oversight

HUD Did Not Always Provide Adequate Oversight of Property Acquisition and Disposition Activities

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)

     Office of Community Planning and
      Development, Washington, DC
       Community Development Block Grant Property
          Acquisition and Disposition Activities




Office of Audit, Region 3     Audit Report Number: 2016-PH-0001
Philadelphia, PA                                    June 30, 2016
To:            Marion M. McFadden, Deputy Assistant Secretary for Grant Programs, DG
               //signed//
From:          David E. Kasperowicz, Regional Inspector General for Audit, Philadelphia
               Region, 3AGA
Subject:       HUD Did Not Always Provide Adequate Oversight of Property Acquisition and
               Disposition Activities




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of HUD’s oversight of Community Development
Block Grant property acquisition and disposition activities.
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 215-
430-6734.
                    Audit Report Number: 2016-PH-0001
                    Date: June 30, 2016

                    HUD Did Not Always Provide Adequate Oversight of Property Acquisition
                    and Disposition Activities




Highlights

What We Audited and Why
We audited the U.S. Department of Housing and Urban Development’s (HUD) Community
Development Block Grant program’s property acquisition and disposition activities. We
conducted the audit as part of our annual audit plan. Our audit objective was to determine
whether HUD had adequate oversight of property acquisition and disposition activities under its
Block Grant program.

What We Found
HUD did not always provide adequate oversight of property acquisition and disposition
activities. Specifically, of 14 activities reviewed, 7 field offices did not provide adequate
oversight of 8 property acquisition and disposition activities totaling more than $26.2 million.
For the eight activities for which adequate oversight was not provided, two activities with draws
totaling $6.1 million had outstanding program-related findings that HUD had not enforced, and
six, totaling $20.1 million, had not been monitored. Additionally, four of the eight activities
totaling nearly $11.9 million had not met a national objective. These conditions occurred
because HUD did not have adequate controls to ensure that it enforced its monitoring findings
and its grantee risk assessment procedures did not specifically address oversight of property
acquisition and disposition activities. As a result, five activities had unsupported draws totaling
nearly $12.2 million, and one of those activities also had ineligible costs totaling $4,214. HUD
had no assurance that funds spent for these acquisition and disposition activities complied with
applicable HUD and Federal requirements.

What We Recommend
We recommend that HUD (1) enforce its monitoring findings and require the City of New
Orleans, LA, and Miami-Dade County, FL, to provide documentation to support costs totaling
$6.1 million or reimburse their programs from non-Federal funds for any costs that they cannot
support; (2) develop and implement controls to ensure that it expeditiously takes action to
enforce grantee compliance with monitoring findings or pursue one of the established remedies
for noncompliance; (3) require the Cities of Saint Paul, MN, and Washington, DC, to provide
documentation to support $6.1 million in unsupported payments or reimburse their programs
from non-Federal funds for any costs that they cannot support; and (4) direct its field offices to
include property acquisition and disposition activities as an area of special emphasis when
assessing grantee risk and establishing their monitoring plans and grantee monitoring strategies.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: HUD Did Not Always Provide Adequate Oversight of Property
         Acquisition and Disposition Activities ............................................................................ 4

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

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

Appendixes ..............................................................................................................12
         A. Schedule of Questioned Costs .................................................................................. 12

         B. Auditee Comments and OIG’s Evaluation ............................................................. 13

         C. List of Sampled Activities ......................................................................................... 16




                                                                2
Background and Objective
The Community Development Block Grant program was established by Title 1 of the Housing
and Community Development Act of 1974, Public Law 93-383 as amended, 42 U.S.C. (United
States Code) 530.1, and is one of the U.S. Department of Housing and Urban Development’s
(HUD) longest continuously running programs. The program provides annual grants on a
formula basis to entitled States, cities, and counties to develop viable urban communities by
providing decent housing and suitable living environments and expanding economic
opportunities, principally for persons of low and moderate income. Entitlement grantees have
the flexibility to develop their own programs and funding priorities. However, to be eligible for
funding, every activity except program administration and planning must meet one of the
following three national objectives: (1) benefit low- and moderate-income persons, (2) aid in
preventing or eliminating slums or blight, or (3) address certain urgent needs in a community
because conditions pose an immediate threat to the health and welfare of the community.

