oversight

EdgeAlliance, Inc., Chicago, IL, Did Not Administer Continuum of Care Program Funds for The Daniel R. Ruscitti Phoenix House in Accordance With Federal Regulations

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-11-24.

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

         EdgeAlliance, Inc., Chicago, IL
                      Continuum of Care Program




Office of Audit, Region 5             Audit Report Number: 2016-CH-1001
Chicago, IL                                           November 24, 2015
                                  2
To:            Ray E. Willis, Director of Community Planning and Development, 5AD
 
               //signed//
From:          Kelly Anderson, Regional Inspector General for Audit, (Chicago Region), 5AGA 
Subject:       EdgeAlliance, Inc., Chicago, IL, Did Not Administer Continuum of Care Program
               Funds for The Daniel R. Ruscitti Phoenix House in Accordance With Federal
               Regulations 




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of EdgeAlliance, Inc.’s Continuum of Care program
funds for The Daniel R. Ruscitti Phoenix House.
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
312-353-7832. 
                    Audit Report Number: 2016-CH-1001
                    Date: November 24, 2015

                    EdgeAlliance, Inc., Chicago, IL, Did Not Administer Continuum of Care
                    Program Funds for The Daniel R. Ruscitti Phoenix House in Accordance
                    With Federal Regulations



Highlights

What We Audited and Why
We audited EdgeAlliance, Inc.’s Continuum of Care program funds for The Daniel R. Ruscitti
Phoenix House (project). The audit was part of the activities in our fiscal year 2015 annual audit
plan. We selected the project for review based upon a citizen’s complaint. Our objectives were
to determine whether EdgeAlliance complied with Federal requirements in its (1) maintenance of
financial management systems for program funds and matching contributions for the project and
(2) use of program funds for the project.

What We Found
EdgeAlliance (1) did not maintain financial management systems that adequately showed how
program funds and matching contributions for the project were used, (2) could not provide
sufficient documentation to support that program funds were used for eligible project expenses,
and (3) used program funds for improper operating expenses. As a result, HUD and
EdgeAlliance lacked assurance that nearly $687,000 in program funds was used for eligible
project expenses. Further, nearly $88,000 in program funds was not available for eligible project
expenses.

What We Recommend
We recommend that the Director of HUD’s Chicago Office of Community Planning and
Development require EdgeAlliance to (1) support or reimburse its program from non-Federal
funds for the program funds drawn down for which it did not provide sufficient documentation to
show that the funds were used for eligible project expenses, (2) reimburse HUD from non-
Federal funds for the program funds used for improper operating expenses, and (3) implement
adequate procedures and controls to address the findings cited in this audit report.
Table of Contents
Background and Objectives ....................................................................................3

Results of Audit ........................................................................................................5
         Finding: EdgeAlliance, Inc., Did Not Administer Program Funds for the Project in
                  Accordance With Federal Regulations ........................................................... 5

Scope and Methodology .........................................................................................11

Internal Controls ....................................................................................................13

Appendixes ..............................................................................................................14
         A. Schedule of Questioned Costs .................................................................................. 14

         B. Auditee Comments and OIG’s Evaluation ............................................................. 16

         C. Federal Requirements .............................................................................................. 19




