oversight

Hamilton County, OH, and People Working Cooperatively, Inc., Did Not Always Comply With HUD's Requirements in the Use of Community Development Block Grant Funds for a Housing Repair Services Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-09-27.

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

                   Hamilton County, OH
        Community Development Block Grant Program




Office of Audit, Region 5       Audit Report Number: 2018-CH-1008
Chicago, IL                                     September 27, 2018



                            2
To:            Jorgelle Lawson, Director of Community Planning and Development, 5ED
               //signed//
From:          Kelly Anderson, Regional Inspector General for Audit, 5AGA
 
Subject:       Hamilton County, OH, and People Working Cooperatively, Inc., Did Not Always
               Comply With HUD’s Requirements in the Use of Community Development
               Block Grant Funds for a Housing Repair Services Program
 

Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of Hamilton County’s subrecipient agreement with
People Working Cooperatively, Inc., for a Community Development Block Grant-funded
housing repair services 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 website. Accordingly, this report will be posted at
http://www.hudoig.gov. 
If you have any questions or comments about this report, please do not hesitate to call me at
312-913-8499. 
                   Audit Report Number: 2018-CH-1008
                   Date: September 27, 2018

                   Hamilton County, OH, and People Working Cooperatively, Inc., Did Not
                   Always Comply With HUD’s Requirements in the Use of Community
                   Development Block Grant Funds for a Housing Repair Services Program


Highlights

What We Audited and Why
We audited Hamilton County’s subrecipient agreement with People Working Cooperatively, Inc.
(corporation), for a Community Development Block Grant-funded housing repair services
program based on a request from the U.S. Department of Housing and Urban Development’s
(HUD) Columbus Office of Community Planning and Development concerning information the
Office received regarding the program, which it did not have the resources to review. The audit
was part of the activities in our fiscal year 2018 annual audit plan. Our objective was to
determine whether the County and corporation complied with HUD’s requirements in the use of
Block Grant funds for the program.

What We Found
The County and corporation did not always comply with HUD’s requirements in the use of
Block Grant funds for the program. Specifically, the County did not ensure that (1) it required
the corporation to submit source documentation before providing it with Block Grant funds for
housing repair services, (2) it provided the corporation Block Grant funds for eligible program
expenses, (3) two households were eligible for assistance under the program, (4) it properly
documented compliance with HUD’s environmental review procedures, (5) the corporation
notified the County before completing a third emergency repair job for households within a grant
year, (6) a member of a household associated with an accessibility modification was disabled,
and (7) the corporation reduced all of the program income it received from its invoices for
housing repair services. As a result, more than $10,000 in Block Grant funds was not available
for eligible expenses of the program, and HUD and the County lacked assurance that nearly
$13,000 in Block Grant funds was used in accordance with HUD’s requirements.

What We Recommend
We recommend that the Director of HUD’s Columbus Office of Community Planning and
Development require the County to (1) reimburse its Block Grant program from non-Federal
funds for inappropriate expenses, (2) support or reimburse its Block Grant program from non-
Federal funds for expenses for which the corporation lacked sufficient documentation to support,
and (3) implement adequate procedures and controls to address the weaknesses cited in this audit
report.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding: The County and Corporation Did Not Always Comply With HUD’s
                  Requirements in the Use of Block Grant Funds for the Program ............... 5

Scope and Methodology .........................................................................................14

Internal Controls ....................................................................................................16

Appendixes ..............................................................................................................17
         A. Schedule of Questioned Costs .................................................................................. 17
         B. Auditee Comments and OIG’s Evaluation ............................................................. 18
         C. Applicable Requirements ......................................................................................... 33




                                                              2
Background and Objective
Hamilton County is an entitlement grantee that received an annual allocation from the U.S.
Department of Housing and Urban Development (HUD) of more than $2.8 million in
Community Development Block Grant funds in fiscal years 2015 through 2017. The
Community Development Division within the County’s Planning and Development Department
administers the County’s Block Grant program. The Community Development Division’s
mission is to provide quality affordable housing programs, community and economic
development programs and services, and homelessness prevention programs throughout the
County in accordance with Federal rules and regulations and as directed by the board of County
commissioners. The County’s records are located at 138 East Court Street, Cincinnati, OH.
The County entered into a subrecipient agreement with People Working Cooperatively, Inc.
(corporation) to provide the corporation with $665,000 in Block Grant funds for a housing repair
services program for the period April 1, 2015, through March 31, 2016. The County renewed the
subrecipient agreement in 2016 and 2017.1 The program provides emergency and critical home
repairs, including accessibility modifications, to very low-income homeowners, particularly
homeowners who are elderly or have a disability. The County provided the corporation more
than $1.7 million in Block Grant funds for 1,668 housing repair service jobs that the corporation
invoiced on April 2015 through November 2017 billing statements.2
Incorporated in 1975, the corporation is a non-profit organization serving low-income, elderly,
and disabled homeowners. The corporation strengthens communities by providing professional,
critical home repairs, weatherization, modification, and maintenance services. Its mission is to
perform critical home repairs and services so that low-income homeowners can remain in their
homes, living independently and healthier in a safe, sound environment. The corporation
provides services to homeowners in Ohio, Indiana, and Kentucky, and its records are located at
4612 Paddock Road, Cincinnati, OH. 
Our objective was to determine whether the County and corporation complied with HUD’s
requirements in the use of Block Grant funds for the program. Specifically, we wanted to
determine whether (1) the County required the corporation to submit source documentation
before providing it with Block Grant funds for housing repair services, (2) the County provided
the corporation Block Grant funds for eligible expenses of the program, (3) households were
eligible for assistance under the program, (4) the County properly documented compliance with
HUD’s environmental review procedures, (5) the corporation completed a third emergency repair
job for households within a grant year without notifying the County, (6) at least one member of a



1
  The renewals included $665,000 in Block Grant funds for the periods April 1, 2016, through March 31, 2017, and
  May 1, 2017, through March 31, 2018.
2
  The more than $1.7 million included more than $106,000 in program income that the corporation was allowed to
  retain and use for its program.


                                                        3
household associated with an accessibility modification was disabled, and (7) the County
ensured that the corporation reduced program income it received from its invoices for housing
repair services.




                                               4
Results of Audit

Finding: The County and Corporation Did Not Always Comply
With HUD’s Requirements in the Use of Block Grant Funds for the
Program
The County and corporation did not always comply with HUD’s requirements in the use of
Block Grant funds for the program.3 Specifically, the County did not ensure that (1) it required
the corporation to submit source documentation before providing it with Block Grant funds for
housing repair services, (2) it provided the corporation Block Grant funds for eligible program
expenses, (3) two households were eligible for assistance under the program, (4) it properly
documented compliance with HUD’s environmental review procedures, (5) the corporation
notified the County before completing a third emergency repair job for households within a grant
year, (6) a member of a household associated with an accessibility modification was disabled,
and (7) the corporation reduced all of the program income it received from invoices for housing
repair services. These weaknesses occurred because the County and corporation lacked adequate
procedures and controls to ensure compliance with HUD’s requirements in the use of Block
Grant funds for the program. As a result, more than $10,000 in Block Grant funds was not
available for eligible expenses of the program, and HUD and the County lacked assurance that
nearly $13,000 in Block Grant funds was used in accordance with HUD’s requirements.
The County Did Not Require the Corporation To Submit Source Documentation
The County did not require the corporation to submit source documentation, such as invoices and
time sheets, before providing Block Grant funds for the housing repair services as required by
HUD’s regulations at 24 CFR (Code of Federal Regulations) 570.506. As a result of our audit,
the County began requesting source documentation in February 2018.
The County Did Not Ensure That Block Grant Funds Were Used for Eligible Expenses
The County Provided Block Grant Funds for Labor, Which Exceeded Actual Labor Costs
We reviewed the nearly $15,400 in Block Grant
funds the County provided to the corporation           The County provided Block Grant
for labor associated with 21 of the 23 jobs
reviewed. Contrary to regulations at 2 CFR
                                                       funds for labor, which exceeded actual
200.403 and 200.404, the amount provided               labor costs by more than 31 percent.
exceeded actual labor costs by $4,822 (31.3
percent). The subrecipient agreement allowed the corporation to charge the County a labor rate
of nearly $48 per hour. However, the corporation provided documentation showing that the
hourly rate, including fringe benefits, for 35 of the corporation’s 37 employees who charged time




