oversight

The Housing Authority of the City of Annapolis, MD, Did Not Always Administer Its Resident Opportunities and Self-Sufficiency Program in Accordance With Applicable Requirements

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)

   The Housing Authority of the City of
            Annapolis, MD
    Resident Opportunities and Self-Sufficiency Program




Office of Audit, Region 3      Audit Report Number: 2016-PH-1006
Philadelphia, PA                                  August 31, 2016
To:            William D. Tamburrino, Director, Office of Public Housing, Baltimore Field
               Office, 3BPH
               //signed//
From:          David E. Kasperowicz, Regional Inspector General for Audit, Philadelphia
               Region, 3AGA
Subject:       The Housing Authority of the City of Annapolis, MD, Did Not Always
               Administer Its Resident Opportunities and Self-Sufficiency Program in
               Accordance With Applicable Requirements




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 Housing Authority of the City of Annapolis’
Resident Opportunities and Self-Sufficiency 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
215-430-6734.
                    Audit Report Number: 2016-PH-1006
                    Date: August 31, 2016

                    The Housing Authority of the City of Annapolis, MD, Did Not Always
                    Administer Its Resident Opportunities and Self-Sufficiency Program in
                    Accordance With Applicable Requirements



Highlights

What We Audited and Why
We audited the Housing Authority of the City of Annapolis’ Resident Opportunities and Self-
Sufficiency (ROSS) program due to a hotline complaint. The complaint alleged that the Authority
used ROSS grant funds to pay a resident who did not work on a grant. This is the first of two audit
reports on the Authority. Our audit objective was to determine whether the Authority administered
its ROSS program in accordance with applicable U.S. Department of Housing and Urban
Development (HUD) requirements.

What We Found
The Authority did not always administer its ROSS program in accordance with applicable HUD
requirements, and the allegation in the complaint had merit. Specifically, the Authority did not
maintain documentation to support program accomplishment data reported to HUD for two
grants with drawdowns totaling $292,611 and salary and fringe benefit costs totaling $109,248
paid to its service coordinator for one grant. It also incurred $6,850 in ineligible costs for
training that HUD had not approved in advance as required for two grants and $3,400 in
ineligible costs for payments to a public housing resident who did not perform duties related to a
grant. In addition, the Authority could not support in-kind service contributions from
community partners totaling $243,750 as required. These conditions occurred because the
Authority was not aware of requirements and lacked controls over its tenant councils and service
coordinators administering the program. As a result, the Authority could not show that
disbursements totaling $401,859 complied with program requirements, and it incurred ineligible
expenses totaling $10,250.

What We Recommend
We recommend that HUD require the Authority to provide documentation to support program
accomplishments related to disbursements totaling $292,611 and salary and fringe benefit costs
totaling $109,248 or repay HUD from non-Federal funds for any amounts that it cannot support.
We also recommend that HUD require the Authority to repay $6,850 from non-Federal funds for
the ineligible training costs and $3,400 for the ineligible payments to a public housing resident.
We further recommend that HUD require the Authority to develop and implement policies,
procedures and controls to ensure that (1) it complies with program and financial reporting
requirements, (2) tenant councils and service coordinators administering the grants comply with
applicable requirements, and (3) in-kind contribution amounts are verified.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: The Authority Did Not Always Administer Its ROSS Program in
         Accordance With Applicable HUD Requirements ........................................................ 4

Scope and Methodology ...........................................................................................8

Internal Controls ....................................................................................................10

Appendixes ..............................................................................................................11
         A. Schedule of Questioned Costs and Funds To Be Put to Better Use ...................... 11

         B. Auditee Comments and OIG’s Evaluation ............................................................. 12

         C. Grant Award and Disbursement Data as of May 2016 ......................................... 15

         D. Ineligible and Unsupported Costs by ROSS Grant ............................................... 16




                                                            2
Background and Objective
The Housing Authority of the City of Annapolis was founded in 1937 to provide affordable
housing in Annapolis, MD, for families who lacked the means to purchase or rent housing at
market prices. The Authority’s mission is to achieve excellence by providing housing, and self-
sufficiency opportunities and by promoting customer satisfaction to enhance the quality of life
for low-, very low-, and moderate-income residents. The Authority is an independent agency
chartered by the State of Maryland, funded by the U.S. Department of Housing and Urban
Development (HUD), under the direction of a board of commissioners appointed by the mayor of
Annapolis. The board of commissioners consists of five members. An executive director,
appointed by the board of commissioners, manages the daily operations of the Authority.