                                                               2
Background and Objectives
The Continuum of Care program was authorized under the McKinney-Vento Homeless
Assistance Act, as amended by the Homeless Emergency Assistance and Rapid Transition to
Housing Act of 2009.1 The Continuum of Care program (1) promotes community-wide
commitment to the goal of ending homelessness; (2) provides funding for efforts by nonprofit
providers and State and local governments to quickly rehouse homeless individuals and families
while minimizing the trauma and dislocation caused to homeless individuals, families, and
communities by homelessness; (3) promotes access to and effective use of mainstream programs
by homeless individuals and families; and (4) optimizes self-sufficiency among individuals and
families experiencing homelessness. 
Incorporated in October 1992 as a nonprofit corporation under the laws of the State of Illinois,
EdgeAlliance, Inc.’s mission is to assist its members in developing and operating quality housing
and providing life-enriching services to vulnerable individuals and families. To accomplish its
mission, EdgeAlliance has developed and operates the following housing subsidiaries: The Daniel
R. Ruscitti Phoenix House (project), Sawyer Gardens, Garden View, and The Shawn Feeley Alpha
House. The project is a 32-unit supportive living facility located in Chicago, IL, for adults who are
otherwise homeless, disabled, and diagnosed with HIV-AIDS. The project’s records are located at
1251 South Sawyer Avenue, Chicago, IL. 
The U.S. Department of Housing and Urban Development (HUD) entered into 2011 through
2013 program grant agreements with EdgeAlliance totaling more than $1.1 million for the
project. The following table shows the grant year, program grant, and amount of program funds
HUD awarded EdgeAlliance for the project for operating costs, supportive services, and
administration. 

    Grant                           Operating Supportive Admin-
    year      Program grant           costs    services  istration                               Totals
    2011 Supportive Housing Program  $317,625    $31,050 $17,433                                 $366,108
     2012           Continuum of Care                318,465           31,050       24,245        373,760
     2013           Continuum of Care                321,650           31,050       24,245        376,945

                      Totals                        $957,740          $93,150      $65,923 $1,116,813




1
 The Act streamlined HUD’s homeless grant programs by consolidating the Supportive Housing Program, Shelter
Plus Care, and Single Room Occupancy grant programs into the Continuum of Care program. Unless otherwise
noted in this audit report, the term “program” refers to the Supportive Housing Program, the Continuum of Care
program, or both programs. 



                                                       3
Our objectives were to determine whether EdgeAlliance complied with Federal requirements in
its (1) maintenance of financial management systems for program funds and matching
contributions for the project and (2) use of program funds for the project.




                                              4
Results of Audit

Finding: EdgeAlliance, Inc., Did Not Administer Program Funds
for the Project in Accordance With Federal Regulations
EdgeAlliance (1) did not maintain financial management systems that adequately showed how
program funds and matching contributions for the project were used, (2) could not provide
sufficient documentation to support that program funds were used for eligible project expenses,
and (3) used program funds for improper operating expenses. These weaknesses occurred
because EdgeAlliance lacked adequate procedures and controls for administering its program
funds for the project to ensure that the funds were used in accordance with Federal regulations.
As a result, HUD and EdgeAlliance lacked assurance that nearly $687,000 in program funds was
used for eligible project expenses. Further, nearly $88,000 in program funds was not available
for eligible project expenses.
Financial Management Systems Were Not Adequate
We selected for review more than $934,000 in program funds EdgeAlliance drew down from
HUD’s Line of Credit Control System2 through 16 vouchers3 from July 1, 2012, through
December 31, 2014, to determine whether EdgeAlliance used program funds for the project in
accordance with Federal requirements.
EdgeAlliance’s financial management systems did not adequately show how program funds and
matching contributions for the project were used as required by Federal regulations.4
EdgeAlliance initially deposited the more than $934,000 in program funds into a bank account
for the project (project account number 1). However, at least $504,000 of the funds was
transferred to EdgeAlliance’s primary operating account (EdgeAlliance account number 1) from
August 2012 through May 2014.5 Its accounting system showed that the program funds in the
account (EdgeAlliance account number 1) were commingled with other funds, such as Housing
Opportunities for Persons with AIDS funds from the City of Chicago, non-Federal Supportive
Housing Program funds from the Illinois Department of Human Services,6 fundraising income,
and donations. The accounting system also showed that funds from the account (EdgeAlliance
account number 1) were used to pay for expenses of the project, Garden View, and Alpha House;



2
  The System is HUD’s primary grant disbursement system for most of its programs. 
3
  The 16 vouchers included more than $244,000 in Supportive Housing Program funds (4 vouchers) and more than
$690,000 in Continuum of Care funds (12 vouchers).
4
  See appendix C of this audit report.
5
  Due to commingling and the transfers of funds mentioned later in this audit report, we were generally unable to
track the remaining program funds.
6
  According to EdgeAlliance’s chief operating officer, the matching contributions for the project were Housing
Opportunities for Persons with AIDS funds from the City of Chicago and non-Federal Supportive Housing Program
funds from the Illinois Department of Human Services.



