oversight

The State of Indiana's Administrator Lacked Adequate Controls Over the State's Community Development Block Grant Disaster Recovery Program Income and Posting of Quarterly Performance Reports

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-06-30.

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

                            State of Indiana
        Community Development Block Grant Disaster
                   Recovery Program




Office of Audit, Region 5            Audit Report Number: 2016-CH-1003
Chicago, IL                                                June 30, 2016
To:            John J. Dorgan, Director of Community Planning and Development, 5HD

               //signed//
From:          Kelly Anderson, Regional Inspector General for Audit, 5AGA
Subject:       The State of Indiana’s Administrator Lacked Adequate Controls Over the State’s
               Community Development Block Grant Disaster Recovery Program Income and
               Posting of Quarterly Performance Reports




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of the State of Indiana’s Community Development
Block Grant Disaster Recovery program.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at
312-353-7832.
                          Audit Report Number: 2016-CH-1003
                          Date: June 30, 2016

                          The State of Indiana’s Administrator Lacked Adequate Controls Over the
                          State’s Community Development Block Grant Disaster Recovery Program
                          Income and Posting of Quarterly Performance Reports



Highlights

What We Audited and Why
We audited the State of Indiana’s Community Development Block Grant Disaster Recovery
program. The audit was part of the activities in our fiscal year 2015 annual audit plan. We
selected the State because it received the most program funds under the Consolidated Security,
Disaster Assistance, and Continuing Appropriations Act of 2009 in Region 5’s1 jurisdiction. Our
objectives were to determine whether the State’s Office of Community and Rural Affairs ensured
compliance with the Federal Register regarding the (1) use and reporting of the State’s program
income and (2) posting of the State’s quarterly performance reports to its official Web site.

What We Found
The Office of Community and Rural Affairs did not always ensure that the Indiana Housing and
Community Development Authority complied with the Federal Register in its use and reporting
of program income. More than $28.7 million in program funds were inappropriately drawn
down from the U.S. Department of the Treasury to reimburse the Authority for program income
that it used or when the Authority had available program income. Further, the Authority did not
report program income in the U.S. Department of Housing and Urban Development’s (HUD)
Disaster Recovery Grant Reporting system in a timely manner. As a result, (1) the U.S. Treasury
paid nearly $373,000 in unnecessary interest on the program funds and (2) HUD and the State
lacked assurance regarding the amount of program income available to the Authority.
The Office did not always comply with the Federal Register in posting the State’s quarterly
performance reports for the program. It posted the State’s reports for the program for the third
and fourth quarters of 2014 to its official Web site more than 33 days after the end of each
quarter. As a result, the public did not have timely access to the State’s reports for the program.

What We Recommend
We recommend that the Director of HUD’s Indianapolis Office of Community Planning and
Development require the State to (1) reimburse HUD, for transmission to the U.S. Treasury,
from non-Federal funds; (2) reduce program income in HUD’s system; and (3) implement
adequate procedures and controls to address the findings cited in this audit report.



1
    Region 5 includes the States of Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin.
Table of Contents
Background and Objectives ....................................................................................3

Results of Audit ........................................................................................................4
         Finding 1: The Office Did Not Always Ensure That the Authority Appropriately
                    Used and Reported Program Income .......................................................... 4

         Finding 2: The Office Did Not Always Post the State’s Quarterly Performance
                    Reports for the Program in a Timely Manner............................................ 7

Scope and Methodology ...........................................................................................9

Internal Controls ....................................................................................................11

Appendixes ..............................................................................................................13
         A. Schedule of Questioned Costs .................................................................................. 13

         B. Auditee Comments and OIG’s Evaluation ............................................................. 14

         C. Federal Requirements .............................................................................................. 20




