12(c), no HUD financial assistance (including
                 mortgage insurance) may be approved after May 23, 1994,
                 with respect to


                                    48
                           •   Any action, other than a functionally dependent use,
                               located in a floodway;
                           •   Any critical action located in a coastal high-hazard
                               area; or
                           •   Any noncritical action located in a coastal high-hazard
                               area unless the action is designed for location in a
                               coastal high-hazard area or is a functionally dependent
                               use.

                       Section 55.2(b)(1) states, “Coastal high hazard area means
                       the area subject to high velocity waters, including but not
                       limited to hurricane wave wash or tsunamis.”

                       Section 55.2(b)(2)(i) states, “Critical action means any
                       activity for which even a slight change of flooding would be
                       too great, because such flooding might result in loss of life,
                       injury to persons, or damage to property. Critical actions
                       include activities that create, maintain or extend the useful life
                       of those structures of facilities that
                            • Provide essential and irreplaceable records or utility or
                                emergency services that may become lost or
                                inoperative during flood and storm events (e.g., data
                                storage centers, generating plants, principal utility
                                lines, emergency operations centers including fire and
                                police stations, and roadways providing sole egress
                                from flood-prone areas).”

                       Section 55.2(b)(2)(ii) states that critical actions must not be
                       approved in floodways or coastal high-hazard areas.

                       Section 55.2(b)(2)(ii)(4) states that floodway means that
                       portion of the floodplain that is effective in carrying flow,
                       where the flood hazard is generally the greatest, and where
                       water depths and velocities are the highest.

                      Section 55.20, Subpart C, states that the decision-making
                      process for compliance with floodplain management contains
                      eight steps, including public notices and an examination of
                      practicable alternatives.
                 Environmental review procedures for entities
                 assuming HUD environmental responsibilities
24 CFR Part 58        Section 58.2(a)(7)(ii)(B) states that “responsible entity”
                      means, for public housing agencies, the unit of general local
                      government within which the project is located that exercises
                      land use responsibility.


                                         49
Section 58.5 states that “the responsible entity must certify
that it has complied with the requirements that would apply to
HUD under these laws and authorities and must consider the
criteria, standards, policies, and regulations of these laws and
authorities.” The statutory requirements for categorically
excluded projects subject to 24 CFR 58.5 include
    • Air quality,
    • Airport hazards (clear zones and accident potential
    zones),
    • Coastal zone management,
    • Contamination and toxic substances,
    • Endangered species,
    • Environmental justice,
    • Explosive and flammable operations,
    • Farmlands protection,
    • Floodplain management,
    • Historic preservation,
    • Noise abatement and control,
    • Water quality (sole-source aquifers),
    • Wetland protection, and
    • Wild and scenic rivers.

Section 58.6 states that the responsible entity remains
responsible for addressing requirements in its environmental
review record and meeting these requirements as applicable,
regardless of whether the activity is exempt or categorically
excluded. The statutory requirements for all projects subject
to 24 CFR 58.6 include
    • Airport runway protection zone and clear zone
       notification,
    • The Coastal Barriers Resources Act and Coastal
       Barrier Improvement Act, and
    • The Flood Disaster Protection Act (flood insurance).

Section 58.22(a) states that neither a recipient nor a
participant in the development process may commit HUD
assistance under a program listed in section 58.1(b) on an
activity or project until HUD has approved the recipient’s
request for release of funds and the related certification from
the responsible entity. In addition, until the request for release
of funds and the related certification have been approved,
neither a recipient nor any participant in the development
process may commit non-HUD funds on or undertake an
activity or project under a program listed in section 58.1(b) if



                  50
the activity or project would have an adverse environmental
impact or limit the choice of reasonable alternatives.

Section 58.22(b) states that if a project or activity is exempt
under section 58.34 or is categorically excluded under section
58.35(b), no request for release of funds and certification is
required, and the recipient may undertake the activity
immediately after the responsible entity has documented its
determination as required in sections 58.34(b) and 58.35(d)
but the recipient must comply with applicable requirements
under section 58.6.

Section 58.30(a) states that “the environmental review process
consists of all the actions that a responsible entity must take to
determine compliance with this part.”

Section 58.38 states that the responsible entity must maintain
a written record of the environmental review undertaken under
this part for each project. The document will be designated
the “Environmental Review Record” and must be available for
public review. The responsible entity must use the current
HUD-recommended formats or develop equivalent formats.

Section 58.38(a) states that the environmental review record
must contain all of the environmental review documents,
public notices, and written determinations or environmental
findings required by this part as evidence of review, decision
making, and actions pertaining to a particular project of a
recipient. The document must
    • Describe the project and the activities that the recipient
        has determined to be part of the project;
    • Evaluate the effects of the project or the activities on
        the human environment;
    • Document compliance with applicable statutes and
        authorities, in particular those cited in sections 58.5
        and 58.6; and
    • Record the written determinations and other review
        findings required by this part.

