oversight

The City of New York, NY, Generally Disbursed Community Development Block Grant Disaster Recovery Funds for Its Temporary Disaster Assistance Program in Accordance With Federal Regulations

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-03-11.

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

         The City of New York, NY
      Office of Management and Budget
        Community Development Block Grant Disaster
                     Recovery Funds
           Temporary Disaster Assistance Program




Office of Audit, Region 2      Audit Report Number: 2016-NY-1005
New York – New Jersey                              March 11, 2016
To:            Marion Mollegen McFadden
               Deputy Assistant Secretary for Grant Programs, DG

               //SIGNED//

From:          Kimberly Greene
               Regional Inspector General for Audit, 2AGA
Subject:       The City of New York, NY, Generally Disbursed Community Development
               Block Grant Disaster Recovery Funds for Its Temporary Disaster Assistance
               Program 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 the City of New York, Office of
Management and Budget’s administration of Community Development Block Grant Disaster
Recovery funds for its Temporary Disaster Assistance 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 212-
264-4174.
                   Audit Report Number: 2016-NY-1005
                   Date: March 11, 2016

                   The City of New York, NY, Generally Disbursed Community Development
                   Block Grant Disaster Recovery Funds for Its Temporary Disaster Assistance
                   Program in Accordance With Federal Regulations



Highlights

What We Audited and Why
We audited the City of New York, Office of Management and Budget’s administration of its
Temporary Disaster Assistance Program (TDAP) funded with Community Development Block
Grant Disaster Recovery (CDBG-DR) funds provided by the U.S. Department of Housing and
Urban Development (HUD) to assist in the disaster recovery and rebuilding efforts resulting from
Hurricane Sandy. The disaster recovery funds were authorized by Congress under the Disaster
Relief Appropriations Act of 2013. This review included the disbursement of approximately $4
million in CDBG-DR funds pertaining to the City’s program. The objectives of the audit were to
determine whether the City (1) disbursed CDBG-DR funds for eligible activities in accordance
with TDAP guidelines established under the HUD-approved action plan, action plan
amendments, applicable Federal requirements, and City policy, and (2) developed a housing plan
to ensure that at the end of the 2-year subsidy period, residents would remain stably housed.

What We Found
City officials generally disbursed CDBG-DR funds for TDAP in accordance with guidelines
established under the HUD-approved action plan, action plan amendments, and applicable
Federal requirements. The City also approved and denied TDAP applications in accordance with
the City’s policies and procedures for the program. In addition, it developed a housing plan to
ensure that at the end of the 2-year subsidy period, residents would remain stably housed.

What We Recommend
There are no recommendations.
Table of Contents
Background and Objectives ....................................................................................3

Results of Audit ........................................................................................................5
         Finding: The City Generally Disbursed CDBG-DR Funds for Its Temporary
         Disaster Assistance Program in Accordance With HUD Regulations ......................... 5

Scope and Methodology ...........................................................................................7

Internal Controls ......................................................................................................9

Appendix .................................................................................................................11
         A. Auditee Comments .................................................................................................... 11




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Background and Objectives
The U.S. Department of Housing and Urban Development (HUD), Office of Block Grant
Assistance, is responsible for the management and oversight of the Community Development Block
Grant Disaster Recovery (CDBG-DR) program. The CDBG-DR program provides flexible grants
to help cities, counties, and States recover from Presidentially-declared disasters, especially in
low-income areas. CDBG-DR funding is appropriated by Congress as a special CDBG
appropriation in response to a disaster. The statutory authority for CDBG-DR funding is made
through individual supplemental appropriations that address specific disasters. Funds for damages
caused by Hurricane Sandy are found in the Disaster Appropriations Act of 2013 (Public Law 113-
2). This appropriation has provided the City of New York access to more than $4.2 billion in
disaster assistance. These funds are to be used in the most impacted and distressed areas for
necessary expenses related to disaster relief, long-term recovery and restoration of infrastructure,
and housing and economic revitalization. Each recipient must (1) address a disaster-related impact
(direct or indirect) in a presidentially declared county for the covered disaster, (2) be a CDBG-
eligible activity, and (3) meet a national objective.

On October 29, 2012, Hurricane Sandy made landfall along the eastern seaboard, impacting more
than a dozen States. Over a 48-hour span, the storm caused extensive high winds and rainfall in
the metropolitan area of New York City. The effect of these forces caused power outages,
damaged homes, and destroyed critical public and private infrastructure.

The table below identifies the three allocations made to the City for CDBG-DR
funded activities.

            According to the Federal Register                     Allocation amount
                      March 5, 2013                                $1,772,820,000
                    November 18, 2013                              $1,447,000,000
                     October 16, 2014                                 $994,056,000
           Total funding through October 2014                      $4,213,876,000

The City received an allocation of $19 million in CDBG-DR funds to administer its
Temporary Disaster Assistance Program (TDAP). Approximately $4.5 million of these funds
had been disbursed as of July 31, 2015. The New York City Department of Housing
Preservation and Development administered TDAP for eligible low-income individuals
and families impacted by Hurricane Sandy. Housing Preservation and Development was
authorized to implement this program using CDBG-DR funds under a waiver granted to it
by HUD in April 2013.