                                                               2
Background and Objectives
Community Development Block Grant Disaster Recovery funds were authorized under the
Consolidated Security, Disaster Assistance, and Continuing Appropriations Act of 2009 for
necessary expenses related to disaster relief, long-term recovery, restoration of infrastructure,
housing, and economic revitalization in areas affected by hurricanes, floods, and other natural
disasters occurring during 2008 for which the President declared a major disaster under Title IV of
the Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1974. The funds were to
be used for activities authorized under Title I of the Housing and Community Development Act of
1974 as amended. The U.S. Department of Housing and Urban Development (HUD) allocated
more than $372.5 million in State Block Grant Disaster Recovery funds to the State of Indiana.
The State’s Office of Community and Rural Affairs administers the State’s program. The Office
was created in 2006 by the Indiana General Assembly as part of the Office of the Lieutenant
Governor. Its mission is to promote community prosperity to strengthen the State’s economy by
providing capacity-building solutions to ensure ready, marketable, and competitive communities for
economic growth. The Office of Community and Rural Affairs’ program records are located at 1
North Capitol Avenue, Indianapolis, IN. On July 6, 2009, the Office entered into a professional
services contract with the Indiana Housing and Community Development Authority to provide
grants for housing activities.
The Authority was created in 1978 by the Indiana General Assembly and is a quasi-public
financially self-sufficient statewide government agency. It is governed by a seven-member board of
directors consisting of the State’s lieutenant governor, the State’s treasurer, and the Indiana Finance
Authority’s public finance director. The board includes four other members appointed to 4-year
terms by the State’s governor. Its mission is for every resident of the State to have the opportunity
to live in safe, affordable, good-quality housing in economically stable communities. The
Authority’s program records are located at 30 South Meridian Street, Indianapolis, IN. The
Authority’s activities generated nearly $15.7 million in program income from November 2011
through April 2015. The Office allowed the Authority to retain the program income.
Our objectives were to determine whether the Office ensured compliance with the Federal Register
regarding the (1) use and reporting of the State’s program income and (2) posting of the State’s
quarterly performance reports to its official Web site.




                                                   3
Results of Audit

Finding 1: The Office Did Not Always Ensure That the Authority
Appropriately Used and Reported Program Income
The Office of Community and Rural Affairs did not always ensure that the Authority complied
with the Federal Register2 in its use and reporting of program income. The Office of the
Lieutenant Governor3 inappropriately drew down more than $28.7 million in program funds from
the U.S. Department of the Treasury from December 2011 through January 2015 to reimburse
the Authority for program income that it used or when the Authority had available program
income. Further, the Authority did not report program income in HUD’s Disaster Recovery
Grant Reporting system4 in a timely manner. These weaknesses occurred because the Office of
Community and Rural Affairs and the Authority lacked adequate procedures and controls to
ensure that the Authority used and reported program income in accordance with the Federal
Register. As a result, (1) the U.S. Treasury paid nearly $373,000 in unnecessary interest on the
program funds inappropriately drawn down from the U.S. Treasury and (2) HUD and the State
lacked assurance regarding the amount of program income available to the Authority.
Program Funds Were Inappropriately Drawn Down
Contrary to the Federal Register, the Office of Community and Rural Affairs did not ensure that
the Authority always properly used income generated from the State’s program. The Office of
the Lieutenant Governor inappropriately made
650 drawdowns from the U.S. Treasury from
December 2011 through January 2015 to
                                                   The U.S. Treasury paid nearly
reimburse the Authority for program income         $373,000 in unnecessary interest on
that it used or when the Authority had available the program funds inappropriately
program income. The drawdowns totaled more         drawn down.
                                      5
than $28.7 million in program funds. The



2
  See appendix C of this audit report.
3
  Staff from the Office of the Lieutenant Governor processed drawdowns of program funds for the Office of
Community and Rural Affairs.
4
  HUD’s system is the drawdown and reporting system for the program.
5
  Through a July 2013 monitoring review of the State’s program, HUD’s Indianapolis Office of Community
Planning and Development identified that the Office of Community and Rural Affairs did not ensure that the
Authority receipted and used program income generated from the Authority’s housing activities before program
funds were drawn down from the U.S. Treasury. In September 2013, the Director of HUD’s Indianapolis Office of
Community Planning and Development informed the Office that the Authority was required to disburse the accrued
program income before additional program funds were drawn down from the U.S. Treasury. However, more than
$9.5 million of the more than $28.7 million in program funds inappropriately drawn down occurred after September
2013. Further, the Office of the Lieutenant Governor inappropriately drew down more than $126,000 after the start
of our audit in December 2014. As of April 2015, the Authority had disbursed nearly all of its available program
income.