3
    See appendix C of this audit report for the applicable requirements.


                                                            5
to one or more of the jobs, was less than $48. Therefore, the labor rate in the subrecipient
agreement was improper. The County also inappropriately provided the corporation $988 in
Block Grant funds for indirect costs associated with the excessive labor costs.4 The County’s
community development administrator stated that the County assumed that the corporation
provided the County with supporting documentation to justify the rate of nearly $48. The
community development administrator added that failing to ensure that the rate was reasonable
and supported was an oversight by the County.
Although we did not perform a 100 percent review of the labor costs associated with all 1,668
jobs that the corporation invoiced on April 2015 through November 2017 billing statements, we
estimated, based on the results of our representative sample of 20 of the 1,660 jobs that did not
exceed $3,000 in total costs,5 that the County provided the corporation more than $317,000 in
Block Grant funds for excessive labor costs associated with the remaining 1,640 jobs (1,660 - the
20 jobs reviewed). We estimated that the County also inappropriately provided the corporation
nearly $65,000 in Block Grant funds for indirect costs associated with the excessive labor costs.6
The Corporation Lacked Sufficient Documentation To Support That Costs for Materials and
Services Were Reasonable and Included a Surcharge on Materials
We reviewed the nearly $18,800 in Block Grant funds that the County provided to the
corporation for materials and services associated with 20 of the 23 jobs reviewed. The
corporation did not solicit competitive quotations or maintain sufficient documentation to
support that costs were reasonable for nearly $5,000 (26.4 percent) in materials and services as
required by regulations at 2 CFR 200.320(a). The County’s community development
administrator and the corporation’s president stated that the County and corporation were not
aware of the level of documentation required to support that a cost was reasonable. The
president added that due to the amount of materials and services acquired by the corporation,
many of which were low in cost, obtaining documentation to support that each cost was
reasonable would not be an efficient use of the corporation’s time or resources. However, as a
result of our audit, the corporation obtained and provided sufficient documentation to support
that the costs for the nearly $5,000 in materials and services were reasonable.
Further, the corporation inappropriately included a 4 percent surcharge on all materials for 16
jobs, which resulted in an overpayment of $182. The corporation’s president stated that
assessing a surcharge on materials was a common business practice in the private sector. The
corporation’s previous contracts with the County included the surcharge, and the corporation was
not aware that the surcharge was not included in the subrecipient agreement. According to the
County’s community development administrator, the County identified the surcharge during its
November 2017 monitoring of the corporation. However, the County did not include the issue in
its January 2018 monitoring letter to the corporation and did not provide support that it notified
the corporation in writing that the surcharge was inappropriate until after we identified it in our




4
  Indirect costs associated with the 23 jobs were nearly 20.5 percent of direct job costs.
5
  See the Scope and Methodology section.
6
  Indirect costs associated with the 1,640 jobs were nearly 20.5 percent of direct job costs.


                                                           6
audit. The corporation’s chief financial officer stated that as a result of our audit, the corporation
did not include the 4 percent surcharge on materials in its January 2018 invoice for housing
repair services and would include only actual costs for materials on future invoices.
The Corporation Lacked Sufficient Documentation To Support Indirect Costs
We reviewed the $7,128 in Block Grant funds the County provided to the corporation for indirect
costs associated with the 23 jobs. The following table shows the subrecipient agreement period
for each applicable grant year, the number of jobs, and the amount of Block Grant funds the
County provided to the corporation for indirect costs associated with the 23 jobs reviewed.

                                                                           Number
               Subrecipient agreement period (grant year)                                  Amount
                                                                           of jobs
               April 1, 2015, through March 31, 2016 (2015)                    13              $4,800
               April 1, 2016, through March 31, 2017 (2016)                     6               1,699
               May 1, 2017, through March 31, 2018 (2017)                      4                  629
                                      Totals                                   23               7,128

The amount provided for the indirect costs was nearly 17 (16.998) percent of the corporation’s
total job costs as allowed in the indirect cost allocation plan in the subrecipient agreement and
continued in the renewals of the agreement.7 The indirect cost allocation plan was supported by
the corporation’s consolidated statements of functional expenses, which showed that general and
administrative expenses were approximately 17.7, 17.9, and 17.1 percent of the total functional
expenses for the years ended December 31, 2014, 2015, and 2016, respectively.8 However, the
general and administrative expenses for the years ended December 31, 2014 and 2015, included
direct lobbying expenses. Further, the corporation did not allocate indirect costs to the direct
lobbying expenses as required by regulations at 2 CFR 200.405(b).
In response to our audit, the corporation provided schedules showing the total general and
administrative expenses without the direct lobbying expenses. Based on the schedules, the total
general and administrative expenses were nearly 17 (16.999) and 17.1 percent of the total
functional expenses for the years ended December 31, 2014 and 2015, respectively. However,
the corporation’s chief financial officer said that a small portion of lobbying-related expenses
would also be included as part of the salaries allocated to general and administrative expenses.9
The chief financial officer added that the amount would be difficult to determine.




7
  Exhibit B of the subrecipient agreement stated that indirect costs would be 17 percent of the total costs of the
  program. This is nearly 20.5 percent of the direct costs.
8
  The consolidated statements of functional expenses for the years ended December 31, 2014, 2015, and 2016, were
  used to support the indirect cost allocation plan in the subrecipient agreement, the 2016 renewal of the agreement,
  and the 2017 renewal of the agreement, respectively.
9
  Such salaries would have included employees’ time spent reviewing and discussing lobbying activities and
  reviewing, processing, and paying lobbying invoices.


                                                          7
In addition, the corporation’s general and administrative expenses for the years ended December
31, 2015 and 2016, also included rent paid for a warehouse in Indiana. However, according to
the chief financial officer, the warehouse was not associated with the County and did not directly
or indirectly benefit the County’s Block Grant-funded program.
Therefore, the total general and administrative expenses without direct lobbying expenses and
rent for the warehouse in Indiana, as applicable, were nearly 17 (16.999), 17.1 (17.068), and 17.1
(17.051) percent of the total functional expenses for the years ended December 31, 2014, 2015,
and 2016, respectively.
Because a small portion of lobbying-related expenses would also be included as part of the
salaries allocated to general and administrative expenses and the corporation did not allocate
indirect costs to the direct lobbying expenses, we were unable to determine whether the County
provided Block Grant funds for indirect costs that included lobbying-related expenses. However,
it appeared that the County provided the corporation Block Grant funds for indirect costs, which
included an unknown amount of lobbying-related expenses, during at least the subrecipient
agreement period from April 1, 2015, through March 31, 2016. This is because the County
provided Block Grant funds for indirect costs at a percentage of the corporation’s total job costs
(16.998), which was approximately the same as the percentage of the corporation’s general and
administrative expenses without direct lobbying expenses in relation to total functional expenses
for the year ended December 31, 2014 (16.999).
The corporation’s president stated that based on a history of clean financial statement audits, the
corporation was not aware of changes that needed to be made to improve its accounting for
indirect costs. The president added that the general and administrative expenses in the
corporation’s consolidated statements of functional expenses did not include a number of
delivery costs critical to completing the subrecipient agreement and these expenses were neither
directly nor indirectly reimbursed by the County. Therefore, the corporation disagreed that
lobbying expenses were paid for through the subrecipient agreement. However, the corporation
did not provide sufficient documentation to support these statements.
The County’s community development administrator stated that the County did not realize that
the corporation’s indirect cost allocation plan included lobbying-related expenses because it had
not conducted an indepth review of the plan. The community development administrator stated
that future subrecipient agreements with the corporation would no longer include indirect costs
as an eligible expense.
The Corporation Lacked Sufficient Documentation To Support Household Eligibility
The County did not ensure that the corporation provided housing repair services to eligible
households as required by the subrecipient agreement. The corporation lacked sufficient
documentation to support that households associated with 3 of the 23 jobs reviewed were eligible
for assistance. Contrary to HUD’s requirements, the corporation used income documentation
that was more than 12 months old to calculate the income for the households associated with two
jobs. The County provided the corporation $2,080 in Block Grant funds for the two jobs (more
than $1,400 for job number 264535 + nearly $700 for job number 316196).