TDAP was a rental subsidy program that provided rental assistance to low-income residents
displaced by Hurricane Sandy for a period of up to 2 years. The City assisted households in
finding apartments in the existing affordable housing portfolio, or participants could identify



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their own apartments. Participants signed leases directly with the property owners and were
responsible for paying up to 30 percent of their income in rent. The City used CDBG-DR funds
to cover the gap between the contract and the tenant’s share of the rent. The program was
modeled to follow the regulations and procedures of the Section 8 housing program, including
the requirement that units meet HUD’s housing quality standards.

To be eligible for TDAP, households initially were required to be at or below 50 percent of area
median income. After the initial launch of this program, the City expanded the program’s
eligibility to include households at or below 50 percent of area median income which relocated
following Hurricane Sandy and which now pay more than 40 percent of income in rent.

The objectives of the audit were to determine whether the City (1) disbursed CDBG-DR funds
for eligible activities in accordance with the TDAP guidelines established under its HUD-
approved action plan, action plan amendments, applicable Federal requirements, and City policy,
and (2) developed a housing plan to ensure that at the end of the 2-year subsidy period, residents
would remain stably housed.




                                                4
Results of Audit
Finding: The City Generally Disbursed CDBG-DR Funds for Its
Temporary Disaster Assistance Program in Accordance With HUD
Regulations
City officials generally disbursed CDBG-DR funds for TDAP in accordance with the guidelines
established under the City’s HUD-approved action plan and amendments and applicable Federal
requirements. Additionally, officials developed a housing plan to ensure that at the end of the 2-
year subsidy period, residents would remain stably housed.

Funds Were Disbursed in Compliance With the City’s HUD-Approved Action Plan and
Federal Requirements
City officials generally disbursed CDBG-DR funds in accordance with the HUD-approved action
plan and amendments and applicable Federal regulations. We reviewed and tested
approximately $4 million in CDBG-DR funds disbursed to the City and identified no material
deficiencies. These disbursements included more than $2.9 million for rental assistance,
$734,829 for case management costs, and $346,959 for staffing costs incurred during the period
October 29, 2012, through July 31, 2015. The City established controls to ensure that landlords
did not get paid for more than the 2-year rental subsidy period. The City selected a financial
management company as the contractor for case management services for all applicants affected
by Hurricane Sandy. The case management costs were divided into several categories, which
included registration of applicants for the program, identified as renter’s deliverable, project
management fees which included program design and labor costs, and a customer operations fee.
The staffing costs incurred by City employees in administering TDAP included an initial
eligibility screening, a final review of the application package for eligibility requirements, and
scheduling eligible applicants for a mandatory briefing session. The City provided payroll
journals and employee time certifications verifying that employees worked on the TDAP
program, and the certifications were signed by the employee and a supervisor. The funds
reviewed that were disbursed for TDAP were found to be reasonable, properly supported,
eligible, and in compliance with the HUD-approved action plan and amendments and Federal
regulations.

We selected and reviewed a sample of 28 TDAP applications and determined that the City
approved and denied applicants in accordance with its policies and procedures for TDAP. The
application review process had two distinct stages. An initial eligibility screening was conducted
by Housing Preservation and Development’s Placement Task Force, followed by an eligibility
determination conducted by its Division of Tenant Resources. When an applicant submitted an
application package to Housing Preservation and Development, it was reviewed by the
Placement Task Force to determine whether (1) an applicant was a New York City resident
displaced by Hurricane Sandy, (2) the applicant had refused or had access to other rental
assistance programs or permanent housing, (3) the reported household income was at or below
50 percent of area median income, and (4) the applicant filed a complete TDAP application. The



                                                 5
Division of Tenant Resources conducted a final review of the application package, which
included verifying income eligibility based on documents provided by the applicant and a
screening for lifetime sex offender registration status. Upon verification of eligibility, the
Division of Tenant Resources notified the applicant of his or her eligibility and scheduled the
applicant for a briefing appointment. After an applicant met the eligibility requirements, the City
issued a coupon to the applicant, conducted a housing quality standards inspection of the unit,
and calculated the correct amount of rental subsidy.

If an applicant was denied eligibility, the Division of Tenant Resources issued the applicant a
notice of denial for the program with information on the appeal process and procedures. Our
review indicated that the denied applicants had not submitted documentation to prove residency
at the damaged address at the time of Hurricane Sandy and did not provide all other required
documentation or did not attend the required program workshops. Denied applicants were
provided the opportunity to appeal the decision to the TDAP Appeals Department, a separate
unit within Housing Preservation and Development. The review of the appeals properly
documented whether applicants’ appeals were granted. Further, it documented that proof a loss
of residency was incurred due to Hurricane Sandy and contained all other required documents.
The City Developed a Housing Plan To Ensure That Residents Would Remain Stably Housed
HUD provided a waiver at 78 FR (Federal Register) 23580 (April 19, 2013) to forgo the
requirements for a housing plan. However, City officials developed a housing plan to ensure that
at the end of the 2-year subsidy period, residents would remain stably housed. Application files
showed that during the 2-year subsidy period, City officials provided ongoing counseling to the
TDAP participants to help ensure that they would have a housing plan after their subsidy period
expired. Documentation in the application files also indicated that City officials provided
participants with an independent living planner resource packet, which included information on
eviction prevention, employment, and affordable or supportive housing. In addition, City
officials reached out to TDAP participants and encouraged them to apply for Section 8 housing
choice vouchers.