                                                        4
Authority generally disbursed program income and then requested program funds from the
Office of the Lieutenant Governor to cover the disbursements. The Office of the Lieutenant
Governor’s controller and assistant controller would approve the requests and draw down the
funds for reimbursement to the Authority for the program income that it had disbursed.
Program Income Was Not Reported in a Timely Manner
The Office of Community and Rural Affairs did not ensure that the Authority accurately reported
program income in HUD’s system in accordance with the Federal Register. Although the
Authority received more than $6 million in program income through August 2013, it reported
only more than $249,000 through September 2013. Further, it reported nearly $17.1 million in
program income through June 2014 although it had received only nearly $12.2 million in
program income. The Authority then reduced the amount of program income that it received to
more than $12.8 million through December 2014. However, it received nearly $15.6 million in
program income through December 2014. In addition, the Authority reported more than $15.9
million in program income through March 2015, although it had received only nearly $15.7
million (more than $293,000 in overreported program income).
The Office and the Authority Lacked Adequate Procedures and Controls
The weaknesses described above occurred because the Office of Community and Rural Affairs
and the Authority lacked adequate procedures and controls to ensure that the Authority used and
reported program income in accordance with the Federal Register. The Authority’s program
accountant manager said that the Authority initially had difficulties in reporting program income
in HUD’s system. The Authority’s deputy counsel stated that after HUD’s Indianapolis Office
of Community Planning and Development’s July 2013 monitoring review, the Authority
obligated the program income to four activities. However, the activities did not progress as
expected, and not much of the program income was disbursed. During the second quarter of
2014, the Authority obligated program income to many activities in HUD’s system. However,
some activities did not have program income obligated to them in HUD’s system, and program
funds were drawn down for those activities.
The Office of the Lieutenant Governor’s controller said that she was aware that HUD ordered the
Authority to disburse its program income before requesting program funds to cover prior
disbursements. However, she said that she was not informed of the Authority’s program income
balance and believed it was the Authority’s responsibility to inform her of its program income
balance before it submitted the requests for payment to her. The Office of Community and Rural
Affairs’ former state CDBG [Block Grant] director said that the Office conducted a monitoring
review of the Authority’s program activities during 2011 and relied on the results of HUD’s July
2013 monitoring review. The Office did not monitor the Authority annually due to a staffing
shortage.
Conclusion
The Office of Community and Rural Affairs and the Authority lacked adequate procedures and
controls to ensure that the Authority used and reported program income in accordance with the
Federal Register. As a result, (1) the U.S. Treasury paid $372,783 in unnecessary interest on the
more than $28.7 million in program funds that the Office of the Lieutenant Governor




                                                5
inappropriately drew down from the U.S. Treasury and (2) HUD and the State lacked assurance
regarding the amount of program income available to the Authority.
Recommendations
We recommend that the Director of HUD’s Indianapolis Office of Community Planning and
Development require the State to
       1A.    Reimburse HUD, for transmission to the U.S. Treasury, $372,783 from non-
              Federal funds for the unnecessary interest the U.S. Treasury paid on the program
              funds that the Office of the Lieutenant Governor drew down from the U.S.
              Treasury to reimburse the Authority for program income that it used or when the
              Authority had available program income.
       1B.    Reduce program income in HUD’s system by more than $293,000.
       1C.    Implement adequate procedures and controls to ensure that the Authority (1) uses
              available program income for eligible activities before the Office of the
              Lieutenant Governor draws down program funds from the U.S. Treasury and (2)
              accurately reports program income in HUD’s system.