Acquisition and disposition activities are 2 of the 17 basic eligible activities for which program
funds may be used. Acquisition is defined as acquiring, in whole or in part, by the recipient –
through purchase, long-term lease, donation, or otherwise – real property for any public purpose.
Disposition is defined as disposing of – through sale, lease, donation, or otherwise – any real
property acquired with program funds or its retention for public purposes, including reasonable
costs of temporarily managing such property or property acquired under urban renewal, provided
that the proceeds from any such disposition will be program income. Acquisition and disposition
activities accounted for 1.9 percent of all Block Grant disbursements from fiscal years 2012 to
2014, with more than $201 million disbursed for these activities.

                                                   Total program funds         Percentage of
                      Total program funds
     Fiscal year                                  used for acquisition and      total funds
                           disbursed
                                                    disposition activities       disbursed
        2012             $3,882,915,749                 $63,871,307                 1.6
        2013             3,565,021,407                   74,915,997                 2.1
        2014             3,339,636,410                   62,384,491                 1.9
       Totals           $10,787,573,566                 $201,171,795                 1.9

Acquisition and disposition activities have an inherently higher risk compared to other activities
because the projects are generally more complicated and involve several partners, such as
developers, management companies, and other entities. These activities can take a long time to
complete, mitigating the intended program benefits by delaying compliance with a national
objective.

Our audit objective was to determine whether HUD had adequate oversight of property
acquisition and disposition activities under its Block Grant program.


                                                 3
Results of Audit

Finding: HUD Did Not Always Provide Adequate Oversight of
Property Acquisition and Disposition Activities
HUD did not always provide adequate oversight of property acquisition and disposition
activities. Specifically, of 14 activities reviewed, 1 7 field offices did not provide adequate
oversight of 8 property acquisition and disposition activities totaling more than $26.2 million.
For the eight activities for which adequate oversight was not provided, two activities with draws
totaling $6.1 million had outstanding program-related findings that HUD had not enforced, and
six, totaling $20.1 million, had not been monitored. Additionally, four of the eight activities
totaling nearly $11.9 million had not met a national objective. These conditions occurred
because HUD did not have adequate controls to ensure that it enforced its monitoring findings
and its grantee risk assessment procedures did not specifically address oversight of property
acquisition and disposition activities. As a result, five activities had unsupported draws totaling
nearly $12.2 million, and one of those activities also had ineligible costs totaling $4,214. HUD
had no assurance that $12.2 million spent for these activities complied with applicable
requirements.

HUD Did Not Enforce Corrective Actions Related to Monitoring for Two Activities
While HUD had monitored 7 of the 14 activities reviewed, it did not enforce findings for 2
activities totaling $6.1 million. Specifically, although two field offices issued findings and
corrective actions as a result of their monitoring reviews, they did not enforce their corrective
actions. The two inadequate monitoring reviews are discussed below.

                              HUD                Date of last      Met
        Grantee                                                               Amount      Unsupported
                              field              documented      national
      (activity ID)                                                           drawn          costs
                              office              followup       objective
    New Orleans, LA           New
                                                September 2009      No       $4,959,911    $4,959,911
        (4663)               Orleans
      Miami-Dade
      County, FL              Miami              March 2014         No       1,161,616     1,161,616
        (3660)
    Totals                                                                   $6,121,527    $6,121,527

      •   New Orleans, LA (4663) – In September 2009, HUD’s New Orleans field office notified
          the grantee that it had failed to maintain documentation to show that its acquisition
          activity, with draws totaling nearly $5 million, had met a national objective. HUD also
          reminded the City that there were many outstanding findings from prior years that had