                                                        5
payroll; rent for its former administrative office at 212 East Ohio Street, Chicago, IL; and
fundraising expenses. Further, EdgeAlliance transferred funds from this account (EdgeAlliance
account number 1) to several other bank accounts, including a second account for the project
(project account number 2). In June 2014, EdgeAlliance started transferring funds7 from another
operating account (EdgeAlliance account number 2) to the bank account for the project into
which program funds were initially deposited (project account number 1). In July 2014,
EdgeAlliance changed its primary operating account (EdgeAlliance account number 1) to this
other operating account (EdgeAlliance account number 2). In addition, funds were transferred
from the two bank accounts for the project (project account numbers 1 and 2) to one or more of
EdgeAlliance’s operating accounts (EdgeAlliance account numbers 1 and 2). Project expenses
were also paid from both of the bank accounts for the project (project account numbers 1 and 2).
However, neither EdgeAlliance’s nor the project’s accounting systems adequately showed which
funds were used for the project’s disbursements. Although the commingling of funds was not a
violation, it placed greater responsibility on EdgeAlliance to maintain an accounting system that
adequately showed how program funds and matching contributions for the project were used.
EdgeAlliance’s chief operating officer, who joined the organization in July 2013, could not
explain why former staff did not set up EdgeAlliance’s financial management systems to show
how program funds and matching contributions for the project were used. The chief operating
officer also stated that before our audit, she was not aware of HUD’s regulations at 24 CFR
(Code of Federal Regulations) Part 84 regarding the uniform administrative requirements for
Federal grants awarded to nonprofit organizations. Further, EdgeAlliance did not maintain
written policies regarding how to account for program funds and matching contributions in its
financial management systems.
In July 2014, the chief operating officer updated the project’s chart of accounts to include
descriptions designed to show the percentage allocable to the program funds and matching
contributions for select expense accounts.8 However, the percentages used were general
estimates that were not (1) always accurate, (2) based upon specific allocation bases or actual
expenses from prior years, (3) fully integrated into the project’s accounting system, or (4)
regularly used to manually compare budgeted amounts to actual expenditures. Further,
EdgeAlliance did not have a system in place to ensure the accuracy of the percentages if
expenses fluctuated from period to period.
EdgeAlliance also did not maintain other records, such as voucher packages or match logs, to
show the expenses paid for with program funds and matching contributions. However,
EdgeAlliance maintained source documentation, such as invoices, receipts, and check stubs, for
expenses. The chief operating officer reviewed the source documentation, matched it with a




7
  EdgeAlliance’s accounting system showed that the other operating account included several types of funds, such as
program funds, Housing Opportunities for Persons with AIDS funds from the City of Chicago, non-Federal
Supportive Housing Program funds from the Illinois Department of Human Services, and donations.
8
  Before July 1, 2014, the project’s accounting system did not associate expenses with funding sources.



                                                         6
voucher if she believed it was associated with project expenses under the program, and then
provided it to us.
Lack of Sufficient Documentation To Support the Use of Program Funds
Although we were generally unable to determine whether program funds were used specifically
for project expenses based on EdgeAlliance’s financial management systems, we reviewed the
source documentation that the chief operating officer associated with the vouchers to determine
whether it supported that project expenses were eligible under the program. Contrary to Federal
regulations, EdgeAlliance could not provide sufficient documentation to support that it used
nearly $687,000 in program funds for eligible project expenses. The following table shows the
unsupported category and the amount of program funds disbursed for unsupported expenses and
drawn down without source documentation or sufficient payment records.