                                               6
Finding 2: The Office Did Not Always Post the State’s Quarterly
Performance Reports for the Program in a Timely Manner

The Office of Community and Rural Affairs did not always comply with the Federal Register6 in
posting the State’s quarterly performance reports for the program. It posted the State’s reports
for the program for the third and fourth quarters of 2014 to its official Web site more than 33
days after the end of each quarter. This weakness occurred because the Office lacked adequate
procedures and controls to ensure that it reported the State’s program accomplishments on its
Web site in a timely manner and in accordance with the Federal Register. As a result, the public
did not have timely access to the State’s reports for the program.
Quarterly Performance Reports Were Not Posted in a Timely Manner
We reviewed the Office’s posting of the State’s quarterly performance reports for the program
for the third quarter of 2014 through the first quarter of 2015 to its official Web site.

Contrary to the Federal Register, the Office did not always post the State’s quarterly
performance reports for the program to its Web site in a timely manner. It posted the State’s
reports for the third and fourth quarters of 2014 to its official Web site more than 33 days after
the end of each quarter. The following table shows the quarter for the reports, the date by which
the Office was required to post the reports, the date on which the Office posted the reports, and
the number of days late the reports were posted.

                         Quarterly                  Required                        Days
                    performance report             posting date     Date posted     late
                   Third quarter of 2014           Nov. 2, 2014     Dec. 12, 2014    40
                   Fourth quarter of 2014           Feb. 2, 2015    Apr. 14, 2015    71


The Office posted the State’s report for the program for the first quarter of 2015 to its official
Web site in a timely manner. However, it posted the report under the incorrect grant for the
program.7
The Office Lacked Adequate Procedures and Controls
The weakness described above occurred because the Office lacked adequate procedures and
controls to ensure that it reported the State’s program accomplishments on its official Web site in
a timely manner and in accordance with the Federal Register. The Office did not have written
policies and procedures for posting the State’s quarterly performance reports to its official Web
site. The Office’s former state CDBG [Block Grant] director said that since July 2014, she had
instructed staff from other departments of the Office of the Lieutenant Governor to post the



6
    See appendix C of this audit report.
7
    HUD entered into two grants with the State for program funds.



                                                           7
State’s reports to the Office’s Web site. However, she did not always instruct the staff to post
the State’s reports within 3 days from the time the reports were submitted to HUD. Further, she
did not check the Office’s Web site to ensure that the reports had been posted. She is drafting
written policies and procedures for posting the reports to the Office’s Web site.
Conclusion
The Office lacked adequate procedures and controls to ensure that it reported the State’s program
accomplishments on its Web site in a timely manner and in accordance with the Federal Register.
As a result, the public did not have timely access to the State’s quarterly performance reports for
the program.
Recommendations
We recommend that the Director of HUD’s Indianapolis Office of Community Planning and
Development require the State to
       2A.     Implement adequate procedures and controls to ensure that the Office accurately
               posts the State’s quarterly performance reports for the program to its official Web
               site no later than 33 days following the end of each quarter.




