oversight

The State of Louisiana's Subrecipient Did Not Always Comply With Its Agreement and HUD Requirements When Administering Its Disaster Assistance Programs

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-08-31.

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

     St. John the Baptist Parish, State of
           Louisiana’s Subrecipient
        Community Development Block Grant Disaster
               Recovery Assistance Funds




Office of Audit, Region 6     Audit Report Number: 2016-FW-1006
Fort Worth, TX                                    August 31, 2016
To:            Stanley Gimont, Director, Office of Block Grant Assistance, DGBPI


               //signed//
From:          Kilah S. White, Acting Regional Inspector General for Audit, 6AGA
Subject:       The State of Louisiana’s Subrecipient Did Not Always Comply With Its
               Agreement and HUD Requirements When Administering Its Disaster Assistance
               Programs




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 Louisiana’s subrecipient’s compliance
with its agreement with the State and HUD requirements when implementing its disaster
assistance programs.
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: 2016-FW-1006
                    Date: August 31, 2016

                    The State of Louisiana’s Subrecipient Did Not Always Comply With Its
                    Agreement and HUD Requirements When Administering Its Disaster
                    Assistance Programs


Highlights

What We Audited and Why
We audited the State of Louisiana, Office of Community Development’s disaster assistance
programs, administered by the State’s subrecipient, St. John the Baptist Parish, as part of our
annual audit plan to review disaster assistance programs under the 2013 Disaster Relief
Appropriations Act. Our objective was to determine whether the Parish, as the State’s
subrecipient, met the requirements of its agreement with the State and followed U.S. Department
of Housing and Urban Development (HUD) requirements related to its program participant,
procurement, and expenditure activities when administering its disaster assistance programs.

What We Found
The Parish, as the State’s subrecipient, did not always meet the requirements of its agreement
and follow HUD requirements when administering its disaster assistance programs, as it (1) did
not always ensure that its contractor had adequate documentation to support the eligibility of
disaster assistance program participants, (2) violated procurement requirements when it did not
perform an independent cost estimate for one contract, and (3) did not maintain detailed
information regarding time worked on disaster projects to support salary expenditures. This
condition occurred because the State’s onsite reviews did not address all program areas and its
administrative manual did not include guidance for all contract types. In addition, the Parish did
not have consistent program policies, understand procurement requirements, and have adequate
procurement and written expenditure policies. As a result, the State could not provide reasonable
assurance to HUD that the Parish would properly administer and spend Community
Development Block Grant disaster assistance funds in accordance with requirements, putting at
least $5.3 million obligated for the disaster assistance programs at risk of mismanagement, and
paid more than $1.5 million in questioned costs.

What We Recommend
We recommend that HUD require the State to develop and implement written procedures and
actions that would correct and prevent the deficiencies outlined in the finding to better ensure
that the Parish spends at least $5.3 million in accordance with requirements. We also
recommend that HUD require the State to (1) ensure that the Parish supports program participant
eligibility, review the remaining 293 program participant files for eligibility, and support or
repay more than $1.5 million, (2) provide assistance to the Parish on procurement requirements,
and (3) review the Parish’s procurement and expenditure policies for adequacy.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: The Parish, as the State’s Subrecipient, Did Not Always Comply With Its
         Agreement and HUD Requirements ............................................................................. 4

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

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

Appendixes ..............................................................................................................13
         A. Schedule of Questioned Costs and Funds To Be Put to Better Use ...................... 13

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

         C. Participant Eligibility Review Results…………………………………………….19




                                                            2
Background and Objective
The Disaster Relief Appropriations Act of 2013, 1 made available $15.18 billion in Community
Development Block Grant (CDBG) funds for necessary expenses related to disaster relief, long-
term recovery, restoration of infrastructure and housing, and economic revitalization. The
Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1974 required use of these
funds in the most impacted and distressed areas affected by disasters that occurred during
calendar years 2011, 2012, and 2013. On May 29, 2013, through Federal Register, Volume 78,
Number 103, HUD made more than $106 million available for Louisiana for Hurricane Isaac 2
disaster recovery. Of that amount, the U.S. Department of Housing and Urban Development
(HUD) allocated more than $66 million to the State of Louisiana’s Office of Community
Development, the grantee, to help the areas hardest hit by the hurricane. The Federal regulations
required the State to submit an action plan detailing its proposed use of funds 3 and allowed the
State, as the grantee, to use subrecipients to carry out eligible activities but held the State legally
and financially accountable for the use of all funds and responsible for providing adequate
technical assistance to subrecipients to ensure timely, compliant, and effective use of funds. 4