HUD’s Resident Opportunities and Self-Sufficiency (ROSS) program provides grants to public
housing agencies and other entities to coordinate supportive services and other activities
designed to help public housing residents attain economic and housing self-sufficiency. The
services provided enable participating families to increase earned income; reduce or eliminate
the need for welfare assistance; make progress toward achieving economic independence and
housing self-sufficiency; or, in the case of elderly or disabled residents, help improve living
conditions and enable residents to age in place. A service coordinator arranges services for
residents and ensures that program participants are linked to the supportive services they need to
achieve self-sufficiency or remain independent. Between 2011 and 2015, HUD awarded the
Authority and its site-based tenant councils four ROSS grants totaling $975,000. 1

Our audit objective was to determine whether the Authority administered its ROSS program in
accordance with applicable HUD requirements.




1
    Appendix C provides details.


                                                3
Results of Audit

Finding: The Authority Did Not Always Administer Its ROSS
Program in Accordance With Applicable HUD Requirements
The Authority did not always administer four ROSS grants totaling $975,000, which it received
between 2011 and 2015, in accordance with applicable HUD requirements. Specifically, it did
not maintain documentation to support (1) program accomplishment data reported to HUD for
two grants with drawdowns totaling $292,611 and (2) salary and fringe benefit costs totaling
$109,248 paid to its service coordinator for one grant. It also incurred $6,850 in ineligible costs
for training that HUD had not approved in advance as required for two grants and $3,400 in
ineligible costs for payments to a public housing resident who did not perform duties related to a
grant. In addition, the Authority could not support in-kind service contributions from
community partners totaling $243,750 as required. These conditions occurred because the
Authority was not aware of requirements and lacked controls over its tenant councils and service
coordinators administering the program. As a result, it could not show that disbursements
totaling $401,859 complied with program requirements, and it incurred ineligible expenses
totaling $10,250.

The Authority Could Not Support Program Accomplishment Data Reported to HUD
The Authority’s service coordinators and tenant councils did not maintain documentation to
support achievement data reported to HUD for two grants with expenditures totaling $298,455. 2
The Authority provided some documentation, such as program summaries, but it was not
sufficient because it lacked details. For example, for one grant, the Authority reported that 11
residents enrolled in the program, 10 residents received educational services, and 8 residents
gained full-time employment. For the other grant, the Authority reported that three providers
agreed to provide services, three new participants enrolled in individual training service plans,
and seven residents participated in self-sufficiency activities. However, the Authority could not
provide documentation, such as resident participation files, case notes, or other documentation,
to identify the assisted residents and support the achievement data that it reported to HUD.
Subarticle E(1) of the Authority’s grant agreement with HUD required it to evaluate its activities
and submit a program accomplishment report annually. The report shows the achievements to
date against projections for services and outcomes as proposed in the HUD-approved
application. Data, such as the number of residents involved in community services, number of
residents who gained full-time employment, and number of persons who obtained a general
education degree, are evaluated by HUD to determine whether the Authority met program
requirements. Subarticle F(2) of the grant agreement required the Authority to maintain copies
of documents related to the award and administration of the grant for at least 3 years after the
final closeout of the grant. The condition described above occurred because the Authority was
not aware that it needed to maintain detailed documentation. Because the Authority did not


2
    Robinwood Tenant Council grants MD001RPS186A011 ($240,000) and MD001RPS009A014 ($58,455)


                                                 4
maintain documentation such as resident participation files, case notes, or other documentation,
to identify the assisted residents to support program accomplishments, expenditures totaling
$292,611 3 were unsupported.

The Authority Paid Salary and Fringe Benefit Costs That Were Not Supported
The Authority could not support salary and fringe benefit costs totaling $109,248 that it paid for
a service coordinator. 4 The Authority hired the service coordinator to work full time and assist
with administering self-sufficiency activities related to the grant. However, the service
coordinator also served as the Authority’s resident manager. The resident manager duties were
not eligible grant activities. The service coordinator provided timesheets, which showed that 100
percent of her time was charged to the grant. The Authority charged associated fringe benefits at
the same time it charged the grant for salary expenses. However, the service coordinator
explained that she spent 80 percent of her time on grant activities and 20 percent on nongrant
activities. The Authority did not require the service coordinator to track time spent separately on
timesheets or other documentation. This condition occurred because the Authority lacked
controls to ensure that the service coordinator complied with timekeeping requirements.
Regulations at 2 CFR (Code of Federal Regulations) Part 225, appendix B(8)(h)(4), require that
employees who work on multiple activities distribute their salaries and fringe benefits to reflect
an after-the-fact distribution of actual activities. As a result, expenditures totaling $109,248 were
unsupported.