                                                 8
Scope and Methodology
We performed our onsite audit work from December 2014 through June 2015 at the Office of
Community and Rural Affairs’ offices located at 1 North Capitol Avenue, Indianapolis, IN, and
the Authority’s offices located at 30 South Meridian Street, Indianapolis, IN. The audit covered
the period May 2009 through November 2014 and was expanded as necessary.
To accomplish our objectives, we reviewed
      Applicable laws; regulations at 24 CFR (Code of Federal Regulations) Parts 85 and 570;
       the Federal Register, dated February 13 and August 14, 2009; HUD’s Office of Block
       Grant Assistance’s manual, “Basically CDBG [Block Grant] for States”, dated July 2014;
       grant agreements with the State for program funds, dated April 13, 2009, February 2,
       2010, and February 21, 2011; and HUD’s Indianapolis Office of Community Planning
       and Development’s 2013 monitoring review.
      The State’s action plan for program funds; amendment to the State’s action plan for
       program funds, dated February 2014; single audit reports for 2009 through 2011;
       comprehensive annual financial reports for 2012 and 2013; and program data from
       HUD’s system and the Office of Community and Rural Affairs’ Web site.
      The Office of Community and Rural Affairs’ professional services contract with the
       Authority, policies and procedures, and financial records.
      The Authority’s financial statements and independent auditors’ reports for 2008 through
       2012, policies and procedures, financial records, and organizational chart.
In addition, we interviewed the Office of Community and Rural Affairs’, the Authority’s, and the
Office of the Lieutenant Governor’s employees and HUD’s staff.
Finding 1
We reviewed nearly $15.7 million in program income that the Authority received from
November 2011 through April 2015. We were conservative in our determination of the amount
of unnecessary interest that the U.S. Treasury paid. We based our calculation on the 10-year
U.S. Treasury rate, using simple interest on the Authority’s daily balance of program income.
Further, we did not include in the Authority’s daily balance of program income any program
income received during a month until the first day of the following month.
Finding 2
We reviewed the Office of Community and Rural Affairs’ posting of the State’s quarterly
performance reports for the program for the third quarter of 2014 through the first quarter of
2015 to its official Web site.
We relied in part on the data from HUD’s 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. However, we did not completely rely on data



                                                 9
from the Authority’s Great Plains accounting system. We performed a detailed assessment of
the reliability of the data and found that the data regarding program income received was not
adequately reliable for our purposes.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                                10
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 Deficiencies
Based on our review, we believe that the following items are significant deficiencies:
The Office of Community and Rural Affairs and the Authority lacked adequate procedures and
controls to ensure that

   The Authority used and reported program income in accordance with the Federal Register
    (finding 1).



                                                  11
   The Office reported the State’s program accomplishments to its Web site in a timely manner
    and in accordance with the Federal Register (finding 2).




                                               12
Appendixes

Appendix A
                             Schedule of Questioned Costs
                            Recommendation
                                               Ineligible 1/
                                number
                                    1A            $372,783

                                  Totals          $372,783



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.




                                             13
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




                               14
Ref to OIG   Auditee Comments
Evaluation




Comment 1


Comment 2




Comment 3




                            15
Ref to OIG   Auditee Comments
Evaluation




Comment 4




Comment 5




Comment 6




Comment 6




                            16
Ref to OIG   Auditee Comments
Evaluation




Comment 7




                            17
                         OIG Evaluation of Auditee Comments


Comment 1   The executive director of the Office of Community and Rural Affairs stated that the
            Authority began receiving program income at an unanticipated rate and the
            Authority’s systems were not prepared to receive, deposit, document, and apply
            the volume of program income that it received. Therefore, when program income
            began to accumulate, it was not properly reported in HUD’s system or allocated.
            We agree that the Authority did not always account for program income in its
            systems accurately and in a timely manner.
Comment 2   The executive director stated that the main reason the Authority did not initially
            report program income in HUD’s system was due to system-wide problems with
            release 7.3 of the system. These problems caused HUD to issue an emergency
            release of the system in January 2012. The Authority was not able to draw down
            program income in the system.
            HUD’s former system administrator said that there were issues with HUD’s
            system crashing before emergency release 7.3.2 of the system in January 2012.
            However, this did not prevent grantees from reporting program income in the
            system. HUD’s system was also used to report program income for HUD’s
            Neighborhood Stabilization Program. The Authority reported in the system, each
            quarter from the first quarter of 2012 through the second quarter of 2013,
            Neighborhood Stabilization Program income received. For example, during the
            first quarter of 2012, the Authority reported in the system nearly $870,000 in
            Neighborhood Stabilization Program income received.
            The Authority could not draw down program income in HUD’s system without
            first reporting program income.
Comment 3   The executive director stated that in November 2013, the Authority planned to use
            the program income for four activities with awards totaling nearly $6.7 million.
            However, the activities did not progress as expected, and the program income was
            not disbursed as originally anticipated.
            To the maximum extent feasible, program income must be used or distributed
            before a State makes additional withdrawals from the U.S. Treasury. Obligating
            program income to specific projects does not ensure that program income is used
            before program funds are drawn down from the U.S. Treasury.
Comment 4   The executive director stated that the Office will ensure that HUD is reimbursed,
            for transmission to the U.S. Treasury, nearly $373,000 from non-Federal funds.
            The State should work with HUD’s Indianapolis Office of Community Planning
            and Development to ensure that the U.S. Treasury receives nearly $373,000 from
            non-Federal funds.