The State awarded more than $32 million to St. John the Baptist Parish, Laplace, LA, one of the
most impacted parishes in Louisiana. The State executed an agreement with the Parish on May
29, 2013. In the agreement, the State required the Parish to comply with 24 CFR (Code of
Federal Regulations) Part 85 and 2 CFR Part 225. 5

The State’s action plan, dated November 28, 2014, stated that the Parish would (1) administer the
demolition and clearance, homeowner rehabilitation, home-buyer assistance, housing elevation,
and small rental rehabilitation programs in response to Hurricane Isaac and (2) identify eligible
households and coordinate all aspects of administering the programs, including applicant intake,
case management, and construction work as applicable. To assist in implementing these
programs, the Parish executed contracts for grant management, intake, inspection, and title
services. As of December 31, 2015, the Parish had spent more than $2.4 million in
administration and project delivery costs on these programs.

Our objective was to determine whether the Parish, as the State’s subrecipient, met the
requirements of its agreement with the State and followed HUD requirements related to its
program participant, procurement, and expenditure activities when administering its disaster
assistance programs.


1
    Public law 113-2, dated January 29, 2013, Title X, chapter 9, initially authorized $16 billion. On March 1, 2013,
    the President issued a sequestration order under section 251A of the Balanced Budget and Emergency Deficit
    Control Act, as amended (2 U.S.C.(United States Code) 901a), and reduced funding to $15.18 billion.
2
    Hurricane Isaac made landfall in Louisiana on August 28, 2012.
3
    78 Federal Register 43 (March 5, 2013), section VI(a)(13)
4
    78 Federal Register 43 (March 5, 2013), section VI(a)(1)(a)(12)
5
    Section IV(A) and (B)



                                                          3
Results of Audit
Finding: The Parish, as the State’s Subrecipient, Did Not Always
Comply With Its Agreement and HUD Requirements
The Parish, as the State’s subrecipient, did not always meet the requirements of its agreement
and follow HUD requirements when administering its disaster assistance programs. Specifically,
it (1) did not always ensure that its contractor had adequate documentation to support the
eligibility of disaster assistance program participants, (2) violated procurement requirements
when it did not perform an independent cost estimate for one contract, and (3) did not maintain
detailed information regarding time worked on disaster projects to support salary expenditures.
This condition occurred because the State’s onsite reviews did not address all program areas and
its administrative manual did not include guidance for all contract types. In addition, the Parish
did not have consistent program policies, understand procurement requirements, and have
adequate procurement and written expenditure policies. As a result, the State could not provide
reasonable assurance to HUD that the Parish would properly administer and spend CDBG
disaster assistance funds in accordance with requirements, putting at least $5,365,327 obligated
for the disaster assistance programs 6 at risk of mismanagement. In addition, the Parish paid more
than $1.5 million in questioned costs.
Documentation Did Not Support Participant Eligibility
The Parish did not always ensure that its contractor maintained documentation supporting that
program participants met the eligibility requirements under its homeowner rehabilitation,
housing elevation, and home-buyer assistance programs. The Parish’s agreement 7 with the State
required it to maintain all records used to determine eligibility for disaster assistance. To meet
this requirement, the Parish developed written policies and procedures outlining eligibility and
documentation requirements but hired an intake contractor to gather the documentation and make
eligibility determinations. For eligibility, the Parish required the following:

   •   Income reverification – Under its home-ownership rehabilitation 8 and housing elevation
       programs, 9 the Parish required reverification of income after 6 months and after 4 months
       under its home-buyer assistance program. 10
   •   Low- to moderate-income limits – The Parish established the maximum low- to
       moderate-income limits using HUD’s median income limits for the Parish. Program
       participants who exceeded the maximum gross income were not eligible for the
       programs. 11
   •   Income documentation – The Parish required income verification for all adult household
       members who were 18 years of age or older 12 and accepted documentation, such as check
       stubs, tax returns, Social Security benefits, retirement, alimony, and unemployment
       statements.
   •   Property ownership – If the original property owner died, the Parish required that an heir
       have documentation of a judgment of possession showing legal possession of the
       property, which had to be issued before executing agreements associated with this
       program. 13