                                                                                  Program
                                   Unsupported category                            funds
                     Salaries and wages                                             $276,828
                     Draws with no source documentation                              256,551
                     Utilities                                                        63,049
                     Equipment maintenance and repairs                                20,180
                     Telephone                                                        15,995
                     Property insurance                                               12,973
                     Draws with insufficient payment records                          11,939
                     Credit card purchases9                                            6,942
                     Supplies (maintenance and office)                                 5,584
                     Equipment                                                         4,018
                     Locksmith services                                                3,429
                     Internet services                                                 2,369
                     Insurance (automobile, directors, and officers)                   2,359
                     Miscellaneous10                                                   1,697
                     Postage                                                           1,469
                     Security                                                           1,319
                                              Total                                 $686,701




9
 The credit card purchases were from a home improvement specialty retailer.
10
  The miscellaneous unsupported category included pest control, garbage services, internet services (for residents),
vehicle gas, sales tax, and an appliance store charge.



                                                          7
EdgeAlliance used nearly $277,00011 in program funds for unsupported salaries and wages.
Before July 2014, it did not maintain documentation to support the time that employees spent
working on the project. In July 2014, it started using grant tracking sheets to support the amount
of time employees spent on grants. However, the chief operating officer stated that the grant
tracking sheets included predetermined estimates rather than after-the-fact determinations of the
actual amount of time employees spent on project activities.
EdgeAlliance drew down nearly $257,000 in program funds for which it did not provide source
documentation, such as checks and invoices or receipts, to support the use of the program funds.
The chief operating officer stated that she believed that some of these program funds were used
to pay for the salaries and wages of EdgeAlliance’s employees.12
EdgeAlliance used more than $63,000 in program funds to pay for unsupported utility expenses,
including gas, electricity, and water. The first floor of the three-story project did not include
supportive housing units.13 As of November 2015, EdgeAlliance had not provided an acceptable
allocation method to support the portion of the utility expenses eligible to be charged to the
program for the project.
Program Funds Were Used for Improper Operating Expenses
EdgeAlliance used nearly $88,000 in program funds for improper operating expenses. The
following table shows the expense category and the amount of program funds disbursed for the
improper operating expenses.




11
   The nearly $277,000 in unsupported salaries and wages included nearly $151,000 for operating costs, nearly
$73,000 for supportive services, and more than $53,000 for administration. All of the program funds drawn down
from July 1, 2012, through December 31, 2014, for supportive services and administration were used for these
unsupported salaries and wages.
12
   We were unable to determine whether program funds were used for the salaries and wages because the financial
management systems did not adequately show how program funds were used.
13
   The first floor consisted of EdgeAlliance’s administrative offices, a security office, computer and television rooms
for the project’s residents, and other common areas.



                                                           8
                                                                                Program
                                     Expense category                            funds
                     Equipment maintenance and repairs                            $27,288
                     Expenses not associated with the project                      17,199
                     Building maintenance and repairs*                             13,105
                     Accounting and auditing services                               7,850
                     Internet services (for residents)                              7,606
                     Gas (for generator)                                            4,259
                     Landscaping (for beautification)                               2,820
                     Miscellaneous*14                                               2,653
                     Fees and penalties                                             1,941
                     Cable television                                               1,067
                     Duplicate payments                                               972
                     Building assessment                                              891
                                             Total                                 $87,651
                   *Expenses associated with common areas.