                                              18
Comment 5   The executive director stated that the Authority will verify the source of the
            apparent overreported program income in HUD’s system totaling more than
            $293,000 and reduce it accordingly. The State should work with HUD’s
            Indianapolis Office of Community Planning and Development to reduce the more
            than $293,000 in overreported program income in HUD’s System.
Comment 6   The executive director stated that the Authority now has written procedures and
            controls in place to send a monthly report to the Office that details all of the
            program income received, disbursed, and remaining during the period. On March
            1, 2015, the Authority implemented new written procedures and controls for
            reporting program income in HUD’s system and drawing down program income.
            The executive director provided the Authority’s program incoming funds policy,
            effective July 24, 2015, as an attachment. The policy defined program income as
            funds received from a loan repayment. However, program income includes more
            than just funds received from a loan repayment. The executive director stated that
            the Office will monitor the Authority to ensure that it makes every effort to
            obligate and expend all program income received in accordance with HUD’s
            regulations. The State should work with HUD’s Indianapolis Office of
            Community Planning and Development to ensure that it implements adequate
            procedures and controls to ensure that the Authority (1) uses available program
            income for eligible activities before the Office of the Lieutenant Governor draws
            down program funds from the U.S. Treasury and (2) accurately reports program
            income in HUD’s system.
            We did not include in appendix B the Authority’s program incoming funds policy
            since it was not necessary to understand the executive director’s comments. We
            provided the Director of HUD’s Indianapolis Office of Community Planning and
            Development with a complete copy of the written comments plus the attachment.
Comment 7   The executive director stated that a step regarding the posting of quarterly
            performance reports will be added to the policies and procedures for completing
            the action plan and quarterly performance reports. The State should work with
            HUD’s Indianapolis Office of Community Planning and Development to ensure
            that the Office accurately posts the State’s quarterly performance reports for the
            program to its official Web site no later than 33 days following the end of each
            quarter.




                                              19
Appendix C
                                    Federal Requirements


Findings 1 and 2
HUD’s grant agreements with the State for the program, dated April 13, 2009, February 2, 2010,
and February 21, 2011, state that the State must comply with all waivers and alternative
requirements in the Federal Register, dated February 13, 2009.
Finding 1
74 FR (Federal Register) 7247, dated February 13, 2009, states that grantees will use HUD’s
system to record obligations and make draws of program funds from the line of credit established
for each grant. HUD will use the transactional data from its system and from grantee reports to
monitor for inconsistencies or performance problems that suggest fraud, abuse of funds, and
duplication of benefits and reconcile budgets, obligations, funding draws, and expenditures.
Page 7251 states that to the maximum extent feasible, program income must be used or
distributed before a State makes additional withdrawals from the U.S. Treasury.
Finding 2
74 FR 7252, dated February 13, 2009, states that each grantee must submit a quarterly
performance report, as HUD prescribes, no later than 30 days following the end of each quarter.
The reports to HUD must be submitted using HUD’s system and, within 3 days of submission,
be posted to the grantee’s official Web site open to the public.




                                                20