oversight

Jefferson Parish, Jefferson, LA, Did Not Always Properly Administer Its Rehabilitation Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-01-29.

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

                            Jefferson Parish,
                             Jefferson, LA
           Community Development Block Grant and
            HOME Investment Partnerships Program
              Property Rehabilitation Program




Office of Audit, Region 6             Audit Report Number: 2018-FW-1001
Fort Worth, TX                                           January 29, 2018
To:            Cheryl Breaux, Director of Community Planning and Development, 6HD
               //signed//
From:          Kilah S. White, Regional Inspector General for Audit, 6AGA
Subject:       Jefferson Parish, Jefferson, LA, Did Not Always Properly Administer Its
               Rehabilitation Program




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our audit of Jefferson Parish’s property rehabilitation program
funded with Community Development Block Grant and HOME Investment Partnerships
program funds.
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
817-978-9309.
                    Audit Report Number: 2017-FW-1001
                    Date: January 29, 2018

                    Jefferson Parish, Jefferson, LA, Did Not Always Properly Administer Its
                    Rehabilitation Program



Highlights

What We Audited and Why
We audited the Jefferson Parish Community Development Department in response to a citizen
complaint and in accordance with our annual audit plan to review the U.S. Department of
Housing and Urban Development’s (HUD) community planning and development programs,
including the Community Development Block Grant (CDBG) and HOME Investment
Partnerships programs. Our objective was to determine whether the Parish (1) ensured that
payments to contractors were supported, reasonable, and necessary and (2) properly monitored
and ensured completion of the contractors’ work in accordance with contract and HUD
requirements for its CDBG- and HOME-funded property rehabilitation program.

What We Found
The complaint had merit. The Parish did not always administer its rehabilitation program in
accordance with program requirements. Specifically, it did not always ensure that payments to
contractors were eligible, supported, and reasonable as it made payments (1) for duplicate
payments and overpayments, (2) for work not completed and excessive material costs, (3)
without adequate invoice documentation or cost analyses for change orders, (4) without
performing independent cost estimates before the bidding process, and (5) for properties not
brought up to code. In addition, the Parish did not properly monitor and ensure completion of its
contractors’ work. This occurred because the Parish did not have adequate written policies and
procedures, lacked adequate staffing levels, and its staff members were not always aware of their
responsibilities. As a result, the Parish could not provide reasonable assurance to HUD that its
program met its purpose or that it followed HUD and other requirements, putting more than
$216,000 in allocated HOME funds at risk of mismanagement. In addition, the Parish paid more
than $1 million in questioned costs, and left homeowners in unsafe and unsanitary living
conditions.

What We Recommend
We recommend that HUD require the Parish to (1) develop and implement written procedures
and take actions to ensure that it better spends more than $216,000, (2) repay $9,489, (3) support
or repay more than $1 million, (4) develop and implement written procedures and management
controls, and (5) correct the deficiencies identified during the onsite inspections and in the
remaining homes.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding: The Parish Did Not Always Administer Its Property Rehabilitation
         Program in Accordance With HUD Requirements ....................................................... 5

Scope and Methodology .........................................................................................13

Internal Controls ....................................................................................................15

Appendixes ..............................................................................................................16
         A. Schedule of Questioned Costs and Funds To Be Put to Better Use ..................... 16
         B. Auditee Comments and OIG’s Evaluation ............................................................. 17
         C. Contract File Issues................................................................................................... 30




                                                                 2
Background and Objective
The Community Development Block Grant (CDBG) program was established by Title I of the
Housing and Community Development Act of 1974, Public Law 93-383 as amended, 42 United
States Code (U.S.C.) 530.1. Under the CDBG program, the U.S. Department of Housing and
Urban Development (HUD) awards grants to State and local governments to aid in the
development of viable urban communities. These grant funds are used to provide decent housing
and suitable living environments and to expand economic opportunities, principally for persons
of low and moderate income.

The HOME Investment Partnerships program is authorized under Title II of the Cranston-
Gonzalez National Affordable Housing Act as amended. The program was designed to create
decent, safe, and affordable housing for low-income households. HOME provides formula
grants to States and localities that communities use – often in partnership with local nonprofit
groups – to fund a wide range of activities, including building, buying, or rehabilitating
affordable housing for rent or home ownership or providing direct rental assistance to low-
income people.
CDBG and HOME funds are managed through HUD’s Integrated Disbursement and Information
System (IDIS), which allows grantees to request their CDBG and HOME grant funding from
HUD and report on what is accomplished with these funds.
The Jefferson Parish Community Development Department is located at 1221 Elmwood Park
Boulevard, Suite 605, Jefferson, LA. The Parish is the third largest CDBG and HOME grant
recipient in the State of Louisiana. The Parish is also the lead entity for the Jefferson HOME
Consortium, made up of Jefferson Parish, the City of Kenner, and St. Charles Parish. Further, all
municipalities in Jefferson Parish participate in both Jefferson Parish’s CDBG and HOME
programs, with the exception of the City of Kenner, which administers and receives its own
CDBG funds. The other incorporated municipalities of Jefferson Parish (Westwego, Gretna,
Jean Lafitte, Harahan, and Grand Isle) have entered into cooperation agreements with the
Jefferson Parish Community Development Department for the use of these funds.