Section 58.38(b) states that the environmental review record
must contain verifiable source documents and relevant base
data used or cited in environmental assessments,
environmental impact statements, or other project review
documents. These documents may be incorporated by
reference into the environmental review record, provided each


                  51
                           source document is identified and available for inspection by
                           interested parties. Proprietary material and special studies
                           prepared for the recipient that are not otherwise generally
                           available for public review must not be incorporated by
                           reference but must be included in the environmental review
                           record.

                          Section 58.77(d) states that at least once every 3 years, HUD
                          intends to conduct in-depth monitoring and exercise quality
                          control (through training and consultation) over the
                          environmental activities performed by responsible entities
                          under this part. Limited monitoring of these environmental
                          activities will be conducted during each program monitoring
                          site visit. If, through limited or in-depth monitoring of these
                          environmental activities or by other means, HUD becomes
                          aware of environmental deficiencies, HUD may take one or
                          more of the following actions:
                              • In the case of problems found during limited
                                   monitoring, HUD may schedule in-depth monitoring at
                                   an earlier date or may schedule in-depth monitoring
                                   more frequently;
                              • HUD may require attendance by staff of the
                                   responsible entity at HUD-sponsored or -approved
                                   training;
                              • HUD may refuse to accept the certifications of
                                   environmental compliance on future grants;
                              • HUD may suspend or terminate the responsible
                                   entity’s assumption of the environmental review
                                   responsibility; or
                              • HUD may initiate sanctions, corrective actions, or
                                   other remedies specified in program regulations or
                                   agreements or contracts with the recipient.
                    The Public Housing Operating Fund program
24 CFR Part 990           Subpart A, section 990.116, states, “The environmental
                          review procedures of the National Environmental Policy Act
                          of 1969 (NEPA) (42 U.S.C. [United States Code] 4332(2)(C))
                          and the implementing regulations at 24 CFR parts 50 and 58
                          are applicable to the Operating Fund Program.”
            Public and Indian Housing-Office of Field Operations guidance
Field office              Section 5, Program Requirements – Capital Fund
environmental review      Program (Special Note: Use of Capital Funds for
guidance                  Operating Costs), states that public housing agencies wishing
                          to spend capital funds on operating costs have been permitted
                          to do so by reporting the amount of funds “transferred” to



                                            52
                           operating costs on budget line item 1406 and drawing the
                           funds down to the general ledger after budget approval.
                           Public Housing staff should be aware that some public
                           housing agencies are spending funds reported on budget line
                           item 1406 on standard capital—not operating—costs after they
                           have been added to the general ledger. Amounts allocated by
                           public housing agencies to line 1406 should be only those
                           used for true operating costs. The public housing agencies
                           should provide a description of operating costs to HUD or the
                           responsible entity to allow completion of the environmental
                           review.

                         Section 6, Role of the Field Office – Internal Controls,
                         states that at a minimum, Public Housing must maintain the
                         following:
                             • A list of responsible entities that HUD has determined
                                 will or will not perform the environmental review on
                                 behalf of HUD. This list will be an important
                                 document for determining which public housing
                                 agencies will need to submit the clearance documents.
                             • A list of requests for release of funds and certifications
                                 that have been received and for which clearance has
                                 been provided.
                             • A list of environmental reviews that have been
                                 conducted by Public Housing for each program
                                 requiring environmental clearance.
                             • Separate environmental clearance files for each public
                                 housing agency.
  Guidance for categorizing an activity as maintenance for compliance with HUD’s
                environmental regulations at 24 CFR Parts 50 and 58
Memorandum from the This memorandum clarifies the difference between
Office of Environment maintenance and repair for compliance with HUD’s
and Energy Director,     environmental regulations at 24 CFR Parts 50 and 58.
dated March 28, 2006     Environmental reviews for repair activities are more
                         extensive, requiring compliance with related Federal
                         environmental laws in sections 50.4 and 58.5, including the
                         National Historic Preservation Act of 1966. In contrast,
                         maintenance activities do not require compliance with Federal
                         environmental laws. Distinguishing between maintenance and
                         repair activities requires careful examination. Unless the
                         activity meets the definition of maintenance provided below,
                         the activity should be considered a repair or improvement, and
                         the environmental review will require compliance with the
                         related Federal environmental laws at sections 50.4 and 58.5.
                         Unlike repair and improvements, maintenance activities do not


                                            53
materially add to the value of the building, appreciably
prolong its useful life, or adapt it to new uses.
Definition – Maintenance activities are
    (1) Cleaning activities;
    (2) Protective or preventive measures to keep a building,
        its systems, and its grounds in working order; or
    (3) Replacement of appliances or objects that are not
        fixtures or part of the building. A fixture is an object
        that is physically attached to the building and cannot
        be removed without damage to the building and
        includes systems designed for occupant comfort and
        safety such as heating, ventilation, and air
        conditioning; electrical or mechanical systems;
        sanitation; fire suppression; and plumbing. Fixtures
        also include but are not limited to kitchen cabinets,
        built-in shelves, toilets, light fixtures, staircases, crown
        molding, sinks, and bathtubs.




                   54