                                                4
6
     We derived this amount by using HUD’s financial summary report as of July 8, 2016. See the Scope and
     Methodology section.
7
     Section IV(C)(1)(c)
8
     Homeowner rehabilitation policies and procedures, v.1.2, section C - income requirements
9
     Housing elevation program policies and procedures, v.1.2, section C - income requirements
10
     Home-buyer assistance program policies and procedures, v.1.2, section C - income requirements
11
     Homeowner rehabilitation policies and procedures, v.1.2, and housing elevation program policies and
     procedures; v.1.2, section C - income requirements
12
     Homeowner rehabilitation policies and procedures, v.1.2, section C - income requirements
13
     Homeowner rehabilitation policies and procedures, v.1.2, section C - ownership and occupancy requirements



                                                         5
   •   Flood insurance – Program participants who received compensation for prior disasters
       were required to have had flood insurance at the time of the disaster. 14 Participants, who
       received compensation from previous disasters and did not have flood insurance at the
       time of sustaining damages, were not eligible for assistance.
However, of 32 participant files reviewed for the homeowner rehabilitation, housing elevation,
home-buyer assistance, and small rehabilitation programs, 28 (88 percent) did not contain
documentation 15 showing income reverifications to support the eligibility of program participants
as required. These 28 included 18 under the homeowner rehabilitation, 2 under the housing
elevation, and 8 under the home-buyer assistance programs. In addition, of the 28, 12 also either
exceeded the low- to moderate-income limits, did not have adequate income documentation,
lacked income verifications for all adult household members, did not have adequate
documentation to support property ownership, or did not have flood insurance, in violation of the
eligibility requirements. See appendix C for details on the issues identified.
The Parish stated that it, along with its contractors, planned to perform income reverifications
before beginning construction on the participant properties. However, this process did not
comply with the program policies, and although the Parish had not disbursed funds to program
participants, the lack of required documentation could allow disbursement of disaster assistance
funds to persons not eligible to participate in the program.

The Parish Did Not Comply With Procurement Requirements
The Parish did not always comply with procurement requirements when procuring for contract
services. The Parish procured for grant management and applicant intake services. Regulations
at 24 CFR 85.36(f)(1) and the agreement 16 required the Parish to perform independent cost
estimates before receiving bids or proposals for every procurement to support the reasonableness
of contract costs. However, a review of documentation in two procurement files for its grant
management and intake contractors determined that the Parish did not have documentation
showing that it performed an independent cost estimate before receiving bids or proposals for its
grant management contract. Therefore, the Parish could not support the cost reasonableness of
more than $1.5 million paid to this contractor.

The Parish Did Not Adequately Support Salary Payments
The Parish did not always support its salary payments with detailed information regarding time
worked on specific disaster projects. The agreement required the Parish to maintain financial
records, which adequately identified and accounted for all costs under the agreement; ensure the
proper accounting for all project funds; and follow all State policies and procedures. 17 The
State’s administrative manual 18 and certification of time allocation form required the Parish to
document a breakdown of the actual number of hours that employees worked on each disaster
assistance program. However, a review of five disbursements determined that the Parish did not
maintain adequate documentation for four disbursements to a temporary employee totaling
$37,450. Specifically, the file documentation listed only the total hours worked, without a
breakdown of the number of hours worked on each disaster assistance program. Without
detailing the actual hours worked per program, we could not verify the accuracy of the amounts
billed to each disaster assistance program.




                                                 6
The State’s Onsite Reviews Did Not Address All Program Areas and Its Manual Did Not
Include Guidance For All Contract Types
Although the State conducted five onsite reviews between December 2013 and July 2015 19,
providing assistance to the Parish, the reviews did not address all program areas. For example,
the State’s report on its July 2015 onsite review showed that the State reviewed files and policies
for the home-buyer assistance program; however, the reviews did not evidence that the files or
policies for the homeowner rehabilitation, housing elevation, or small rental programs were
reviewed. In addition, its January 2015 onsite review report showed that the State informed the
Parish that procurement files should reflect the entire procurement process in sequential order
and expressed the need for a cost analysis; however, the reviews did not address the need for an
independent cost estimate. Further, none of the reviews indicated that the Parish’s procurement
or financial policies were reviewed.
In addition, the State’s administrative manual addressed the requirement for independent cost
estimates for construction, architecture, engineering, and infrastructure contracts but did not
include guidance for other contract types, such as grant management services.