                                                 8
Further, the corporation lacked sufficient documentation to support the household size associated
with another job. The household’s application, dated March 29, 2017, included four members.
However, two of the members had been crossed out. In addition, a notarized letter, dated March
14, 2017, stated that the two individuals with their names crossed out were not part of the
household. With only two members, the household was not income eligible. The corporation
then provided a notarized letter, dated April 18, 2017, stating that one of the two individuals who
was crossed out had zero income for the previous 12 months. The letter did not state that the
individual was a member of the household. The corporation determined that the household was
income eligible on April 27, 2017. As a result of our audit, the corporation obtained and
provided a notarized letter, dated April 25, 2018, stating that the individual had moved back into
the house in April 2017 and still lived in the house.
In addition, the corporation did not always verify household income as required by the
subrecipient agreement. Although the corporation had notarized letters for two members of
separate households stating that the members were not receiving income when their income was
verified, the corporation calculated annual income using old wage and tax statements.
The corporation’s director of administration services stated that the corporation recertified a
household’s income based on when the corporation originally certified the household’s income
rather than the age of the income documentation used in the original certification.
The County Did Not Comply With Environmental Review Procedures
The County determined that all 23 jobs reviewed were exempt activities under regulations at 24
CFR 58.34(a)(10). However, the repairs did not qualify as exempt under section 58.34(a)(10)
because the activities were not necessary to control or arrest the effects from disasters or
imminent threats to public safety.10 Twenty of the jobs qualified as categorically excluded
activities under regulations at 24 CFR 58.35(b)(3). The remaining three jobs qualified as
categorically excluded activities under regulations at 24 CFR 58.35(a)(3)(i). In documenting
compliance for the jobs as exempt activities, the County met the requirement of documenting
compliance with applicable requirements at 24 CFR 58.6. However, for the three jobs that
qualified as categorically excluded activities at 24 CFR 58.35(a)(3)(i), it did not document
compliance with applicable requirements at 24 CFR 58.5. As a result of our audit, the County
provided corrected environmental review determinations for all 23 jobs.
Further, the County did not document its environmental review determinations before the start of
each job as required by regulations at 24 CFR 58.22(b). It documented the environmental review
determinations an average of 121 days after the jobs had started.
The County’s community development administrator stated that the County and the contractor
that conducted environmental reviews for the jobs associated with the housing repair services
program lacked an adequate understanding of HUD’s requirements regarding environmental




10
     The repairs included such items as plumbing, heating, and electrical maintenance and repairs, and roof and system
     replacements in owner-occupied homes.


                                                           9
reviews. In addition, the County believed that the environmental review determinations were not
required to be documented before work started for emergency repairs.
The County Was Not Properly Notified Before Third Emergency Repairs Were Completed
We also reviewed all 1,668 jobs for which the County provided the corporation Block Grant
funds to determine whether the corporation completed a third emergency repair job for a
household within a grant year without notifying the County. The County’s community
development administrator stated that when the subrecipient agreement limited emergency
repairs to two for a household per year, year meant the grant year.
The County provided the corporation nearly $35,000 in Block Grant funds for 44 third or fourth
emergency repair jobs completed within a grant year. However, the corporation could not
provide support showing that it notified the County before it completed 37 (84.1 percent) of the
jobs totaling $31,235 (90 percent).
The corporation’s director of administrative services said that the corporation tracked emergency
repair jobs by calendar year.11 However, the County provided the corporation nearly $33,000 in
Block Grant funds for 34 third or fourth emergency repair jobs completed within a calendar year,
and the corporation could not provide support showing that it notified the County before it
completed 31 (91.2 percent) of the jobs totaling $29,130 (89.6 percent).
According to the corporation’s president, the corporation disregarded its responsibility to notify
the County before it completed third emergency repairs based on a diminished relationship with
the County. The County’s community development administrator stated that the County
assumed that the corporation notified the County of all third emergency repairs.
As a result of our audit, the County provided third emergency requests from the corporation,
which it retroactively approved for all 37 of the third or fourth emergency repair jobs that were
completed within a grant year for which the corporation could not provide support showing that
it notified the County before it completed the jobs.
The Corporation Lacked Sufficient Documentation to Support That a Household Member
Was Disabled
We selected all 11 jobs exceeding $2,500 to determine whether the jobs were emergency or
critical repairs and the corporation requested and received approval from the County if required.
The County provided the corporation $48,991 in Block Grant funds for the 11 jobs. Although
the corporation listed 10 of the 11 jobs as emergency repairs in the documentation it provided to
the County, the corporation stated that all 11 jobs should have been listed as critical repairs.




11
     Therefore, we also reviewed all 1,668 jobs to determine whether the corporation completed a third emergency
     repair job for a household within a calendar year without notifying the County. The purpose of this review was to
     determine whether the corporation was notifying the County before completing a third emergency repair job for a
     household based on calendar year rather than grant year due to a misunderstanding of the language in the
     subrecipient agreement.


                                                           10
Therefore, the jobs would not have been subject to the $2,500 limit for emergency repairs.
Further, the jobs did not exceed $10,500, the limit for critical repairs.
In addition, the corporation stated that 8 of the 11 critical repair jobs, totaling $28,087, included
accessibility modifications for clients with physical disabilities. However, the corporation did
not maintain sufficient documentation to support that a member of one of the households was
physically disabled as required by regulations at 2 CFR 200.403 and in accordance with the
subrecipient agreement. The County provided the corporation $4,953 in Block Grant funds for
the job (job number 285743).
The corporation’s president stated that the corporation relied on visual evidence to support that a
member of a household was physically disabled. The president added that the County did not
ask for documentation to support physical disabilities.
Program Income Received Was Not Always Reduced From the Corporation’s Invoices
The County did not ensure that the corporation reduced all of the program income it received
from its invoices for housing repair services as required by the subrecipient agreement.
Although the corporation reduced its April 2015 through November 2017 invoices to the County
by more than $106,000 in program income from loan repayments, it did not include $4,127 in
interest from two loan repayments it received in August and December 2015 as program income.
Therefore, the County inappropriately provided the corporation more than $4,100 in Block Grant
funds for housing repair services. The corporation’s controller stated that he did not realize that
program income included the interest on loans made using Block Grant funds.
Further, the corporation mistakenly reduced its 2015 invoices to the County by $3,979. The
nearly $4,000 included income from loan repayments associated with other programs or other
funding sources and adjustments that were not program income. The corporation then increased
its January 2016 invoice by $4,086 to account for the nearly $4,000 that it mistakenly reduced
from the 2015 invoices. However, the corporation generally could not explain the $107
difference. According to the corporation’s controller, the mistakes that occurred in 2015 were a
result of new staff members who lacked the initial training to correctly account for program
income.
As a result of our audit, the corporation reduced its January and February 2018 invoices to the
County by $107 and $4,127, respectively. The County’s community development administrator
stated that the County would apply the amounts as credits to future invoices once we completed
our review.
Conclusion
The weaknesses described above occurred because the County and corporation lacked adequate
procedures and controls to ensure compliance with HUD’s requirements in the use of Block
Grant funds for the program. As a result, more than $10,000 in Block Grant funds was not
available for eligible expenses of the program, and HUD and the County lacked assurance that
nearly $13,000 in Block Grant funds was used in accordance with HUD’s requirements.




                                                  11
Recommendations
We recommend that the Director of HUD’s Columbus Office of Community Planning and
Development require the County to
           1A.      Implement adequate procedures and controls to ensure that it obtains and reviews
                    source documentation, such as invoices and time sheets, to support that expenses
                    are eligible before providing Block Grant funds to the corporation for housing
                    repair services.
           1B.      Reimburse its Block Grant program from non-Federal funds for the $5,810 it
                    provided to the corporation for labor that exceeded actual labor costs (more than
                    $4,800) and indirect costs associated with the excessive labor costs (nearly
                    $1,000).
           1C.      Review the labor costs associated with the remaining 1,645 (1,668 - 23 reviewed)
                    jobs that we did not review to determine whether the Block Grant funds it
                    provided the corporation for labor exceeded the actual labor costs for each job. If
                    the labor exceeded the actual labor cost for a job, the County should reimburse its
                    Block Grant program from non-Federal funds for the excessive labor costs and the
                    indirect costs associated with the excessive labor costs that the County provided
                    to the corporation.
           1D.      Implement adequate procedures and controls to ensure that it does not provide the
                    corporation Block Grant funds for excessive labor costs.
           1E.      Implement adequate procedures and controls to ensure that sufficient
                    documentation is maintained to support that the cost of materials and services
                    acquired for the program is reasonable.
           1F.      Reimburse its Block Grant program from non-Federal funds for the $182 it
                    provided to the corporation for a 4 percent surcharge that was inappropriately
                    included on all materials.
           1G.      Support or reimburse its Block Grant program from non-Federal funds for the
                    $6,140 it provided to the corporation for indirect costs for which the corporation
                    lacked sufficient documentation to support whether the indirect costs included
                    lobbying-related expenses.12
           1H.      Support or reimburse its Block Grant program from non-Federal funds for the
                    $1,541 it provided to the corporation for jobs for which the corporation lacked




12
     We did not include $988 in Block Grant funds the County provided to the corporation for indirect costs for which
     the corporation lacked sufficient documentation to support whether the indirect costs included lobbying-related
     expenses because we included that amount in recommendation 1B.