Service Coordinators Attended Training Sessions That Were Not Approved by HUD
The Authority used $6,850 in grant funds to pay for training expenses, but it did not obtain HUD
approval in advance as required. 5 The Authority paid for two service coordinators to attend a 4-
day training conference in Indianapolis, IN, and one service coordinator to attend a 3-day
training conference in Columbus, OH. The expenses related to these trips included registration
fees, airfare, lodging, and other travel-related expenses. Subarticle B(5) of the grant agreements
state that before traveling outside the local area for program-related training sessions, the grantee
must request approval from the HUD field office in advance. The Authority did not request
approval from HUD in advance because it was not aware of the requirement. As a result,
training expenses totaling $6,850 were ineligible.

The Authority Paid a Public Housing Resident Who Did Not Work On Grant Activities
The complaint alleging that the Authority used ROSS grant funds to pay a resident who did not
work on a grant had merit. During the period July 2013 to February 2014, the Authority made 17
payments totaling $3,400 to a public housing resident to assist the service coordinator with
administrative tasks; however, the resident did not perform work related to the grant. 6 Although
the resident completed timesheets and the service coordinator approved them, the service
coordinator explained that the resident did not perform work on the grant and she could not

3
    To avoid double counting, we reduced the amount of unsupported costs reported for this issue by the ineligible
    amounts attributable to these grants discussed in later paragraphs of this finding.
4
    Housing Authority of the City of Annapolis grant MD001RPS037A013
5
    $2,444 from Robinwood Tenant Council grant MD001RPS186A011 and $4,406 from Morris Blum Tenant
    Council grant MD001RPS015A012
6
    Robinwood Tenant Council grant MD001RPS186A011


                                                         5
justify the payments. Section IV(E)(4)(a) of a HUD Federal Register notice 7 allows
administrative costs to be incurred for administrative staff support. The condition described
above occurred because the Authority lacked controls to ensure that residents performed work on
specific grants before paying them with grant funds. As a result, the $3,400 was ineligible.

In-Kind Services Were Not Supported
The Authority did not maintain documentation to show that it met program match contribution
requirements. For the four grants reviewed, HUD notices 8 required the Authority to acquire a 25
percent non-Federal match contribution for each of its grants in either cash or in-kind services
totaling $243,750. 9 Grantees are required to meet the minimum 25 percent match requirement to
be eligible for the ROSS grant. The Authority provided a list of community partners and
services to be provided by each partner with a dollar value associated with the services provided.
All of the partners planned to provide in-kind services, such as educational classes, literacy
training, computer classes, and other sessions to enhance the self-sufficiency skills of the
residents. However, none of the documentation provided was verifiable as required. This
condition occurred because the Authority was not aware of the requirements. Regulations at 24
CFR 85.24(b)(6) required the Authority to maintain records of costs and third-party in-kind
contributions. The regulations require costs and third-party in-kind contributions counting
toward satisfying a cost-sharing or matching requirement to be verifiable from the records of
grantees and subgrantees. The records must also show how the value of the in-kind contributions
was determined. Without verifiable documentation, HUD had no assurance that the Authority
met the 25 percent match requirement.

Conclusion
The Authority did not always administer its ROSS program in accordance with applicable HUD
requirements, and the allegation in the complaint had merit. The Authority did not maintain
documentation to support program accomplishment data reported to HUD and salary and fringe
benefit costs paid to its service coordinator. It also incurred ineligible costs for training that
HUD had not approved in advance and for payments it made to a public housing resident who
did not perform duties related to a grant. In addition, it could not support in-kind service
contributions from community partners totaling $243,750 as required. As a result, the Authority
could not show that disbursements totaling $401,859 complied with program requirements, and it
incurred ineligible expenses totaling $10,250.

Recommendations
We recommend that the Director of HUD’s Baltimore Office of Public Housing require the
Authority to




7
    Federal Register Notice 5500-N-08
8
    Federal Register Notices 5500-N-08, 5800-N-03, 5700-N-07, 5600-N-30
9
    $975,000 x .25 = $243,750


                                                     6
         1A.      Provide documentation to support program accomplishment data related to
                  disbursements totaling $292,611 10 or repay HUD from non-Federal funds for any
                  amount that it cannot support.