The Parish Did Not Have Consistent Program Policies, Understand Procurement
Requirements, or Have Adequate Policies
The Parish did not have consistent disaster assistance program policies, understand procurement
requirements, or have an adequate procurement policy or a written expenditure policy.
The Parish Did Not Have Consistent Program Policies
In addition to disregarding the disaster assistance program requirements, the Parish’s disaster
assistance program policies did not have consistent requirements throughout the policy. These
policies also contradicted the Parish’s document checklist and income calculation worksheet
used to check eligibility. For example, the homeowner rehabilitation and elevation program
policies stated that the Parish intended to assist homeowners above the low- to moderate-income
standards. However, other portions of the policies, as well as the forms within the participant
files, showed that participants who exceeded the low- to moderate-income maximum were not
eligible for the programs. In another example, in the Parish’s home-buyer assistance program 20
policy, one section required documentation of the last three consecutive check stubs, while
another section required check stubs for the last 3 consecutive months. With these types of
discrepancies, the Parish could not maintain consistent documentation within the file and ensure
the proper documentation of program participant eligibility.
The Parish Did Not Understand Procurement Requirements or Have an Adequate Procurement
Policy


14
     Homeowner rehabilitation policies and procedures, v.1.2, section D
15
     This information was based upon documentation included in the files as of March 2016.
16
     Section IV(A) and (D)
17
     Section IV(C)(1)(g)
18
     Section 5 - financial management, 9.3
19
     We reviewed the State’s assistance activities that occurred between January 2013 and December 2015.
20
     Home-buyer assistance program policies and procedures, v.1.2, section C - income requirements and section J -
     application intake process



                                                          7
The Parish provided a fee comparison document after it received bids, which listed all of the bid
amounts for bid proposal responses, and believed that this document served as an independent
cost estimate. The Parish’s grant administrator also stated that based upon the Parish’s
understanding, the bid amounts received in response to the request for proposals were sufficient
to meet the independent cost estimate requirement. Thus, the Parish misunderstood the
requirements.
In addition, the Parish’s agreement 21 with the State required it to comply with 24 CFR 85.36, and
the State’s administrative manual 22 required the Parish to ensure that its procurement policy
included all activities and requirements under the 2013 Disaster Relief Appropriations Act.
However, when the Parish executed the procurements (discussed above) between April 2013 and
October 2014, its written procurement policy did not cover activities under the Act. The Parish
amended its written procurement policy and adopted it in March 2016 to cover activities under
the Act. However, the policy did not include the requirement to perform an independent cost
estimate before receiving bids or proposals for every procurement.
The Parish Did Not Have a Written Expenditure Policy
In addition to following Federal and State expenditure requirements, the agreement 23 required the
Parish to have financial controls. However, when it drew down funds for the salary expenditures
between March and November 2015, the Parish did not have written expenditure policies and
procedures. The Parish adopted a financial management policy in March 2016. However, the
policy did not address employee timesheet documentation requirements for employees paid from
CDBG disaster assistance funding or include requirements to ensure compliance with the State’s
administrative manual and certification of time allocation form when applicable.

Conclusion
The State’s onsite reviews did not address all program areas, and its manual did not include
guidance for all contract types. Further, the Parish did not have consistent disaster assistance
program policies, understand procurement requirements, and have adequate written procurement
and expenditure policies. Therefore, the Parish, as the State’s subrecipient, did not always have
documentation to support program participant eligibility and that it followed procurement and
expenditure requirements. As a result of these deficiencies, the State could not provide
reasonable assurance to HUD that the Parish could spend its disaster funding for eligible and
necessary purposes, putting at least $5.3 million at risk of mismanagement, and could not
support more than $1.5 million in CDBG disaster assistance expenditures.

Recommendations
We recommend that the Director of HUD’s Office of Block Grant Assistance require the State to

          1A.      Develop and implement written procedures and actions that would correct and
                   prevent the deficiencies outlined in the finding to ensure that the Parish


21
     Section IV(D)
22
     Section 6 - procurement methods and contractual requirements, 3.0
23
     Appendix A, Hurricane Isaac grantee statement of assurances and certifications, number 40



                                                          8
      adequately supports program participant eligibility. The written procedures and
      actions should include but not be limited to (1) reviewing and amending the
      Parish’s program policies, documentation checklist, and income calculation
      worksheet to ensure the consistency of file documentation and eligibility
      determinations; (2) providing training and assistance to the Parish and its
      contractors regarding program participant eligibility determinations and
      documentation requirements; and (3) conducting a final file review before
      disbursing funds on behalf of program participants to ensure that files have
      complete documentation, appropriate follow-ups are conducted, and the
      participant remains eligible for disaster assistance. Implementing this
      recommendation should better ensure that the Parish spends at least $5,365,327 in
      CDBG disaster assistance funds obligated for its disaster assistance programs in
      accordance with requirements.