EdgeAlliance used more than $27,000 in program funds to pay for improper equipment
maintenance and repair expenses. The following items are examples of improper equipment
maintenance and repair costs: (1) computer-related costs, such as user account maintenance,
monthly security bulletin updates, personal computer repairs and updates, monthly managed
services, and remote maintenance for servers and workstations; (2) generator-related costs, such
as installation of new batteries, annual inspections, and remote monitoring; and (3) repair of an
electrical bypass automatic transfer switch in a control panel with flood damage.
EdgeAlliance used more than $13,000 in program funds to pay for improper building
maintenance and repair expenses associated with the project’s common areas. The following
items are examples of improper building maintenance and repair costs: repair of concrete at the
front entrance, installation of a new gutter, replacement of double-pane glass at the front
entrance, replacement of tiles in the second and third floor hallways, installation of a new
commercial door closer at the second floor stairwell, and supply and installation of a commercial
touch bar exit device and replacement of an electric strike for a television room door.
The chief operating officer said that in April 2014, she met with staff from HUD’s Chicago
Office of Community Planning and Development to obtain a better understanding of the purpose
of, reporting requirements for, and allowable costs associated with Continuum of Care program




14
  The improper miscellaneous operating expense category included an iPad, clothing, pest control,* locksmith
services (administrative), furniture,* towing services, and a coffee maker.



                                                        9
grants. Before the meeting, she was not aware of the specific allowable and unallowable costs
associated with the grants.
Conclusion
The weaknesses described above occurred because EdgeAlliance lacked adequate procedures
and controls for administering its program funds for the project to ensure that the funds were
used in accordance with Federal regulations. As a result, HUD and EdgeAlliance lacked
assurance that nearly $687,000 in program funds was used for eligible project expenses. Further,
nearly $88,000 in program funds was not available for eligible project expenses.
Recommendations
We recommend that the Director of HUD’s Chicago Office of Community Planning and
Development require EdgeAlliance to
       1A.    Support or reimburse its program from non-Federal funds for the $686,701 in
              program funds drawn down for which it did not provide sufficient documentation
              to support that the funds were used for eligible project expenses.
       1B.    Reimburse HUD from non-Federal funds for the $87,651 in program funds used
              for improper operating expenses.
       1C.    Implement adequate procedures and controls to ensure that (1) its financial
              management systems adequately show how program funds and matching
              contributions for the project are used and (2) it uses program funds for the project
              in accordance with Federal regulations.




                                                10
Scope and Methodology
We performed our audit work from March through August 2015 at the project located at 1251
South Sawyer Avenue, Chicago, IL, and HUD’s Chicago regional office located at 77 West
Jackson Boulevard, Chicago, IL. The audit covered the period July 2012 through December
2014.
To accomplish our objectives, we reviewed

      Applicable laws, Federal regulations at 2 CFR Parts 215 and 230; HUD’s regulations at
       24 CFR Parts 84, 578, and 583; HUD’s Supportive Housing Program desk guide; HUD’s
       grant agreements with EdgeAlliance for program funds; data in HUD’s Line of Credit
       Control System; and HUD’s files for the project.

      EdgeAlliance’s accounting records, audited financial statements for 2011 through 2013,
       organizational charts, and job descriptions associated with the project.

      The project’s accounting records and source documentation associated with project
       expenses.
In addition, we interviewed EdgeAlliance’s chief operating officer and HUD’s staff.
Finding
We selected for review more than $934,000 in program funds EdgeAlliance drew down from
HUD’s Line of Credit Control System through 16 vouchers from July 1, 2012, through
December 31, 2014, to determine whether EdgeAlliance used program funds for the project in
accordance with Federal requirements. The more than $934,000 in program funds included more
than $808,000 for operating costs, nearly $73,000 for supportive services, and more than $53,000
for administration. Although we were generally unable to determine whether program funds
were used specifically for project expenses based on EdgeAlliance’s financial management
systems, we reviewed the source documentation that EdgeAlliance’s chief operating officer
associated with the vouchers to determine whether it supported that project expenses were
eligible under the program.
We relied in part on the data from HUD’s Line of Credit Control System. Although we did not
perform a detailed assessment of the reliability of the data, we performed minimal levels of
testing and found the data to be adequately reliable for our purposes. Further, we performed
minimal levels of testing on EdgeAlliance’s financial management systems and determined that
the systems did not adequately show how program funds were used. Therefore, we were unable
to rely on data from these systems to show which expenses were paid with the program funds. 
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