                                                          12
                    sufficient income documentation to support that the households were eligible for
                    assistance.13
           1I.      Implement adequate procedures and controls to ensure that sufficient income
                    documentation is maintained to ensure that households are eligible for assistance
                    under the program and income is verified in accordance with HUD’s requirements
                    and the subrecipient agreement.
           1J.      Implement adequate procedures and controls to ensure that it properly documents
                    compliance with HUD’s environmental review procedures before the start of each
                    job.
           1K.      Implement adequate procedures and controls to ensure that third emergency
                    repairs are documented in writing and reported to the County before completion
                    of assistance in accordance with the subrecipient agreement.
           1L.      Support or reimburse its Block Grant program from non-Federal funds for the
                    $4,953 it provided to the corporation for one job for which the corporation lacked
                    sufficient documentation to support that a member of the household was
                    physically disabled.
           1M.      Implement adequate procedures and controls to ensure that sufficient
                    documentation is maintained to support that accessibility modifications are
                    provided only to households with at least one member who is physically disabled.
           1N.      Reimburse its Block Grant program from non-Federal funds for the $4,127 it
                    inappropriately provided to the corporation due to not ensuring that the
                    corporation reduced all of its program income from its invoices for housing repair
                    services.
           1O.      Support or reimburse its Block Grant program from non-Federal funds for the
                    $107 it provided to the corporation for the January 2016 invoice that the
                    corporation generally could not explain.
           1P.      Implement adequate procedures and controls to ensure that the corporation
                    reduces program income from its invoices for housing repair services.




13
     We did not include $539 in Block Grant funds the County provided to the corporation for jobs for which the
     corporation lacked sufficient income documentation to support that the households were eligible for assistance
     because we included $532 in recommendation 1B and $7 in recommendation 1F.


                                                           13
Scope and Methodology
We performed our onsite audit work between January and April 2018 at the County’s
administration building and the corporation’s office located at 138 East Court Street, Cincinnati,
OH, and 4612 Paddock Road, Cincinnati, OH, respectively. The audit covered the period April
2015 through December 2017.
To accomplish our objective, we reviewed

          Applicable laws, Federal regulations at 2 CFR Part 200, HUD’s regulations at 24 CFR
           Parts 58 and 570, and HUD’s grant agreements with the County for Block Grant funds.

          The County’s consolidated plan for 2015 through 2019, audited financial statements,
           subrecipient agreement with the corporation for the program, renewals of the subrecipient
           agreement, procedures, financial records, monitoring reports for the corporation’s
           program, and organizational charts.

          The corporation’s accounting and financial records, audited financial statements, policies
           and procedures, program documentation, and organizational charts.
In addition, we interviewed employees of the County and corporation and HUD’s staff.
The County provided the corporation more than $1.7 million in Block Grant funds for 1,668
housing repair service jobs that the corporation invoiced on April 2015 through November 2017
billing statements.14
During our survey, we selected for review 23 of the jobs totaling nearly $42,000 in Block Grant
funds. First, we selected a representative nonstatistical sample of 20 of the jobs totaling more
than $21,000 from the 1,660 jobs that did not exceed $3,000. We used a representative
nonstatistical sample during the survey because the number of jobs was too large to review 100
percent, we were determining whether we should review additional jobs during our audit, and we
were not projecting the results to the population that we did not review. We also selected a
nonstatistical sample of three of the jobs totaling nearly $21,000 from the remaining eight jobs.
We used a nonstatistical sample because we knew enough about the population to identify a
relatively small number of items of interest that were likely to be misstated or otherwise have a
high risk and we were not projecting the results to the population that we did not review. We
reviewed the following for the 23 jobs: expenses, including labor costs, materials and services,
and indirect costs; household income; and environmental reviews. Based on our survey results,
we decided not to review additional jobs.




14
     The 1,668 jobs included 1,660 jobs that did not exceed $3,000. The remaining eight jobs averaged approximately
     $5,100 per job.


                                                         14
Further, we selected all 1,668 jobs for review to determine whether the corporation completed a
third emergency repair job for a household within a grant year without notifying the County.
We also selected the 11 jobs that exceeded $2,500 to determine whether the jobs were
emergency or critical repairs and the corporation requested and received approval from the
County if required. The County provided the corporation nearly $49,000 for the 11 jobs.
We relied in part on computer-processed data generated by the corporation. Although we did not
perform a detailed assessment of the reliability of the data, we performed minimal levels of
testing and found the data to be adequately reliable for our purposes. 
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.




                                               15
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,

   relevance and reliability of information, 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 operations – Policies and procedures that management has
    implemented to reasonably ensure that a program meets its objectives.

   Relevance and reliability of information – Policies and procedures that management has
    implemented to reasonably ensure that operational and financial information used for
    decision making and reporting externally is relevant, reliable, and fairly disclosed in reports.

   Compliance with applicable laws and regulations – Policies and procedures that management
    has implemented to reasonably ensure that resource use is consistent with laws and
    regulations.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:

   The County and corporation lacked adequate procedures and controls to ensure compliance
    with HUD’s requirements in the use of Block Grant funds for the program (finding).




                                                  16
Appendixes

Appendix A
                                Schedule of Questioned Costs


                 Recommendation
                                        Ineligible 1/      Unsupported 2/
                     number
                         1B                       $5,810
                         1F                         182
                         1G                                          $6,140
                         1H                                           1,541
                         1L                                           4,953
                         1N                        4,127
                         1O                                             107
                       Totals                     10,119             12,741



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.




                                             17
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG
Evaluation    Auditee Comments

                                           COUNTY EXECUTIVE SUMMARY

              History

                      The Executive Summary by Board of County Commissioners on behalf of Hamilton County
              Planning and Development Department (“County”) is a summary of the County’s responses to the
              findings presented in the Draft Audit Report. The Executive Summary was prepared by the County
              to address specific issues noted in the Draft Audit Report.

                     Hamilton County is an entitlement grantee that received an annual allocation from the U.S.
              Department of Housing and Urban Development (“HUD”) roughly $2.8 million in Community
              Development Block Grant (“CDBG”) funds from 2015 through 2017.

                      The County and People Working Cooperatively (“Corporation”) have had a working
              relationship with one another for more than 30 years. Over the course of that time, PWC has a
              history of clean audits from independent auditors. In April 2015, as part of the Community
              Development Block Grant Program (“CDBG”), the County and Corporation entered into a
              subrecipient agreement to provide the Corporation $665,000 for housing repair services to low
              income residents of Hamilton County. The County renewed the subrecipient agreement in 2016
              and 2017. The County provided the corporation around $1.7 million in Block Grant funds for 1,668
              housing repair service jobs from April 2015 through November 2017.

                      As a result of email correspondence between the Corporation and the HUD office in
              Columbus, the HUD’s Office of Inspector General (“OIG”) commenced this audit of the County
              and Corporation subrecipient agreement. The objective was to determine whether the County and
              the Corporation complied with HUD’s requirements in the use of Block Grant funds for the program.

              Audit Findings

                     The County acknowledges there are some legitimate issues identified by the OIG in its Draft
Comment 1     Audit Report. However, the County also acknowledges there is no definitive statement from the
              OIG that the CDBG funds were inappropriately apportioned outside the scope of the grant.

              Format of the Audit Responses

                      The responses by the County have been presented in the form of a conclusion and short
              narrative. This includes a determination of whether the County agrees, partially disagrees, or
              disagrees with each finding. As used in the response, the conclusions are defined as follows:

              •        Agree - The County agrees, in total, with the work performed, state or federal guidelines
Comment 1     cited, and the conclusions reached by the OIG. As noted below, however, the County does not agree
              to any Finding for Recovery (FFR).




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Evaluation

             •       Partially agree - The County agrees, in part, with the work performed, state or federal
             guidelines cited, and the conclusions reached by the OIG.

             •        Partially disagree - The County disagrees, in part, with the work performed, the applicability
             of the state or federal guidelines cited, or the conclusions reached by the OIG.

             •       Disagree - The County disagrees, in total, with the work performed, the state or federal
             guidelines cited, as applicable, and the conclusions reached by the OIG

                     The County’s narratives to each of the findings in the Draft Audit Report can be found
             directly following each OIG finding. The County provided thorough responses to address issues
             that had been raised and to validate those issues or to determine where there may be professional
             disagreements with the conclusions reached by the OIG.