Between October 2013 and September 2016, the Parish received more than $7 million in CDBG
funds and more than $3 million in HOME funds from HUD. See the table below.

       CDBG and HOME funding allocated
           Fiscal Year         CDBG funds                           HOME funds
              2014                     2,540,193                           1,216,814
              2015                     2,421,224                           1,055,157
              2016                     2,445,970                           1,145,332
              Total                    7,407,387                           3,417,303




                                                 3
Of this amount, the Parish spent $799,923 in CDBG funds and $514,035 in HOME funds for its
property rehabilitation program’s contracts. The Parish’s rehabilitation program offered home
owners deferred grants of up to $60,000 to bring existing single-family units up to all applicable
electrical, mechanical, plumbing, and building codes and to the housing quality standards
established by HUD.

In November 2016, we received a citizen complaint from a homeowner who received assistance
through the Parish’s property rehabilitation program. The complainant alleged that the Parish
had not adequately addressed complaints regarding contractor performance and that the
contractor (1) left the property infested with mold, (2) performed substandard work, and (3)
charged the Parish for materials not used and work not completed.

Our audit objective was to determine whether the Parish (1) ensured that payments to contractors
were supported, reasonable, and necessary and (2) properly monitored and ensured completion of
the contractors’ work in accordance with contract and HUD requirements for its CDBG- and
HOME-funded property rehabilitation program.




                                                 4
Results of Audit

Finding: The Parish Did Not Always Administer Its Property
Rehabilitation Program in Accordance With HUD Requirements
The Parish did not always administer its property rehabilitation program in accordance with
program requirements. Specifically, it did not always ensure that payments to contractors were
eligible, supported, and reasonable as it made payments (1) for duplicate payments and
overpayments, (2) for work not completed and excessive material costs, (3) without adequate
invoice documentation or cost analyses for change orders, (4) without performing independent
cost estimates before the bidding process, and (5) for properties not brought up to code. In
addition, the Parish did not properly monitor and ensure the proper completion of its contractors’
work. This occurred because the Parish did not have adequate written policies and procedures,
lacked adequate staffing levels, and its staff members were not always aware of their
responsibilities. As a result, the Parish could not provide reasonable assurance to HUD that its
program met its purpose or that it followed HUD and other requirements, putting more than
$216,000 in remaining allocated HOME funds at risk of mismanagement. In addition, the Parish
paid more than $1 million in questioned costs, and left homeowners in unsafe and unsanitary
living conditions.

The Parish Did Not Always Ensure That Contract Payments Were Eligible, Supported,
and Reasonable
The Parish did not always ensure that contract payments were eligible, supported, and
reasonable. Federal regulations required the Parish to

    (1) ensure that costs were necessary and reasonable for the allowance of costs; 1
    (2) maintain supporting documentation for contract payments; 2
    (3) perform a cost analysis for contract modifications, such as change orders, to ensure the
        reasonableness of costs; 3
    (4) make independent cost estimates before receiving bids or proposals; 4 and
    (5) comply with all applicable local codes, rehabilitation standards, ordinances, and zoning
        requirements at the time of project completion for all housing constructed or rehabilitated
        with HOME funds. 5

However, for 52 of 53 contract files reviewed, with payments totaling more than $1 million, the
Parish made payments



1
    2 CFR (Code of Federal Regulations) Part 225, appendix A, section (C)(1)
2
    24 CFR 85.20 and 2 CFR 200.333
3
    24 CFR 85.36(f)(1) and 2 CFR 200.323(a)
4
    24 CFR 85.36(f)(1) and 2 CFR 200.323(a)
5
    24 CFR 92.251(a)(1)



                                                        5
   •   for duplicate payments and overpayments to contractors, resulting in $9,489 in ineligible
       costs and
   •   for work not completed and excessive material costs; without proper invoice
       documentation, cost analyses for change orders, and performing independent cost
       estimates before the bidding process; and for properties not brought up to code as
       required, resulting in more than $1 million in unsupported costs.

See appendix C for details on all 52 contracts with deficiencies.

As an example of duplicate payments, a contractor’s original contract, dated July 1, 2014,
required the contractor to replace and relocate a hot water heater at a cost of $475. The
contractor then submitted a change order, dated August 29, 2014, to replace the same hot water
heater, which the Parish approved, and it paid an additional $390. Regarding overpayments, for
one contractor the Parish paid $365, although the invoices did not have any billable items for this
amount.

For work not completed, one contractor did not install a new ground-fault circuit interrupter as
required by the contract specifications, causing a health and safety hazard. See illustration 1.