         1B.      Provide documentation to support salary and fringe benefit costs totaling
                  $109,248 or repay HUD from non-Federal funds for any amount that it cannot
                  support.

         1C.      Repay HUD $6,850 from non-Federal funds for the ineligible training costs that
                  were not approved in advance.

         1D.      Repay HUD $3,400 from non-Federal funds for the ineligible payments made to
                  the public housing resident.

         1E.      Provide documentation to show that it verified the value of the matching in-kind
                  contributions identified in the audit report.

         1F.      Develop and implement controls to ensure that it complies with applicable
                  program requirements, thereby putting $2,444 in unspent training funds from one
                  grant to better use.

         1G.      Develop and implement controls to ensure that in-kind contribution amounts are
                  verified.

We also recommend that the Director of HUD’s Baltimore Office of Public Housing

         1H.      Provide technical assistance to the Authority to ensure that its administration of its
                  ROSS grants complies with applicable requirements.




10
     Disbursements from both Robinwood Tenant Council grants MD001RPS186A011 ($240,000) and
     MD001RPS009A014 ($58,455) were unsupported. To avoid double counting, we reduced the total by $2,444
     reported in recommendation 1C and by $3,400 reported in recommendation 1D ($298,455-$2,444-$3,400 =
     $292,611).


                                                      7
Scope and Methodology
We conducted the audit from December 2015 through July 2016 at the Authority’s office located
at 1217 Madison Street, Annapolis, MD, and our offices located in Baltimore, MD, and
Richmond, VA. The audit covered the period July 2013 to November 2015 but was expanded
when necessary.

To accomplish our objective, we reviewed
     •    Applicable laws, regulations, HUD’s program requirements at 2 CFR Part 225 and 24
          CFR Part 85, and other guidance.
     •    The Authority’s grant files, annual audited financial statements for fiscal years 2013 and
          2014, policies and procedures, and organizational chart.
     •    Grant agreements, partnership agreements with the Authority’s site-based tenant
          councils, and the Authority’s grant fund draws for program activities.

We also interviewed Authority employees and HUD staff.

To achieve our audit objective, we relied in part on computer-processed data from the
Authority’s computer system. We used the data to identify program expenditures for review.
Although we did not perform a detailed assessment of the reliability of the data, we did perform
a minimal level of testing and found the data to be adequate for our purposes.
We used HUD’s Line of Credit Control System 11 to determine that HUD awarded four ROSS
grants totaling $975,000 to the Authority and its site-based tenant councils during the period
2011 to 2015. We used the Authority’s automated data to determine that during the period July
2013 to November 2015, it made 68 draws totaling $519,800. We sorted the draws in
descending dollar value order and selected the 20 largest draws totaling $225,260 for review
during the survey. Based on our survey results, we expanded our review to include $75,047 in
expenditures for training and salary and fringe benefit costs that were part of the other 48 draws.
Therefore, we reviewed a total of $300,307 in expenditures, which represented 58 percent 12 of
the expenditures during our audit period (appendix D). Although this approach did not allow us
to make a projection to the population, it was sufficient to meet the audit objective.
We determined that $2,444 of funds could be put to better use if the Authority implements our
recommendation. It will do so by not incurring ineligible training expenses against the $6,000
budget line item for training under from Robinwood Tenant Council grant MD001RPS009A014
and, instead, spend those funds on eligible training expenses. We determined that $2,444 could
be put to better use because both of Robinwood Tenant Council’s grants had $6,000 budgeted for

11
     The Line of Credit Control System is HUD’s primary grant disbursement system, handling disbursements for the
     majority of HUD programs, including the ROSS program.
12
     $300,307 / $519,800 = 58 percent


                                                        8
training. We found that the Authority used $2,444 of the $6,000 from grant
MD001RPS186A011 for ineligible training expenses because it did not obtain HUD approval in
advance as required. By preventing this condition from occurring in the future, the Authority
can avoid incurring ineligible training expenses against the unspent budget line item for training
under grant MD001RPS009A014.
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.




                                                 9
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 program operations – Policies and procedures that
    management has implemented to reasonably ensure that a program meets its objectives.
•   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.
•   Compliance with applicable laws and regulations – Policies and procedures that management
    has implemented to reasonably ensure that program participants comply with program 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 Authority lacked controls to ensure that it administered its program in accordance with
    applicable HUD requirements (finding).