             Summary of the County’s Responses to the OIG Draft Audit Report

                   1. The County did not require the Corporation to submit source documentation.

Comment 2               Response: Disagree; all invoices and attached documentation were properly maintained
                        by the County in compliance with 24 CFR 570.506.

                   2. The County did not ensure Block Grant Funds were used for eligible expenses.

                        Response: Partially agree; other than a failure of the Corporation to provide adequate
Comment 3               documentation to evidence the entire labor rate set forth in the subrecipient agreement
                        with the County there is no assertion or evidence to show that the County failed to comply
                        with the remaining criteria set forth in 2 CFR 200.403. Additionally, there has been no
                        assertion, facts or evidence provided by the OIG to negate reasonableness of the labor
                        consistent with the considerations described in 2 CFR 200.404.

                   3. The Corporation lacked sufficient documentation to support costs for materials and
                      services were reasonable and included a surcharge on materials

Comment 4               Response: Partially disagree with OIG’s assertion that the Corporation lacked sufficient
                        documentation to support a) that costs for material and services were reasonable, and b)
                        the inclusion of a surcharge on materials

                   4. The Corporation lacked sufficient documentation to support indirect costs.

                        Response: Partially agree; The County acknowledges the corporation may not have
                        allocated indirect costs to the direct lobbying expenses as required by regulations at 2
Comment 5               CFR 200.405(b). However, absent a detailed calculation from the OIG, the County is



                                                               2




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Comment 5              unable to determine how much if any, of the funds asserted to be lobbying expenses that
                       should be returned.

                   5. The Corporation lacked sufficient documentation to support household eligibility.

                       Response: Agree the Corporation may have failed to provide evidence that housing repair
                       services were provided only to eligible households, as required by the subrecipient
                       agreement.

                   6. The County did not comply with Environmental Review Procedures.

                       Response: Agree

                   7. The County was not properly notified before third party repairs were completed

                       Response: Agree

                   8. The Corporation lacked sufficient documentation to support that a household member
                      was disabled.

                       Response: Agree; the County acknowledges the OIG’s assessment that the Corporation
                       may not have maintained sufficient documentation to support that a member of one of
                       the households was physically disabled as required by regulations at 2 CFR 200.403.

                   9. Program Income received was not always reduced from the Corporation invoices.

                       Response: Agree; The County acknowledges the OIG’s conclusion that the Corporation
                       may not have reduced all of the program income it received from its invoices for housing
                       repair services as required by the subrecipient agreement.

             Conclusion

                      The County’s narrative to the Draft Audit Report is to provide clarity to its position on the
             OIG’s audit findings. While the County may agree with specific findings, the County maintains its
             subrecipient agreement required compliance with the majority of issues identified by the OIG.
Comment 6    County has taken the necessary corrective actions for issues identified by the OIG and have
             instituted procedural safeguards for the future.




                                                               3




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Evaluation

                                                   COUNTY NARRATIVE

               1.    County Did Not Require the Corporation to Submit Source Documentation.

Comment 2    The County respectfully disagrees with the OIG assessment that the County did not require the
             Corporation to submit source documentation for housing services as required by HUD’s regulations
             at 24 CFR 570.506.

             The report asserts that the Corporation failed to submit source documentation, such as invoices and
             timesheets, prior to the payment of Block Grants funds by the County. HUD’s cited regulation at
             24 CFR 570.506 requires a recipient to establish and maintain sufficient records to allow HUD to
             determine if a recipient has met the requirements of this part (emphasis added). Section II.D of the
             subrecipient agreement, in fact, required the Corporation to submit invoices or other reimbursable
             billing documents detailing the services rendered, including charge rates, number of hours, materials
             or supplies consumed, and other information needed to support the invoice to the County (emphasis
Comment 2    added). The invoices submitted by the Corporation to the County included information necessary
             to support such invoice. The information submitted as a part of the invoicing process, included the
             following: i) summary document detailing the final charges to the County; ii) worksheet detailing
             job number, address, direct cost of providing service, associated indirect costs, total due from the
             County; iii) required reductions due to the Corporation’s receipt of program income; and iv) if
             necessary, a report of declined services for non-participating communities.

             It should be further noted that Section VII of the subrecipient agreement required the Corporation
             to prepare and retain records for the period specified in 24 CFR 570.502, and permit access to the
             County, HUD and the Comptroller General to inspect, as deemed necessary, program records. The
             subrecipient agreement, inter alia, specifically required the Corporation to maintain final records
Comments 2   and documentation sufficient to support the payment of expenses. The sufficiency of documentation
             that was ultimately provided by the Corporation is evident since there is no repayment amount
 and 7
             associated with this finding.

Comment 2    Because all invoices and attached documentation were properly maintained by the County in
             compliance with 24 CFR 570.506, the County respectfully disagrees with this finding.

Comment 8    Corrective Action: Based upon the OIG’s assertion that source documentation is required at the
             time an invoice is submitted, beginning in February of 2018 and on an ongoing basis, the County
             specifically began requesting source documentation to be included as part of an invoice. Further,
             the County has suspended all payments to Corporation pending the receipt and review of the
             required source documentation. The source documentation requested is as follows:

               a.    Work orders;


                                                              4




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Evaluation

Comment 8      b.   Staff time sheets (all times will be in 15 minutes increments);

               c.   Actual evidence of actual payroll amounts and related fringe benefits

               d.   Mileage odometer data; and

               e.   Receipts for materials and supplies, etc.


               2.   The County Did Not Ensure that Block Grant Funds Were Used for Eligible Expenses

             The County partially agrees with the OIG conclusion that the County provided Block Grant Funds
             for labor that exceeded actual labor costs.

             The OIG Report asserts that contrary to regulations at 2 CFR 200.403 and 200.404, the subrecipient
             agreement allowed the Corporation to charge the County a labor rate of nearly $48 per hour in
             excess of actual labor costs.

             The subrecipient agreement set forth a labor rate of $47.75 per hour. Based upon the documentation
             provided by the Corporation to the OIG, the hourly labor rate, including fringe benefits, for 35 of
             the Corporation’s 37 employees that charged time to one or more of the jobs reviewed by the OIG
             was less than the $47.75 rate. The OIG report determined the labor rate was not substantiated by
             the Corporation. Consequently the OIG report concluded that $4,899 in labor costs plus $1,003 in
             associated indirect costs were not permitted.

             The County does not dispute costs chargeable to a federal award are governed by 2 CFR 200.403
             and 2 CFR 200.404. 2 CFR 200.403 provides that costs must meet the following eight (8) general
             criteria in order to be allowable under Federal awards:

                    a. Be necessary and reasonable for the performance of the Federal award and be allocable
                       thereto under these principles.

                    b. Conform to any limitations or exclusions set forth in these principles or in the Federal
                       award as to types or amount of cost items.

                    c. Be consistent with policies and procedures that apply uniformly to both federally-
                       financed and other activities of the non–Federal entity.

                    d. Be accorded consistent treatment. A cost may not be assigned to a Federal award as a
                       direct cost if any other cost incurred for the same purpose in like circumstances has been
                       allocated to the Federal award as an indirect cost.


                                                                5




                                         22
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                     e. Be determined in accordance with generally accepted accounting principles (GAAP),
                        except, for state and local governments and Indian tribes only, as otherwise provided
                        for in this part.

                     f.   Not be included as a cost or used to meet cost sharing or matching requirements of any
                          other federally-financed program in either the current or a prior period ;

                     g. Be adequately documented.


Comment 3    Other than a failure of the Corporation to provide adequate documentation to evidence the entire
             labor rate set forth in the subrecipient agreement with the County (emphasis added); there is no
             assertion or evidence to show that the County failed to comply with the remaining criteria set forth
             in 2 CFR 200.403. The OIG’s statement that the County did not ensure that Block Grant funds were
             used for eligible expenses is without merit. While the OIG determined there was an issue related to
             the documentation of the complete labor cost, there are no facts or evidence provided by the OIG to
             suggest the expenses could not have been paid under the subrecipient agreement, if complete
             substantiation had been available. In this same regard, the OIG did not question the type or character
Comments 3   of the cost in relation to the subrecipient agreement. Consequently, the County respectfully
 and 9       disagrees with the OIG statement that labor was not an eligible expense that could be paid for with
             Block Grant funds

             As for the reasonableness of the labor costs set forth in the subrecipient agreement, 2 CFR 200.404
             provides, in pertinent part, that a cost is reasonable if, in its nature and amount, it does not exceed
             that which would be incurred by a prudent person under the circumstances prevailing at the time the
             decision was made to incur the cost. In ascertaining if a cost is reasonable, consideration should be
             given to the following:

                     a. Whether the cost is of a type generally recognized as ordinary and necessary for the
                        operation of the non–Federal entity or the proper and efficient performance of the
                        Federal award.

                     b. The restraints or requirements imposed by such factors as: sound business practices;
                        arm's-length bargaining; Federal, state, local, tribal, and other laws and regulations; and
                        terms and conditions of the Federal award.

                     c. Market prices for comparable goods or services for the geographic area.

                     d. Whether the individuals concerned acted with prudence in the circumstances
                        considering their responsibilities to the non–Federal entity, its employees, where



                                                               6




                                          23
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Evaluation

                           applicable its students or membership, the public at large, and the Federal government.

                      e. Whether the non–Federal entity significantly deviates from its established practices and
                         policies regarding the incurrence of costs, which may unjustifiably increase the Federal
                         award's cost.