                                               11
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                                12
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 objectives:

   Effectiveness and efficiency of operations – Policies and procedures that management has
    implemented to reasonably ensure that a program meets its objectives.
   Reliability of financial reporting – Policies and procedures that management has
    implemented to reasonably ensure that valid and reliable data are obtained, maintained, and
    fairly disclosed in reports.
   Compliance with applicable laws and regulations – Policies and procedures that management
    has implemented to reasonably ensure that resource use is consistent with laws and
    regulations.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:

   EdgeAlliance lacked adequate procedures and controls for administering its program funds
    for the project to ensure that the funds were used in accordance with Federal regulations (see
    finding).




                                                  13
Appendixes

Appendix A
                           Schedule of Questioned Costs
                 Recommendation
                                   Ineligible 1/   Unsupported 2/
                     number
                         1A                                       $686,701
                         1B                   $87,651
                       Totals                 $87,651             $686,701



1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.
2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.




                                              14
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1
Comment 2




Comment 3




Comment 4



Comment 5


Comment 6




                               15
Ref to OIG   Auditee Comments
Evaluation



Comment 7



Comment 8




                            16
                         OIG Evaluation of Auditee Comments


Comment 1   EdgeAlliance stated that its operations officer is working to find the right
            documentation to comply with the appropriate regulations. The acting chairman
            of EdgeAlliance’s board of directors referred to the current chief operating officer
            as the operations officer.
Comment 2   EdgeAlliance stated that the transgressions were under different leadership at
            EdgeAlliance. The current chief operating officer drew down more than
            $340,000 of the more than $934,000 in program funds we reviewed. The more
            than $340,000 included more than $237,000 for which EdgeAlliance could not
            provide sufficient documentation to support that the program funds were used for
            eligible project expenses and more than $22,000 EdgeAlliance used for improper
            operating expenses.
Comment 3   EdgeAlliance stated that the individuals who managed according to need instead
            of compliance have all left or been fired, and one of those former employees is the
            individual who contacted the Office of Inspector General. We informed
            EdgeAlliance’s staff and board members that we selected the project for review
            based upon an anonymous citizen’s complaint.
Comment 4   EdgeAlliance stated that the two major discrepancy amounts in the audit report
            were $276,828 and $256,551 which were the result of salaries from the previous
            staff who were located off campus instead of on campus and who did not keep
            accurate records of their work time and activities.
            In February 2014, EdgeAlliance moved its administrative staff from its
            administrative offices located at 212 East Ohio Street, Chicago, IL, to its offices
            located at the project. Nearly $92,000 of the nearly $277,000 in program funds
            EdgeAlliance used for unsupported salaries and wages and more than $104,000 of
            the nearly $257,000 in program funds EdgeAlliance drew down for which it did
            not provide source documentation to support the use of the program funds were
            drawn down from April through December 2014. The chief operating officer
            stated that she believed that some of these program funds that lacked source
            documentation were used to pay for the salaries and wages of EdgeAlliance’s
            employees. However, EdgeAlliance did not provide documentation to support
            that the nearly $257,000 was used for salaries and wages of employees.
Comment 5   EdgeAlliance stated that since April 2015, its chief operating officer has trained
            staff on recording their hours per building in specific segments instead of using
            percentages. EdgeAlliance should work with HUD’s Chicago Office of
            Community Planning and Development to ensure that it maintains sufficient
            documentation to support the time that employees spend working on the project.
Comment 6   EdgeAlliance stated that the utility expenses were redefined with 66.5 percent of
            the project being used for the residents and 33.5 percent of the project being used



                                              17
            for staff or administrative activities. EdgeAlliance will submit these percentages
            for review. EdgeAlliance should work with HUD’s Chicago Office of
            Community Planning and Development to support the utility expenses.
Comment 7   EdgeAlliance stated that its chief operating officer is working to readdress the
            expenses for telephone, property insurance, and internet services because they
            were for the residents but were not included in previous budgets. EdgeAlliance
            should work with HUD’s Chicago Office of Community Planning and
            Development to support the expenses for telephone, property insurance, and
            internet services.
Comment 8   EdgeAlliance stated that it has implemented significant other changes to ensure
            current and future compliance. EdgeAlliance should work with HUD’s Chicago
            Office of Community Planning and Development to resolve recommendation 1C.