1B.   Ensure that the Parish obtains additional documentation to support eligibility for
      the 28 program participant files that did not have adequate documentation to
      support program eligibility or amend the eligibility determination.

1C.   Ensure that the Parish reviews the remaining 293 program participant files for its
      homeowner rehabilitation, housing elevation, home-buyer assistance, and small
      rental rehabilitation programs to ensure that documentation complies with HUD
      and program requirements and to support the eligibility determinations.

1D.   Ensure that the Parish supports the cost reasonableness of the grant management
      contract or repay $1,534,629 to its CDBG disaster assistance program from non-
      Federal funds.

1E.   Provide assistance to the Parish regarding procurement requirements to ensure
      compliance with requirements for future procurement activities related to CDBG
      disaster assistance contracts.

1F.   Review and evaluate the Parish’s procurement policy to ensure compliance with
      24 CFR 85.36 requirements and that the Parish amends its procurement policy to
      include clear language requiring that its staff perform independent cost estimates
      before receiving bids or proposals for every procurement.

1G.   Ensure that the Parish provides documentation detailing the number of hours
      worked for each disaster assistance program or repay $37,450 to its CDBG
      disaster assistance program from non-Federal funds.

1H.   Review the Parish’s written financial management policy for compliance with
      HUD and program requirements and ensure that the Parish amends its policy to
      incorporate requirements to comply with State policy when applicable.




                                        9
Scope and Methodology
We conducted our audit at the State’s office in Baton Rouge, LA, the Parish’s office in Laplace,
LA, and the HUD Office of Inspector General’s (OIG) offices in New Orleans and Baton Rouge,
LA, between January and June 2016. Our audit scope generally covered the State’s CDBG
disaster assistance programs for the period January 29, 2013, through December 31, 2015. We
expanded the scope as necessary to accomplish our audit objective.

To accomplish our objective, we reviewed

•    Relevant laws, regulations, and program guidance.
•    HUD and State grant agreement(s) and State and Parish agreements and amendments.
•    HUD monitoring reports, State site visit and technical assistance review reports, and a Parish
     contract monitoring report.
•    The State’s and Parish’s organizational structure and written policies for the programs.
•    The State’s action plans.
•    The Parish’s 2013 and 2014 audit reports.
•    The Parish’s program participant, procurement, and expenditure files.
•    The Parish’s budgets, recovery proposal, and project applications.

We also interviewed HUD, State, and Parish staff.

For the program participant file review, using nonstatistical random sampling, we selected 32 24
of 325 program participants approved to receive disaster assistance for the homeowner
rehabilitation, elevation, home-buyer assistance, and small rental rehabilitation programs. We
randomly selected 10 percent of the universe, which included 10 percent of program participants
determined to be eligible for each of the programs, to ensure that we reviewed an equal
percentage of files from each program. Based on our method of selection, the results of our
review apply only to the selected items and must not be projected to the portion of the population
that we did not test. We reviewed the files to determine whether the Parish maintained
documentation supporting that program participants met the eligibility requirements for disaster
assistance. We did not assess the reliability of computer-processed data regarding the participant
eligibility review because we relied on computer data to a limited extent to conduct this review.

For the procurement file review, using nonstatistical sampling, we selected two contracts, with
disbursements totaling nearly $3 million, using a universe of eight disaster assistance contracts
awarded between March 2013 and July 2015 and disbursements of more than $3.4 million as of
April 8, 2016. We selected these contracts based upon contracts with the highest award amounts
and disbursements. 25 Although this approach did not allow us to project the results of the sample


24
     18 homeowner rehabilitation, 2 elevation, 10 home-buyer assistance, and 2 small rental rehabilitation
25
     The Parish had not disbursed funds for three of the eight contracts.



                                                           10
to the population, it was sufficient to meet the audit objective. We reviewed the procurement
files to determine whether the Parish maintained adequate documentation to support compliance
with its agreement and procurement requirements. Through the file reviews, we assessed the
reliability of the computer-processed data regarding the disbursed amounts for the procured
contracts and determined that the data were generally reliable.