Comment 3    The sole assertion of the OIG report, in relation to this cost, is the failure of the Corporation to
             provide adequate documentation to evidence the entire labor rate that was set forth in the
             subrecipient agreement (emphasis added). There has been no assertion, facts or evidence provided
             by the OIG to negate reasonableness of the labor consistent with the considerations described in 2
             CFR 200.404. To the contrary, the County was provided a report from KZF Design to suggest the
             costs were in correlation with the regional industry standard. 1 This correspondence supports
             reasonableness of the County’s payment of a $47.75 labor rate and to trades workers.

Comments 3   Consequently, the County respectfully disagrees with the OIG statement that labor was not an
             eligible expense that could be paid for with Block Grant funds.
 and 9
             Corrective Action:

Comment 10   The County has and will continue to request documentation from the Corporation in order to review
             labor rates. If required, the County will undertake to perform a complete review of the labor costs
             associated with all 1,668 jobs that the Corporation invoiced for April 2015 through November 2017
             along with associated indirect costs. The County continues to explore that possibility of using an
             outside accounting firm to ensure completeness of calculations of the labor rate.

Comment 10   County will update contract terms and conditions in future contracts to state that County will only
             compensate subrecipients for the actual labor rate of those performing services. If appropriate,
             County would consider a statistical sample.

                3.    The Corporation Lacked Sufficient Documentation to Support that Costs for Material
                      and Services were Reasonable and Included a Surcharge on Materials.

Comment 4    The County partially disagrees with OIG’s assertion that the Corporation lacked sufficient
             documentation to support a) that costs for material and services were reasonable, and b) the inclusion
             of a surcharge on materials


             _________________________
             1
               The report was referenced by PWC in a letter to the County. The County obtained the report through the City and can
             be made available upon request.




                                                                      7




                                              24
Ref to OIG    Auditee Comments
Evaluation

                a.    The OIG report states the Corporation did not solicit competitive quotations or maintain
                      sufficient documentation to support the costs were reasonable pursuant to 2 CFR
                      200.320(a). 2 CFR 200.67 provides that a micro-purchase is a purchase of supplies or
                      services using simplified acquisition procedures, the aggregate amount of which does not
                      exceed the micro-purchase threshold. Non–Federal entities2, such as the Corporation, use
                      such procedures in order to expedite the completion of its lowest-dollar small purchase
                      transactions and minimize the associated administrative burden and cost.3 2 CFR
                      200.320(a) provides that “micropurchases may be awarded without soliciting competitive
                      quotations if the non-Federal entity considers the price to be reasonable.” As discussed in
                      Finding #2, 2 CFR 200.404 provides, in pertinent part, that a cost is reasonable if, in its
                      nature and amount, it does not exceed that which would be incurred by a prudent person
                      under the circumstances prevailing at the time the decision was made to incur the cost. The
                      costs of the materials purchased by the County ranged from as low as 89 cents to as high as
                      $565.

Comments 4            Contrary to the OIG Report and consistent with the cited regulation, the Corporation was
 and 11               not required to seek competitive quotations for the purchases described in this finding.
                      There have been no assertions, facts, or evidence provided by the OIG to negate
Comment 4             reasonableness of the cost of the materials and supplies consistent with the considerations
                      described in 2 CFR 200.404. The sufficiency of documentation that was ultimately provided
                      by Corporation is evident since there is no repayment amount associated with a finding that
                      the costs were not reasonable.

                b.    The County agrees with OIG’s assessment that the Corporation inappropriately included a
                      four (4) percent surcharge resulting in an overpayment of $182.

             Corrective Action:

Comment 12   Beginning in February of 2018, and on an ongoing basis, the County specifically began requesting
             source documentation to be included as part of an invoice. Future contracts will stipulate that no
             surcharge can be added to material and services.

                4.    The Corporation Lacked Sufficient Documentation to Support Indirect Costs.

             The County partially agrees with the OIG’s assessment that the Corporation lacked sufficient
             documentation to support indirect costs.

             ____________________________
             2
               2 CFR 200.69 defines, in pertinent part, a non-Federal entity as a nonprofit organization that carries out a Federal award
             as a recipient or subrecipient.
             3
               2 CFR 200.320(a) states procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar
             amount of which does not exceed $3,000.

                                                                          8




                                                25
Ref to OIG   Auditee Comments
Evaluation

             The OIG Report asserts the Corporation’s general and administrative expenses’ used to calculate
             permitted indirect costs included direct lobbying. Consequently, the Corporation did not allocate
             indirect costs to the direct lobbing expenses as required by 2 CFR 200.405(b).

             The County acknowledges the corporation may not have allocated indirect costs to the direct
             lobbying expenses as required by regulations at 2 CFR 200.405(b) which states, “all activities which
             benefit from the non-Federal entity's indirect (F&A) cost, including unallowable activities and
             donated services by the non-Federal entity or third parties, will receive an appropriate allocation of
             indirect costs.” The OIG Report indicates the Corporation’s Chief Financial Officer explained to
             OIG that a small portion lobbying of related expenses would be a part of the salaries allocated to
             general and administrative expenses.

             The OIG Report also states it was unable to determine whether the County provided Block Grant
             funds for indirect costs that included lobbying expenses. However, the OIG Report presumes the
             County provided Block Grant funds for lobbying related expenses during the subrecipient
             agreement period from April 1, 2015 through March 31, 2016. The OIG explains the County
             provided Block Grant funds for indirect costs at a percentage of the corporation’s total job costs
             (16.998), which was approximately the same as the percentage of the corporation’s general and
             administrative expenses without direct lobbying expenses in relation to total functional expenses for
             the year ended December 31, 2014 (16.999).

Comment 5    Absent a detailed calculation from the OIG, the County is unable to determine how much if any, of
             the funds asserted to be lobbying expenses that should be returned. Consequently, the County
             respectfully disagrees with this finding.

Comment 13   The County is willing to work with the Corporation to ascertain whether the Corporation used Block
             Grant funds for indirect costs that included lobbying expenses. Further, the County is continuing to
             work with the Corporation to support the Corporation’s assertion that the consolidated statements
             of functional expenses did not include a number of delivery costs that were neither directly nor
             indirectly reimbursed by the County. In this same regard, the County will work with the Corporation
             to determine issues related to rent for a warehouse in Indiana that was included in the Corporation’s
             general and administrative expenses for the years ended December 31, 2015 ad 2016.

             Corrective Action:

Comment 13   The County has determined that future contracts will not permit the payment of indirect costs; only
             direct costs will be reimbursed as billed with source documentation included as a part of each
             monthly invoice.

               5.    The Corporation Lacked Sufficient Documentation to Support Household Eligibility


                                                               9




                                         26
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             The OIG Report indicates the County did not ensure that the Corporation provided housing repair
             services to eligible households as required by the subrecipient agreement.

             As a subrecipient of the County, the Corporation was required to determine eligibility for housing
             repairs. The County agrees the Corporation may have failed to provide evidence that housing repair
             services were provided only to eligible households, as required by the subrecipient agreement.

             Corrective Action:

Comment 14   Any future contract will specify that income calculations will be based on current information,
             including anticipated income. In addition, the County will ensure all reported financial information,
             including but not limited to reported income, is within the previous twelve months.

               6.    The County did not comply with Environmental Review Procedures.

             The County agrees with the conclusion in the OIG Report.