                                             18
Appendix C
                                            Federal Requirements


HUD’s 2011 Supportive Housing Program grant agreement with EdgeAlliance (grant number
IL0221B5T101104) states that the grant agreement is governed by the McKinney-Vento
Homeless Assistance Act, 24 CFR Part 583, and the applicable notice of funding availability.
HUD’s 2012 and 2013 Continuum of Care program grant agreements with EdgeAlliance (grant
numbers IL0221L5T101205 and IL0221L5T101306) state that the grant agreements are
governed by the McKinney-Vento Homeless Assistance Act, the Continuum of Care program
regulations,15 and applicable notices of funding availability.
Regulations at 24 CFR 84.21(b)(1) state that recipients’ financial management systems must
provide for accurate, current, and complete disclosure of the financial results of each federally
sponsored project or program. Section 84.21(b)(2) states that the systems must provide for
records that adequately show the source and application of funds for federally sponsored
activities. These records must contain information pertaining to Federal awards, authorizations,
obligations, unobligated balances, assets, outlays, income, and interest. Section 84.21(b)(7)
states that recipients’ financial management systems must provide for accounting records
supported by source documentation.
Regulations at 24 CFR 578.99(e) state that nonprofit recipients must comply with the
requirements of 24 CFR Part 84 and 2 CFR Part 230.
Regulations at 24 CFR 583.330(c) state that policies, guidelines, and requirements of Office of
Management and Budget Circulars A-110 and A-122 apply to the acceptance and use of
assistance by nonprofit organizations except when inconsistent with the provisions of the
McKinney-Vento Homeless Assistance Act, other Federal statutes, or 24 CFR Part 583.
Federal regulations at 2 CFR 215.21(b)(1)16 state that recipients’ financial management systems
must provide for accurate, current, and complete disclosure of the financial results of each
federally sponsored project or program. Section 215.21(b)(2) states that the systems must
provide for records that adequately show the source and application of funds for federally
sponsored activities. These records must contain information pertaining to Federal awards,
authorizations, obligations, unobligated balances, assets, outlays, income, and interest. Section
215.21(b)(7) states that recipients’ financial management systems must provide for accounting
records supported by source documentation.




15
     Continuum of Care program regulations are at 24 CFR Part 578.
16
     Office of Management and Budget Circular A-110 was relocated to 2 CFR Part 215.



                                                         19
Appendix A, section A.2, of 2 CFR Part 23017 requires all costs to be reasonable, allocable to the
award, and adequately documented. Section A.3 states that in determining the reasonableness of
a given cost, consideration must be given to whether the cost is of a type generally recognized as
ordinary and necessary for the performance of the award. Section A.4 states that a cost is
allocable to a Federal award if it is incurred specifically for the award and benefits both the
award and other work and can be distributed in reasonable proportion to benefits received.
Paragraph 8.m.1 of appendix B states that charges to awards for salaries and wages, whether
treated as direct or indirect costs, will be based on documented payrolls approved by a
responsible official(s) of the organization. The distribution of salaries and wages to awards must
be supported by personnel activity reports. Paragraph 8.m.2.a states that the reports must reflect
an after-the-fact determination of the actual activity of each employee. Budget estimates, such as
estimates determined before the services are performed, do not qualify as support for charges to
awards.




17
     Office of Management and Budget Circular A-122 was relocated to 2 CFR Part 230.



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