1
     Appendix C identifies the 14 activities.


                                                           4
         not been resolved and required the City to respond to its letter within 15 days. While the
         field office indicated that the City had provided some additional documentation, it said
         that the documentation was not sufficient to close its finding for the acquisition activity.
         As of April 2016, HUD expected to close its finding by December 2016, more than 7
         years after HUD first notified the City of its monitoring findings.
    •    Miami-Dade County, FL (3660) – In December 2013, HUD’s Miami field office notified
         the grantee that it had failed to maintain documentation to show that its disposition
         activity, with draws totaling more than $1.1 million, had met a national objective. HUD
         required the County to produce supporting documentation or reimburse its program
         within 30 days. The County produced two spreadsheets indicating that the funds had
         been used for staff salaries to carry out various real estate and environmental review
         functions; however, it did not provide evidence to show that the activity had met a
         national objective. In March 2014, the Deputy Assistant Secretary for Grant Programs
         sent a letter to the County indicating that it had failed to demonstrate that a national
         objective had been met and requiring the County to reimburse its program using non-
         Federal funds by May 15, 2014. While HUD indicated that it was preparing to send the
         grantee another letter, it had not enforced the repayment of funds as of April 2016.
These conditions occurred because HUD did not have adequate controls to ensure that its
headquarters and field offices followed up on and enforced findings and corrective actions.
HUD’s Community Planning and Development Monitoring Handbook 6509.2 advised field
offices to send a letter of warning to grantees that did not respond to findings, warning them of
the possible consequences for failure to comply. It also required field offices to contact the
headquarters program office for guidance on carrying out progressive sanctions when grantees
were unresponsive or uncooperative. Further, regulations at 24 CFR (Code of Federal
Regulations) 570.913 stated that when a recipient fails to comply with applicable requirements,
the HUD Secretary would terminate, reduce, or limit payments to the recipient. However,
neither the two field offices nor the headquarters program office followed the established
procedures.

HUD Did Not Monitor Six Acquisition or Disposition Activities
The 5 HUD field offices responsible for 6 2 of the 14 acquisition and disposition activities
reviewed, with draws totaling $20.1 million, had not monitored the activities. We reviewed the
grantee program files for each of the six activities to determine whether the activities met a
national objective and whether funds were used for eligible costs and supported with adequate
documentation. Although three of the six activities met program requirements, $6.1 million in
draws for the remaining three activities did not meet a national objective, were not eligible, or
were not supported with adequate documentation.




2
    HUD did not monitor activity 1515, Westchester County, NY. However, we did not include it in the finding
    because HUD was undergoing litigation with the grantee and not monitoring it was the appropriate course of
    action.


                                                         5
                                                    Met
          Grantee                   HUD                           Amount          Ineligible      Unsupported
                                                  national
        (activity ID)            field office                     drawn             costs            costs
                                                  objective
    Saint Paul, MN (383)        Minneapolis          No          $4,299,963            $0          $4,299,963
      Washington, DC            Washington,
                                                      No          1,451,209          4,214         1,446,995 3
           (1515)                   DC
      Washington, DC            Washington,
                                                     Yes          5,096,807            0             319,783
           (1729)                   DC
    Contra Costa County,            San
                                                     Yes          4,520,680            0                 0
          CA (1170)              Francisco
    Hillsborough County,
                                 Jacksonville        Yes          3,220,000            0                 0
          FL (2623)
     Council Bluffs, IA
                                    Omaha            Yes          1,551,786            0                 0
            (408)
    Totals                                                      $20,140,445         $4,214         $6,066,741

Program regulations at 24 CFR 570.200(a)(2) required the grantee to maintain evidence that each
of its assisted activities met national objective requirements. Further, program regulations at 24
CFR 570.506 required the grantee to maintain evidence to show how program funds were used,
including invoices, schedules containing comparisons of budgeted amounts and actual
expenditures, construction progress schedules signed by appropriate parties, and documentation
appropriate to the nature of the activity. Regulations at 2 CFR Part 225, appendix A, paragraph
(C)(1), also required costs to be reasonable, necessary, and adequately documented. The three
completed activities for which the grantees did not meet applicable HUD program and Federal
requirements are discussed below.
          •   City of Saint Paul, MN (383) – Contrary to regulations at 24 CFR 570.200(a)(2), the
              grantee did not demonstrate that its disposition activity, with draws totaling $4.3
              million, had met a national objective. While the program file showed that the funds
              were used for property maintenance expenses for approximately 350 residential and
              commercial properties located around the City, it did not show how the activity had
              met the selected national objective. Regulations at 24 CFR 570.208(a)(3) state that
              eligible activities include those that provide or improve permanent residential
              structures, which will be occupied by low- and moderate-income households.
              However, while the grantee had disposed of at least 283 properties, it did not provide
              documentation to show that the properties sold were used to benefit low- and
              moderate-income persons.
          •   Washington, DC (1515) – Contrary to regulations at 24 CFR 570.200(a)(2), the
              grantee did not demonstrate that its disposition activity, with draws totaling more than
              $1.4 million, had met a national objective. While the program file showed that the
              funds were related to the redevelopment of a shopping center, it did not show how the

3
     To avoid double counting, we reduced the more than $1.4 million in unsupported costs by $4,214 in ineligible
     costs.