             The OIG Report asserts that the County did not fully comply with the Environmental Review
             Procedures at 24 CFR 58.34. Specifically, the OIG Report indicates the 23 jobs reviewed were
             considered exempt activities by the County pursuant to 24 CFR 58.34(a)(10). However, the OIG
             determined that since the repairs were not necessary to control or arrest the effects from disasters or
             imminent threats to public safety, the repairs did not qualify as exempt under 24 CFR 58.34(a)(10).
             Instead, the OIG found that 20 of the jobs were categorically excluded activities under 24 CFR
             58.35(b)(3) while the remaining 3 jobs were categorically excluded activities under 24 CFR
             58.35(a)(3)(i). For these 3 jobs, the OIG asserted the County did not document compliance under
             24 CFR 58.5. However, in documenting compliance for the jobs as exempt activities, the OIG did
             determine the County met the requirements at 24 CFR 58.6. Although environmental reviews are
             required before the start of each job, as a result of the audit, the County provided corrected
             environmental review determinations for all 23 jobs.

             Corrective Action:

Comment 15   Any future contracts will include language that environmental reviews will be completed prior to
             work being started for all jobs except for those jobs in which necessity requires completion within
             24 hours of the request. The County will develop policies and procedures that will outline processes
             for sharing addresses and scope of work for each work order.

               7.    The County was not Properly Notified before Third Emergency Repairs were
                     completed.

             The County acknowledges and agrees with the OIG’s assessment that at the time of the audit the
             Corporation did not provide documentation evidencing the Corporation notified the County
                                                               10




                                          27
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             before it completed a third emergency repair job for a household with either a grant or calendar year
             as required by the subrecipient agreement.

             Pursuant to Exhibit A of the subrecipient agreement, the Corporation was required to notify the
             County of “the need for third emergencies in exceptional cases must be documented in writing and
             reported to the County prior to completion of assistance.” According to the OIG Report, the
             Corporation reported to OIG it disregarded its responsibility to notify the County before it
             completed third emergency repairs based on a diminished relationship with the County.

             The County, in good faith, expected that the Corporation would comply with the provisions of the
             subrecipient agreement in relation to these types of repairs. The County originally provided for fax
             notification and later permitted email notification. Consequently, all needed notification processes
             were in place and available to the Corporation. Regardless of the manner in which the Corporation
             purportedly described the nature of the relationship with the County, at no time did the County
             expect that the provisions of the subrecipient agreement would not be complied with. Additionally,
             this has not prevented the Corporation from contacting the County with other communications
             during this time period.

             Corrective Action:

Comment 16   On an ongoing basis, the County plans to only allow two (2) emergency repair requests per grant
             year. Furthermore, monthly reports will include the number of repairs completed per year for each
             address.

               8.    The Corporation Lacked Sufficient Documentation to Support that a Household
                     Member was disabled.

             The County acknowledges and agrees with the OIG’s assessment that the Corporation may not have
             maintained sufficient documentation to support that a member of one of the households was
             physically disabled as required by regulations at 2 CFR 200.403.

             The County required the Corporation to document a household member was disabled. Pursuant to
             Exhibit A of the subrecipient agreement, critical repairs would, “include accessibility modifications
             for persons with physical disabilities, as certified by PWC” (emphasis added).

Comment 17   Although the OIG Report states the Corporation did not maintain sufficient documentation, the
             County will continue to work with the Corporation to locate the documentation to support that the
             member in question was disabled.

             Corrective Action:

Comment 17   Future contracts will clarify that when accessibility modifications are included in work orders,
             verification must be included from a medical professional to document the physical disability of
                                                              11




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Comment 17   at least one household member. Policies and procedures will outline what is acceptable to meet this
             requirement.

               9.      Program Income Was Not Always Reduced from the Corporation’s Invoices.

             The County agrees with the OIG’s conclusion that the Corporation may not have reduced all of the
             program income it received from its invoices for housing repair services as required by the
             subrecipient agreement.

             24 CFR 570.500(1)(v) provides that payments of principal and interest on loans made using CDBG
             funds shall be included in program income. The OIG’s report states the Corporation did not include
             $4,127 in interest from two loan payments it received in August and December 2015 as program
             income, consequently causing the County to improperly provide more than $4,100 in Block Grant
             funds for housing repair services. Section III (B) of the subrecipient agreement along with Exhibit
             B requires all program income received from Block Grant funded activities to be considered
             program income and subject to 24 CFR 570.504 of the CDBG regulations. Therefore, the County
             did require the Corporation to include the interest from loan repayments as part of the program
             income.

             The County acknowledges and agrees with the OIG’s assessment that the Corporation may have
             mistakenly reduced its 2015 invoices and then inaccurately increased its January 2016 invoice
             resulting in an extra charge of $107.

             Although the County planned to credit the $4,127 and $107 amounts against any future invoices
             that it receives from the Corporation; the OIG recommends the County reimburse the money
             directly.

             Corrective Action:

Comment 18   The County will work to confirm that all future invoices include monthly loan portfolio reports
             showing payments made, loan balances and loan due dates.




             Signed:                                                    Date:

             //Signed//_________________                                _____9/12/18________________




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                                         29
                         OIG Evaluation of Auditee Comments


Comment 1   It is not clear what the County meant when it stated that we did not make a
            definitive statement that Block Grant funds were inappropriately apportioned
            outside the scope of the grant. However, as stated in the audit report, the County
            and corporation did not always comply with HUD’s requirements in the use of
            Block Grant funds for the program. Specifically, the County did not ensure that
            (1) it required the corporation to submit source documentation before providing it
            with Block Grant funds for housing repair services, (2) it provided the corporation
            Block Grant funds for eligible program expenses, (3) two households were
            eligible for assistance under the program, (4) it properly documented compliance
            with HUD’s environmental review procedures, (5) the corporation notified the
            County before completing a third emergency repair job for households within a
            grant year, (6) a member of a household associated with an accessibility
            modification was disabled, and (7) the corporation reduced all of the program
            income it received from its invoices for housing repair services. As a result, more
            than $10,000 in Block Grant funds was not available for eligible expenses of the
            program, and HUD and the County lacked assurance that nearly $13,000 in Block
            Grant funds was used in accordance with HUD’s requirements. Regulations at 24
            CFR 570.501(b) state that a recipient is responsible for ensuring that Block Grant
            funds are used in accordance with all program requirements. The use of
            subrecipients or contractors does not relieve the recipient of this responsibility.
            The recipient is also responsible for determining the adequacy of performance
            under subrecipient agreements and procurement contracts and for taking
            appropriate action when performance problems arise.
Comment 2   The corporation submitted billing statements to the County that included the
            corporation’s invoices to the County and detailed supporting schedules that
            showed the work the corporation completed under the program. However, the
            billing statements did not include source documentation, such as invoices from
            vendors and time sheets for the corporation’s employees, to support the
            corporation’s invoices to the County and detailed supporting schedules.
            Therefore, the County did not maintain sufficient documentation to enable HUD
            to determine whether the corporation met the requirements of 24 CFR Part 570.
            Further, the County did not require the corporation to submit source
            documentation, such as invoices and time sheets, before providing Block Grant
            funds for the housing repair services as required by HUD's regulations at 24 CFR
            570.506.
Comment 3   The corporation provided documentation showing that the hourly rate, including
            fringe benefits, for 35 of the corporation’s 37 employees who charged time to one
            or more of the jobs, was less than $48. Regulations at 2 CFR 200.403 require all
            Federal award costs to be reasonable. Section 200.404 states that a cost is
            reasonable if, in its nature and amount, it does not exceed that which would be
            incurred by a prudent person under the circumstances prevailing at the time the


                                            30
              decision was made to incur the cost. It was not prudent for the County to provide
              Block Grant funds to the corporation for labor that exceeded actual labor costs.
              Therefore, contrary to regulations at 2 CFR 200.403 and 200.404, the amount of
              Block Grant funds the County provided the corporation for labor exceeded actual
              labor costs by more than $4,800. Further, the labor rate in the subrecipient
              agreement was improper.
Comment 4     Regulations at 2 CFR 200.320(a) state that micropurchases may be awarded
              without soliciting competitive quotations if the non-Federal entity considers the
              price to be reasonable. The corporation did not maintain sufficient documentation
              to support that costs were reasonable for nearly $5,000 in materials and services.
              Further, it did not solicit competitive quotations for the costs. Therefore, the
              corporation did not solicit competitive quotations or maintain sufficient
              documentation to support that costs were reasonable for nearly $5,000 in
              materials and services as required by regulations at 2 CFR 200.320(a).
Comment 5     Because a small portion of lobbying-related expenses would also be included as
              part of the salaries allocated to general and administrative expenses and the
              corporation did not allocate indirect costs to the direct lobbying expenses, we
              were unable to determine whether the County provided Block Grant funds for
              indirect costs that included lobbying-related expenses. Therefore, the corporation
              lacked sufficient documentation to support indirect costs.
Comment 6     The County should work with HUD’s Columbus Office of Community Planning
              and Development to resolve the recommendations in the audit report.
Comment 7     The corporation maintained and provided the OIG with source documentation
              such as invoices and time sheets to support the billing statements it submitted to
              the County. However, if the County would have obtained and reviewed sufficient
              source documentation, such as invoices and receipts for materials, before
              providing Block Grant funds to the corporation for housing repair services, it may
              not have overpaid the corporation $182 associated with a 4 percent surcharge the
              corporation inappropriately included on materials.
Comment 8     The County should work with HUD’s Columbus Office of Community Planning
              and Development to resolve recommendation 1A.
Comment 9     The audit report did not state that labor was not an eligible expense that could be
              paid with Block Grant funds.
Comment 10 The County should work with HUD’s Columbus Office of Community Planning
           and Development to resolve recommendations 1B, 1C, and 1D, including
           reimbursing its Block Grant program from non-Federal funds for the $5,810 it
           provided to the corporation for labor that exceeded actual labor costs (more than
           $4,800) and indirect costs associated with the excessive labor costs (nearly
           $1,000).