For the expenditure file review, using nonstatistical sampling, we selected 5 line items associated
with 5 vouchers (1 line item for each voucher) totaling $776,058 from a universe of 17
drawdowns (with 27 total line items) with disbursements totaling more than $2.4 million. We
selected these expenditures based upon the second highest line item disbursement amount under
the Parish’s homeowner rehabilitation, housing elevation, small rental rehabilitation, home-buyer
assistance, and demolition programs. Although this approach did not allow us to project the
results of the sample to the population, it was sufficient to meet the audit objective. We
reviewed the files to determine whether the Parish complied with its agreement and expenditure
documentation requirements. Through the file reviews, we assessed the reliability of the
computer-processed data for the disbursed amounts and determined that the data were generally
reliable.

To determine the amount of funds to be put to better use, we used the HUD Disaster Recovery
Grant Reporting (DRGR) system 26 grant funds financial summary report as of July 8, 2016. We
identified the projects related to the homeowner rehabilitation, housing elevation, and housing
assistance programs and obtained the remaining amount of obligated funds available. The funds
available amount represented the funds available for disbursement to program participants who
were impacted by Hurricane Isaac (see table).

Table: DRGR grant funds financial summary report – activity level by project
                        Parish program              Funds available
                    Homeowner rehabilitation           $3,800,425
                        Housing elevation                 677,067
                       Housing assistance                 887,835
                             Totals                     5,365,327

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




26
     A HUD CDBG disaster recovery program system, used by the State to draw down funds and submit action plans
     and quarterly performance reports. HUD uses the data to review funded activities, prepare reports to Congress,
     and monitor program compliance.



                                                          11
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

•   Effectiveness and efficiency of operations,
•   Reliability of financial reporting, and
•   Compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.

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

•   Effectiveness and efficiency of policies and procedures used to ensure compliance with the
    2013 Disaster Relief Appropriations Act CDBG disaster assistance grant,
•   Relevance and reliability of data concerning the CDBG disaster assistance expenditures, and
•   Compliance with applicable Federal laws and regulations.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:

    •   The State’s onsite reviews did not address all program areas, and the State’s
        administrative manual did not cover all contract types. In addition, the Parish, as the
        State’s subrecipient, did not have consistent disaster assistance program policies,
        understand procurement requirements, or have an adequate procurement policy or a
        written expenditure policy (finding).




                                                  12
Appendixes

Appendix A


           Schedule of Questioned Costs and Funds To Be Put to Better Use


                Recommendation                            Funds to be put
                                      Unsupported 1/      to better use 2/
                    number
                        1A                                 $5,365,327
                        1D             $1,534,629
                        1G                 37,450

                      Totals            1,572,079           5,365,327



1/   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.
2/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an OIG recommendation is implemented. These amounts include
     reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
     implementing recommended improvements, avoidance of unnecessary expenditures
     noted in preaward reviews, and any other savings that are specifically identified. In this
     instance, requiring the State to develop and implement written procedures and actions
     that would correct and prevent the deficiencies outlined in the finding would better
     ensure that the Parish spends at least $5.3 million in CDBG disaster assistance funds
     obligated for the Parish’s disaster assistance program in accordance with requirements.




                                              13
Appendix B
             Auditee Comments and OIG’s Evaluation

                        Auditee Comments




                               14
Comment 1




            15
Comment 1




Comment 1




Comment 1




Comment 1



Comment 1



Comment 1




Comment 1




            16
Comment 1




            17
                 OIG Evaluation of Auditee Comments
Comment 1   We appreciate the State’s efforts to address the issues identified in the
            report. The State will need to provide evidence to HUD of actions taken
            toward correcting the identified issues, and work with HUD to continue to
            resolve the remaining issues and satisfy the recommendations in the
            report.