                                                           6
             activity had benefited low- and moderate-income persons. In January 2016 the
             anchor store for the redevelopment project had pulled out of the project and as a
             result, this project may not meet national objective requirements for some time.
             Further, contrary to regulations at 24 CFR 570.506 and 2 CFR Part 225, appendix A,
             paragraph (C)(1)(j), the grantee also did not adequately support $391,748 of the more
             than $1.4 million in draws for this disposition activity because it 1) did not provide
             documentation to support expenditures totaling $280,493, 2) could not show that
             expenditures totaling $103,279 were for this activity, 3) provided inadequate
             documentation to support expenditures totaling $7,562, and 4) may have paid a $414
             invoice twice. The grantee also incurred $4,214 in unnecessary late fees because it
             did not make timely payments for utility services.
         •   Washington, DC (1729) – Contrary to regulations at 2 CFR Part 225, appendix A,
             paragraph (C)(1)(j), the grantee did not adequately support $319,783 in draws for its
             acquisition activity. The program file showed that the $5.1 million drawn was used
             for acquisition and predevelopment costs of an apartment complex and had been used
             to benefit low- and moderate-income persons. However, $319,783 of the $5.1 million
             was unsupported because the invoices were not complete and construction
             management and operating costs were not always supported. The City did not
             maintain adequate documentation, such as completed invoices and other
             documentation, required to support construction services paid for with program funds.
These conditions occurred because HUD’s risk assessment procedures did not specifically
address oversight of property acquisition and disposition activities. HUD’s Community Planning
and Development Notice 14-04 stated that each field office was responsible for developing a
work plan with monitoring strategies encompassing the grantees and programs to be monitored.
HUD’s Community Planning and Development Monitoring Handbook 6509.2 provided
additional guidance for monitoring, including the selection of grantees, but did not specify which
programs, projects, or activities to monitor. While field offices used this guidance when
performing risk assessments to select which program to monitor, the selection of activities was
subjective and based on field office staff’s knowledge of grantee performance.

Conclusion
HUD did not always provide adequate oversight of property acquisition and disposition activities
under its Block Grant program. As a result, five activities had unsupported draws totaling nearly
$12.2 million, including nearly $11.9 million in draws for four activities 4 that had not met a
national objective. Further, one of the five activities had ineligible costs totaling $4,214. HUD
had no assurance that funds spent for these property acquisition and disposition activities
complied with applicable HUD and Federal requirements. If HUD does not improve its risk
assessment procedures and controls over monitoring, it may fail to detect additional activities
that do not comply with applicable requirements.



4
    Four activities with draws totaling $11.9 million: activity 4663, New Orleans, LA, $5 million; activity 3660,
    Miami-Dade County, FL, $1.2 million; activity 383, Saint Paul, MN, $4.3 million; and activity 1515,
    Washington, DC, $1.4 million


                                                          7
Recommendations
We recommend that the Deputy Assistant Secretary for Grant Programs

         1A.      Direct the New Orleans, LA, field office to enforce its monitoring findings and
                  require the grantee to provide documentation to support costs totaling $4,959,911
                  or the grantee must reimburse its program from non-Federal funds for any costs
                  that it cannot support.

         1B.      Enforce the Miami, FL, field office’s monitoring findings and require the grantee
                  to provide documentation to support costs totaling $1,161,616 or the grantee must
                  reimburse its program from non-Federal funds for any costs that it cannot support.

         1C.      Develop and implement controls to ensure that it expeditiously takes action to
                  enforce grantee compliance with monitoring findings or pursue one of the
                  established remedies for noncompliance.

         1D.      Direct the Minneapolis, MN, field office to require the grantee to provide
                  documentation to support the $4,299,963 in unsupported payments identified or
                  the grantee must reimburse its program from non-Federal funds for any costs that
                  it cannot support.