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Comment 11 The audit report does not state that the corporation was required to seek
           competitive quotations for the materials and services.
Comment 12 The County should work with HUD’s Columbus Office of Community Planning
           and Development to resolve recommendations 1E and 1F, including reimbursing
           its Block Grant program from non-Federal funds for the $182 it provided to the
           corporation for a 4 percent surcharge that was inappropriately included on all
           materials.
Comment 13 The County should work with HUD’s Columbus Office of Community Planning
           and Development to resolve recommendation 1G, including supporting or
           reimbursing its Block Grant program from non-Federal funds for the $6,140 it
           provided to the corporation for indirect costs for which the corporation lacked
           sufficient documentation to support whether the indirect costs included lobbying-
           related expenses.
Comment 14 The County should work with HUD’s Columbus Office of Community Planning
           and Development to resolve recommendations 1H and 1I, including supporting or
           reimbursing its Block Grant program from non-Federal funds for the $1,541 it
           provided to the corporation for jobs for which the corporation lacked sufficient
           income documentation to support that the households were eligible for assistance.
Comment 15 The County should work with HUD’s Columbus Office of Community Planning
           and Development to resolve recommendation 1J.
Comment 16 The County should work with HUD’s Columbus Office of Community Planning
           and Development to resolve recommendation 1K.
Comment 17 The County should work with HUD’s Columbus Office of Community Planning
           and Development to resolve recommendations 1L and 1M, including supporting
           or reimbursing its Block Grant program from non-Federal funds for the $4,953 it
           provided to the corporation for one job for which the corporation lacked sufficient
           documentation to support that a member of the household was physically
           disabled.
Comment 18 The County should work with HUD’s Columbus Office of Community Planning
           and Development to resolve recommendations 1N, 1O, and 1P, including (1)
           reimbursing its Block Grant program from non-Federal funds for the $4,127 it
           inappropriately provided to the corporation due to not ensuring that the
           corporation reduced all of its program income from its invoices for housing repair
           services and (2) supporting or reimbursing its Block Grant program from non-
           Federal funds for the $107 it provided to the corporation for the January 2016
           invoice that the corporation generally could not explain.




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Appendix C
                                          Applicable Requirements
Regulations at 2 CFR 200.320(a) state that micropurchases may be awarded without soliciting
competitive quotations if the non-Federal entity considers the price to be reasonable.
Regulations at 2 CFR 200.403 require all Federal award costs to be reasonable and adequately
documented. Section 200.404 states that a cost is reasonable if, in its nature and amount, it does
not exceed that which would be incurred by a prudent person under the circumstances prevailing
at the time the decision was made to incur the cost.
Regulations at 2 CFR 200.405(b) state that all activities which benefit from the non-Federal
entity’s indirect cost, including unallowable activities and donated services by the non-Federal
entity or third parties, will receive an appropriate allocation of indirect costs.
Regulations at 2 CFR 200.450(c) regarding lobbying state that nonprofit organizations’ costs
associated with the following activities are unallowable: (1) attempts to influence the outcome
of any Federal, State, or local election, referendum, initiative, or similar procedure through in-
kind or cash contributions, endorsements, publicity, or similar activity; (2) establishing,
administering, contributing to, or paying the expenses of a political party, campaign, political
action committee, or other organization established for the purpose of influencing the outcomes
of elections in the United States; and (3) any attempt to influence the introduction of Federal or
State legislation or the enactment or modification of any pending Federal or State legislation
through communication with any member or employee of Congress or the State legislature.
Appendix A, section C.1, of 2 CFR Part 22515 requires all Federal award costs to be reasonable
and adequately documented. Section C.2 states that a cost is reasonable if, in its nature or
amount, it does not exceed that which would be incurred by a prudent person under the
circumstances prevailing at the time the decision was made to incur the cost.
Regulations at 24 CFR 58.22(b) state that if an activity is exempt or categorically excluded, no
request for release of funds is required and the recipient may undertake the activity immediately
after the responsible entity has documented its determination as required but the recipient must
comply with the applicable requirements in 24 CFR 58.6.
Regulations at 24 CFR 58.34(a)(10) state that exempt activities include assistance for temporary
or permanent improvements that do not alter environmental conditions and are limited to
protection, repair, or restoration activities necessary only to control or arrest the effects from
disasters or imminent threats to public safety, including those resulting from physical
deterioration.




15
     Office of Management and Budget Circular A-87 was relocated to 2 CFR Part 225.


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Regulations at 24 CFR 58.35 require compliance with the other applicable Federal
environmental laws and authorities listed in 24 CFR 58.5 for any categorical exclusion listed in
section 58.35(a). Section 58.35(a)(3)(i) states that rehabilitation of buildings and improvements,
in the case of a building for residential use in which the density is not increased by more than
four units and the land use is not changed, qualify as categorically excluded activities that are
subject to 24 CFR 58.5. Section 58.35(b)(3) states that operating costs, including maintenance,
security, operation, utilities, furnishings, equipment, supplies, and other incidental costs, qualify
as categorically excluded activities that are not subject to 24 CFR 58.5.
Regulations at 24 CFR 570.200(a)(4) state that the environmental review procedures in 24 CFR
Part 58 must be completed for each activity or project as applicable.
Regulations at 24 CFR 570.501(b) state that a recipient is responsible for ensuring that Block
Grant funds are used in accordance with all program requirements. The use of subrecipients or
contractors does not relieve the recipient of this responsibility. The recipient is also responsible
for determining the adequacy of performance under subrecipient agreements and procurement
contracts and for taking appropriate action when performance problems arise.
As of April 1, 2015, regulations at 24 CFR 570.502(a) stated that recipients that are
governmental entities must comply with Office of Management and Budget Circular A-87. As
of April 1, 2016, regulations at 24 CFR 570.502(a) state that grantees and subrecipients must
comply with 2 CFR Part 200, uniform administrative requirements, costs principles, and audit
requirements for Federal awards.
Regulations at 24 CFR 570.503(a) state that before disbursing any Block Grant funds to a
subrecipient, the recipient must sign a written agreement with the subrecipient. The agreement
will remain in effect during any period in which the subrecipient has control over Block Grant
funds, including program income.
Regulations at 24 CFR 570.506 state that each recipient must establish and maintain sufficient
records to enable HUD to determine whether the recipient has met the requirements of 24 CFR
Part 570.
The answer to a Block Grant entitlement frequently asked question, dated May 2015, states that
Block Grant policy allows income information to be up to 12 months old.
Section VIII.B. of the subrecipient agreement stated that the corporation must comply with the
regulations at 2 CFR Part 200, effective on December 26, 2014.
Exhibit A, section I, of the subrecipient agreement stated that the maximum allowable estimated
cost of an emergency repair without County approval was $2,500. Further, emergency repairs
would be limited to two for a household per year. The need for a third emergency repair in
exceptional cases must be documented in writing and reported to the County before completion
of assistance. The maximum allowable cost of a critical repair without County approval was
$10,500. Further, critical repairs would include accessibility modifications for persons with
physical disabilities as certified by the corporation.




                                                 34
Exhibit A, section I, of the subrecipient agreement stated that owner occupants of property not
exceeding three dwelling units per building whose household income in the previous 12-month
period did not exceed 50 percent of the median income for the County by family size as defined
by HUD’s income limits would be eligible for assistance. If there had been a recent substantial
change in income due to unemployment, projected income for the following 3 months would be
used.
Exhibit B of the subrecipient agreement stated that program income would be retained by the
corporation and used to provide additional eligible services. Program income would be shown as
credits on the corporation’s monthly invoices for payment of services provided.




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