                                     18
         Appendix C
                                            Participant Eligibility Review Results 27
                                                Homeowner rehabilitation program
Sample                                                           Issues identified
number
  1           The file did not contain documentation showing (1) a reverification of income, required in October 2015; (2) that
              the participant met the low- to moderate-income requirement, as the documented income exceeded the threshold
              for a five-person household (although the contractor determined that the participant was ineligible, the Parish
              made this participant eligible); (3) income verification for the participant’s spouse; and (4) adequate income
              documentation, as it had 2 months’ worth of pay stubs instead of the required 3 months.
  2           The file did not contain documentation showing (1) a reverification of income, required in September 2015 and
              March 2016, and (2) verification of income for the participant’s spouse.
  3           The file did not contain documentation showing a reverification of income, required in August 2015 and February
              2016.
  4           The file did not contain documentation showing (1) a reverification of income, required in October 2015; (2) that
              the participant met the low- to moderate-income requirement, as the documented income appeared to have
              exceeded the threshold for a three-person household; and (3) adequate income documentation, as the file did not
              have documentation for income identified on the income calculation worksheet and for one household member,
              only 1 paystub was provided for one of the businesses where they worked, rather than the amount required.
  5           The file did not contain documentation showing a reverification of income, required in September 2015 and
              March 2016.
  6           The file did not contain documentation showing a reverification of income, required in July 2015 and January
              2016.
  7           The file did not contain documentation showing (1) a reverification of income, required in August 2015 and
              February 2016, and (2) property ownership, since the original property owner died and the file did not contain
              documentation of a judgment of possession supporting that the participant currently owned the property.
   8          The file did not contain documentation showing a reverification of income, required in October 2015.
   9          The file did not contain documentation showing a reverification of income, required in October 2015.
  10          The file did not contain documentation showing (1) a reverification of income, required in October 2015, and (2)
              a verification of income for the participant’s spouse.
  11          The file did not contain documentation showing a reverification of income, required in October 2015.
  12          The file did not contain documentation showing a reverification of income, required in October 2015.
  13          The file did not contain documentation showing (1) a reverification of income, required in February 2016, and (2) the
              participant had flood insurance and had received previous disaster assistance.
  14          The file did not contain documentation showing a reverification of income, required in October 2015.
  15          The file did not contain documentation showing a reverification of income, required in October 2015.
  16          The file did not contain documentation showing (1) a reverification of income, required in October 2015, and (2)
              that the participant met the low- to moderate-income requirement, as the documented income exceeded the
              threshold for a two-person household. (Although the contractor determined that the participant was ineligible, the
              Parish made this participant eligible.)
  17          The file did not contain documentation showing (1) a reverification of income, required in October 2015; (2) that
              the participant met the low- to moderate-income requirement, as the documented income exceeded the threshold
              for a four-person household (although the contractor determined that the participant was ineligible, the Parish
              made this participant eligible); and (3) verification of income for two adult household members.
  18          The file did not contain documentation showing a reverification of income, required in June and December 2015.


         27
               These results were based upon documentation included in the files as of March 2016.



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                                            Home-buyer assistance program

Sample                                                    Issues identified
number

  1      The file did not contain documentation showing a reverification of income, required in April, August, and
         December 2015.
  2      The file did not contain documentation showing a reverification of income, required in November 2015 and
         March 2016.
  3      The file did not contain documentation showing a reverification of income, required in November 2015 and
         March 2016.
  4      The file did not contain documentation showing (1) a reverification of income, required in July and November
         2015 and March 2016, and (2) adequate income documentation, as although the income calculation worksheet
         was dated March 2016, the pay stub dates ranged from November to December 2014 and, thus, were not for the
         last 3 consecutive months as required.
  5      The file did not contain documentation showing (1) a reverification of income, required in April, August, and
         December 2015, and (2) adequate income documentation, as although the income calculation worksheet was
         dated December 8, 2014, the pay stub dates ranged from November to December 2014 and, thus, were not for the
         last 3 consecutive months as required.
  6      None
  7      The file did not have documentation showing a reverification of income, required in June and October 2015 and
         February 2016.
  8      The file did not contain documentation showing a reverification of income, required in June and October 2015
         and February 2016.
  9      The file did not contain documentation showing (1) a reverification of income, required in May and September
         2015 and January 2016, and (2) adequate income documentation, as although the income calculation worksheet
         was dated January 27, 2015, the pay stub dates ranged from December 2014 to January 2015 and, thus, were not
         for the last 3 consecutive months as required.
  10     None

                                              Housing elevation program

Sample                                                    Issues identified
number
  1      The file did not contain documentation showing (1) a reverification of income, required in September 2015, and
         (2) that the participant met the low- to moderate-income requirement, as the documented income exceeded the
         threshold for a one-person household. (Although the contractor determined that the participant was ineligible
         due to exceeding the maximum income limit, the Parish made this participant eligible for disbursement.)
  2      The file did not contain documentation showing a reverification of income, required in October 2015.

                                         Small rental rehabilitation program
Sample                                                   Issue(s) identified
number
  1      None
  2      None




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