                                                  10
Appendixes

Appendix A


          Schedule of Questioned Costs and Funds To Be Put to Better Use
        Recommendation                                    Funds to be put
                           Ineligible 1/ Unsupported 2/    to better use 3/
            number
                1A                                $292,611
                1B                                109,248
                1C             $6,850
                1D              3,400
                1F                                                    $2,444
              Totals            10,250            401,859              2,444


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.
3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (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, if the Authority implements our
     recommendation, it will not incur ineligible training expenses against the budget line item
     for training under Robinwood Tenant Council grant MD001RPS009A014 and, instead,
     will spend those funds on eligible training expenses.




                                             11
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1


Comment 2


Comment 3


Comment 4




                              12
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




                              13
                         OIG Evaluation of Auditee Comments


Comment 1   The Authority asserted that the duties of the resident service manager and the
            service coordinator are basically the same. Although the positions serve the same
            clientele and have the same goals, the work of the service coordinator to
            administer self-sufficiency activities was covered under the grant and the work of
            the resident manager was not covered under the grant. As stated in the audit
            report, regulations require employees who work on multiple activities to distribute
            their salaries and fringe benefits to reflect an after-the-fact distribution of actual
            activities. Since the service coordinator charged all of her time to the grant
            although she was splitting her time between the two roles, the expenditures
            totaling $109,248 for salary and benefit costs were unsupported.

Comment 2   The Authority asserted that it requested approval for the training from the
            designated HUD point of contact but it received no response to its request. The
            Authority provided no documentation to support its assertion. Regardless of the
            Authority’s attempt to obtain approval, the grant agreement required the
            Authority to obtain HUD approval in advance for program-related training
            sessions outside of the local area.

Comment 3   The Authority stated that it could not locate documentation to support this finding
            but asserted that it received an abundance of supportive services from a number of
            providers. As stated in our recommendation, the Authority has the opportunity to
            provide documentation to show that it verified the value of the matching in-kind
            contributions identified in the audit report. As part of the audit resolution process,
            the Authority will provide documentation to HUD to demonstrate that it met the
            25 percent match requirement. If it cannot demonstrate that it met this
            requirement, HUD may take remedial action against the Authority as described in
            the grant agreements.

Comment 4   The Authority stated that it is developing a plan to monitor the activities of its
            grant more effectively and that it has developed a monthly tracking system to
            collect reports and other documentation from the service coordinators for
            individuals needing to meet their community service requirement. We did not
            verify these actions. As part of the audit resolution process, HUD will evaluate
            the corrective actions taken by the Authority to ensure that they satisfy the
            recommendations.




                                             14
Appendix C


                 Grant Award and Disbursement Data as of May 2016
                                        Grant
                                                  Grant     Disbursed    Grant
    Grantee          Grant number       award
                                                 amount      amount     balance
                                         year
Robinwood Tenant
                   MD001RPS009A014       2014   $246,000     $58,455    $187,545
     Council
Housing Authority
  of the City of   MD001RPS037A013       2013    246,000      151,228    94,772
   Annapolis
  Morris Blum
                   MD001RPS015A012       2012    243,000      229,821    13,179
 Tenant Council
Robinwood Tenant
                   MD001RPS186A011       2011    240,000      240,000      0
     Council
     Totals                                      975,000     679,504    295,496




                                       15
Appendix D


                           Ineligible and Unsupported Costs by ROSS Grant
                        Grant award            Grant           Amount           Ineligible       Unsupported
       Grantee
                           year               amount           reviewed          amount            amount
  Robinwood
                             2014             $246,000          $33,184              $0              $58,455
 Tenant Council
    Housing
 Authority of the
                             2013              246,000           115,220             0               109,248
     City of
   Annapolis
  Morris Blum
                             2012              243,000           63,665            4,406                 0
 Tenant Council
  Robinwood
                             2011              240,000           88,238            5,844             234,156
 Tenant Council
                 Totals                        975,000           300,307           10,250           401,859 13




13
     The total unsupported amount is larger than the amount of expenditures reviewed because based on the results of
     our review of a sample of expenditures, we determined that all of the expenditures related to the Robinwood
     Tenant Council grants were unsupported because the Authority did not maintain documentation to support its
     reported accomplishments.


                                                         16