         1E.      Direct the Washington, DC, field office to require the grantee to provide
                  documentation to support the $1,766,778 5 in unsupported payments identified or
                  the grantee must reimburse its program from non-Federal funds for any costs that
                  it cannot support.

         1F.      Direct the Washington, DC, field office to require the grantee to repay its program
                  $4,214 from non-Federal funds for the ineligible costs associated with activity
                  1515.

         1G.      Direct field offices to include property acquisition and disposition activities as an
                  area of special emphasis when assessing grantee risk and establishing their
                  monitoring plans and grantee monitoring strategies.




5
    $1,766,778 consists of $1,446,995 for activity 1515 and $319,783 for activity 1729


                                                         8
Scope and Methodology
We conducted the audit from September 2015 through April 2016 at HUD’s offices located in
Washington, DC, and our offices located in Pittsburgh, PA, and Richmond, VA. The audit
covered the period January 1994 through August 2015 but was expanded when necessary.

To accomplish our objective, we reviewed
         •    Relevant background information;
         •    Applicable laws, regulations, guidance, and HUD notices;
         •    Data contained in HUD’s Integrated Disbursement and Information System 6;
         •    HUD risk assessments, monitoring reports, letters, and related correspondence; and
         •    Grantee program files.

We interviewed HUD officials located in Washington, DC, and in the field offices responsible
for the activities selected for review. We also interviewed grantee staff for each of the activities
reviewed.

To achieve our audit objective, we relied in part on computer-processed data from HUD’s
Integrated Disbursement and Information System to select a sample of acquisition and
disposition activities for review. Although we did not perform a detailed assessment of the
reliability of the data, we performed a minimal level of testing and found the data to be adequate
for our purposes.

To select a sample of acquisition and disposition activities, we obtained disbursement data as of
April 2015 7 for 2,619 acquisition and disposition activities with draw amounts totaling $452.9
million. Our review covered activities completed after August 2012, 8 open activities funded
before 2011, 9 and all canceled activities. To obtain a sample of activities that represented a
variety of HUD field offices, we selected the acquisition or disposition activity with the largest
amount drawn for each of HUD’s 10 regions. To obtain a sample of activities that represented a
cross section of activity types and statuses, we selected the next two completed disposition



6
    HUD’s Integrated Disbursement and Information System is the drawdown and reporting system for its Block
    Grant program and includes information regarding activities across the Nation, including funding and
    accomplishment data. HUD uses this information to report to Congress and to monitor grantees.
7
    The data were current as of April 2015, and the activity completion dates were current as of September 2015.
8
    We focused on this period for completed activities because grantees are required to retain records for a period of
    not less than 4 years.
9
    We focused on this period for open activities because activities open for longer periods may not have met a
    national objective.


                                                           9
activities with the largest amounts drawn, the open disposition activity with the largest amount
drawn, and the canceled acquisition activity with the largest amount drawn.

As shown in the chart below, we selected 14 acquisition and disposition activities totaling $42.8
million to determine whether HUD had adequate oversight of property acquisition and
disposition activities. Appendix C provides additional details on the 14 activities selected.
Although this approach did not allow us to project to the population, it allowed us to select
activities that represented all regions, 13 field offices, and 5 of 6 activity categories 10 which was
sufficient to meet our audit objective.

                              Total            Total amount             Number of        Amount drawn for
        Activity
                           number of            drawn (in            activities selected activities selected
         status
                            activities           millions)               for review          for review
      Completed               2,311               $381.4                      10            $27,572,012
        Open                   184                 66.9                        3             14,813,866
      Canceled                 124                  4.6                        1              430,851
         Totals               2,619                 $452.9                     14                 $42,816,729

We requested monitoring reports from HUD’s field offices for the activities selected for review.
We determined that HUD had monitored 7 of the 14 activities and had not monitored the other 7
activities selected for review. For the seven activities that were monitored, we reviewed HUD’s
monitoring reports, along with related files, letters, e-mails, and supporting documentation. For
one of the activities that had not been monitored, HUD was undergoing litigation with the
grantee, and not monitoring it was the appropriate course of action. For the remaining six
activities that had not been monitored by HUD, along with the one canceled activity selected, we
obtained program files from the grantee. We reviewed the grantee program files to determine
whether the activities met a national objective and whether program funds were used for eligible
costs and supported with adequate documentation.

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.