Conclusion
City officials generally disbursed CDBG-DR funds for TDAP in accordance with the guidelines
established under the HUD-approved action plan and amendments and applicable Federal
requirements and developed a housing plan to ensure that at the end of the 2-year subsidy period,
residents would remain stably housed.

Recommendations
There are no recommendations.




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Scope and Methodology
The review generally covered the period October 29, 2012, through July 31, 2015, and was
extended as needed. Audit fieldwork was performed onsite from September 2015 through
February 2016 at City and Housing Preservation and Development offices located at 255
Greenwich Street, New York, NY, and 90 Gold Street, New York, NY.

To accomplish our audit objectives, we

        Reviewed applicable laws, regulations, HUD handbooks, Federal Registers, the Code of
         Federal Regulations, public laws, and the City’s policies and procedures for TDAP.
        Obtained an understanding of the City’s disbursement and financial controls.
        Interviewed officials of the City, Housing Preservation and Development, and the New
         York City Mayor’s Office of Housing Recovery Operations.
        Reviewed the City’s action plan and amendments.
        Reviewed the grant agreement between HUD and the City.
        Reviewed the memorandums of understanding between the City and New York City
         Mayor’s Office of Housing Recovery Operations and between the New York City
         Mayor’s Office of Housing Recovery Operations and Housing Preservation and
         Development.
        Evaluated the City’s internal controls and reviewed application and disbursement files
         to identify potential weaknesses related to our objectives.
        Reviewed data in HUD’s Disaster Recovery Grant Reporting system.1
        Reviewed HUD monitoring reports.
        Reviewed the City’s comprehensive annual financial reports for the years ending in June
         2013 and June 2014.
        Reviewed the City’s single audit report for the year ending in June 2014.
        Reviewed an audit report on the administration of the New York City Build It Back
         Single Family Program by the New York City Mayor’s Office of Housing Recovery
         Operations dated March 31, 2015.




 1
  The Disaster Recovery Grant Reporting system was developed by HUD’s Office of Community Planning and
 Development for the CDBG-DR program and other special appropriations. Data from the system are used by
 HUD staff to review activities funded under these programs and for required quarterly reports to Congress.




                                                       7
The universe of TDAP disbursements contained 20 voucher drawdowns totaling more than $4.5
million, which included more than $2.9 million for rental assistance, $734,829 for case
management costs, and $895,898 for staffing costs during the review period of October 29, 2012,
through July 31, 2015. We selected a nonstatistical2 sample of 16 of the 20 voucher drawdowns
totaling more than $4 million to gain a general understanding of City’s internal controls and
included all three cost categories. The sample included more than $2.9 million for rental
assistance, $734,829 for case management costs, and $346,959 for staffing costs. The universe
of TDAP applications contained 646 applicants, of which 241 applicants were ineligible, 3
applicants declined assistance, 113 applicants’ coupons had expired, 224 applicants were leased
up, and 65 applicants were pending approval because additional information was required. We
selected a nonstatistical sample of 28 application files for review, which included 5 eligible, 4
ineligible, 6 appeal denied, 10 appeal granted, and 3 declined.

While we used the data obtained from HUD’s Disaster Recovery Grant Reporting system for
information purposes, our assessment of the reliability of the data in the system was limited to
the data reviewed. Therefore, we did not assess the reliability of this system. We performed a
minimal level of testing and found the data to be adequate 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.




2
  A nonstatistical sample is appropriate when the auditor knows enough about the population to identify a relatively
small number of items of interest. The results of procedures applied to items selected under this method apply only
to the selected items and must not be projected to the portion of the population that was not tested.



                                                          8
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:

    Program operations – Policies and procedures that management has
     implemented to reasonably ensure that a program meets its objectives.

    Compliance with laws and regulations – Policies and procedures that management
     has implemented to reasonably ensure that the use of funds is consistent with laws
     and regulations.

    Safeguarding resources – Policies and procedures that management has
     implemented to reasonably ensure that resources are safeguarded against waste, loss,
     and misuse.

    Validity and reliability of data – Policies and procedures that management has
     implemented to reasonably ensure that valid and reliable data are obtained, maintained,
     and fairly disclosed in reports.

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.
We evaluated internal controls related to the audit objectives in accordance with generally
accepted government auditing standards. Our evaluation of internal controls was not designed to



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provide assurance regarding the effectiveness of the internal structure as a whole. According, we
do not express an opinion on the effectiveness of the City’s internal controls as a whole.




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Appendix

Appendix A
             Auditee Comments




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