10
     We did not review any canceled disposition activities since they were insignificant in quantity and dollars
     drawn. There were only 5 canceled disposition activities in our universe and the activity with the largest dollar
     value had only $16,139 in draws.


                                                             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 objective:

•   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 program participants comply with program laws and
    regulations.
•   Safeguarding resources – Policies and procedures that management has implemented to
    reasonably ensure that resources are safeguarded against waste, loss, and misuse.
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:

•   HUD’s risk assessment procedures did not ensure that acquisition and disposition activities
    were adequately monitored.
•   HUD did not have adequate controls to ensure that its headquarters and field offices followed
    up on and enforced findings and corrective actions.




                                                  11
Appendixes

Appendix A


                           Schedule of Questioned Costs
                Recommendation
                                   Ineligible 1/   Unsupported 2/
                    number
                        1A                                  $ 4,959,911
                        1B                                    1,161,616
                        1D                                    4,299,963
                         1E                                   1,766,778
                         1F                  $4,214

                       Totals                $4,214         $12,188,268


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




                                              12
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1




                               13
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




                               14
                         OIG Evaluation of Auditee Comments


Comment 1   HUD suggested that we update recommendation 1G to allow its Office of
            Community Planning and Development to explore options to increase the
            monitoring focus on acquisition and disposition activities. HUD contended that
            the risk assessment process does not focus on specific types of activities but
            instead examines the grantee’s program and evaluates its risk to identify potential
            areas of concern, and explained that it is reluctant to call out specific eligible
            activities for examination when attention to staff capacity and program design can
            serve the purpose of identifying potential areas of concern. We believe that the
            risk assessment process should specifically target property acquisition and
            disposition activities because these activities have an inherently higher risk
            compared to other activities. The projects are generally more complicated and
            involve several partners, such as developers, management companies, and other
            entities. They can also take a long time to complete, which delays compliance
            with a national objective. We acknowledge that the risk assessment process is
            subjective, and that field office staff use their knowledge of grantees to examine
            aspects of the grantee’s program such as staff capacity and program design. Our
            recommendation provides HUD flexibility to propose ways to add more oversight
            of acquisition and disposition activities. As part of the normal audit resolution
            process, HUD can propose ways to include property acquisition and disposition
            activities as an area of special emphasis when assessing grantee risk and
            establishing their monitoring plans and grantee monitoring strategies.




                                             15
Appendix C


                                  List of Sampled Activities
                Grantee                      Activity type       HUD region         Amount
 #
              (activity ID)                    (status)          - field office     drawn
                                             Acquisition
 1     State of Wisconsin (13673)                               5 - Milwaukee      $8,692,339
                                                (open)
                                             Acquisition       3 - Washington,
 2       Washington, DC (1729)                                                      5,096,807
                                             (completed)             DC
                                             Acquisition
 3      New Orleans, LA (4663)                                 6 - New Orleans      4,959,911
                                                (open)
                                             Acquisition
 4   Contra Costa County, CA (1170)                            9 - San Francisco    4,520,680
                                             (completed)
                                             Disposition
 5        Saint Paul, MN (383)                                 5 - Minneapolis      4,299,963
                                             (completed)
                                             Acquisition
 6   Hillsborough County, FL (2623)                            4 - Jacksonville     3,220,000
                                             (completed)
                                             Acquisition
 7   Westchester County, NY (1515)                           2 - New York City      2,781,000
                                             (completed)
                                             Acquisition
 8         Seattle, WA (4157)                                    10 - Seattle       2,675,000
                                             (completed)
                                             Acquisition
 9      Council Bluffs, IA (408)                                  7 - Omaha         1,551,786
                                             (completed)
                                             Disposition       3 - Washington,
10       Washington, DC (1515)                                                      1,451,209
                                             (completed)             DC
                                             Disposition
11   Miami Dade County, FL (3660)                                 4 - Miami         1,161,616
                                                (open)
                                             Acquisition
12       Ft. Collins, CO (1816)                                   8 - Denver        1,072,811
                                             (completed)
                                             Acquisition
13        Arlington, MA (925)                                     1 - Boston        902,756
                                             (completed)
                                             Acquisition
14     Charlottesville, VA (1321)                               3 - Richmond         430,851
                                              (canceled)
                                     Total                                         $42,816,729




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