                 Illustration 1: New ground-fault circuit interrupter not installed

For excessive material costs documented in the citizen complaint, a contractor billed the Parish
for 252 cubic yards of sand and 15 pallets of sod for a program particpant’s backyard. However,
based upon measurements of the backyard taken during our onsite inspection, the contractor
should have billed the Parish for only 87 cubic yards and 7 pallets of sod. Therefore, the
contractor billed the Parish for an estimated $4,253 more than necessary.

For contract modifications, although the Parish’s departmental inspector believed that some costs
lacked reasonableness, the Parish did not conduct cost analyses to support the cost
reasonableness of change orders for 50 contracts. When asked, the Parish’s inspector stated that
he did not verify the reasonableness of costs for change orders and only visibly verified that the
work needed to be completed. The Parish inspector added that he sometimes entered the costs
proposed by the contractor into the Parish’s computer software system so that they could be




                                                 6
presented in a neat and formal manner. A review of the file documentation and change order
costs listed in the computer software supported the Parish inspector’s statements.

While the Parish conducted initial inspections of the properties to determine the work items
needed to rehabilitate the properties, it did not adequately support that staff performed
independent cost estimates before the bidding process for 32 contracts to support the cost
reasonableness of work to be performed.

For its HOME-funded properties, the Parish could not support that the contractors brought 10
properties up to code as required. The code violations included but were not limited to open
junction boxes, exposed electrical wiring, and unsecured breaker panels. For example, one
property had electrical splices made outside the junction box, and had a missing interior cover
for its heating, ventilation, and air conditioning disconnect. See illustration 2.




Illustration 2: Electrical splices made outside the junction box and missing interior cover of
heating, ventilation, and air conditioning disconnect
Lastly, for 52 contract payment files reviewed, although required by the contracts and
documented in its payment documentation, the Parish did not withhold a 10 percent retainage
from the contractors. Instead it paid the full amount of each invoice, limiting the Parish’s
recourse if contractors did not meet the contract requirements.

The Parish Did Not Adequately Monitor Contractor Work Performance
The Parish did not adequately monitor its contractors that performed work on homes under its
property rehabilitation program. Federal regulations required the Parish to monitor its program
activities to assure compliance with applicable Federal requirements and performance
expectations. 6 In addition, local requirements prohibited the Parish from undertaking
construction or reconstruction (alteration, repair, improvement, movement, or demolition) of any
structure without obtaining a valid building permit from the Parish code enforcement
department. 7 However, the Parish did not maintain sufficient documentation to support that it



6
    24 CFR 85.40(a) and 2 CFR 200.328(a)
7
    Jefferson Parish, Louisiana, Code of Ordinances, Chapter 8 - Buildings and Building Regulations, sec. 8-1-4(a)



                                                          7
followed these requirements. None of the 53 contract files reviewed included sufficient
documentation to support that the Parish

    •   evaluated the rehabilitation work progress;
    •   verified the necessity for all work proposed in the change orders;
    •   ensured that contractors completed work before approving pay requests and making
        payments to contractors; and
    •   made a final inspection to ensure that contractors followed all approved rehabilitation
        principles, standards, and project specifications.

For example, the files did not always contain documentation, such as inspection reports or
photographs, to support that the Parish conducted inspections. For files with inspection reports,
the reports did not adequately detail the purpose of the site visit, work items viewed or evaluated,
and an assessment of the contractors’ compliance with the work writeups and rehabilitation
principles and standards. For files with photographs, the photographs did not always have dates
or include a written description of the purpose of the photograph, such as initial inspection,
change order, pay request, or progress inspection.

In addition, for 10 HOME and 10 CDBG- funded contracts, 8 a review of the contract
specifications in conjunction with onsite property inspections determined that the Parish did not
meet requirements. Specifically,

    •   Contract specifications were ambiguous, outdated, and vague with respect to actual work
        requirements, quality of work, and materials to accomplish the repairs.
    •   Completed work items posed health and safety issues. For example, one contract
        required the contractor to remove old drywall from a hall closet and install new drywall.
        However, the onsite property inspection determined that the contractor installed the new
        drywall over the old and that the new drywall had started to form mold and mildew.
        Further, onsite observations noted that the area smelled of mold. In another example, a
        roof had water damage in a closet after the contractor repaired it. See illustration 3.
    •   The Parish did not use contract warranties when necessary. For one contract, instead of
        using either the contract or manufacturer’s warranty to repair or replace two defective air-
        conditioning units, the Parish executed a new contract with a separate contractor to repair
        the units and incurred additional costs.
    •   Contractors did not complete appropriate change orders to add or remove work items
        from the contracts when necessary. For one contract, instead of the required vinyl
        flooring, the contractors installed ceramic tile flooring without a change order or
        adjustment in costs.
    •   Contractors used materials below the standard to cut costs. In some instances,
        contractors used plywood as base molding instead of actual base molding. In another
        instance, a contractor used pine wood and stained it to look like redwood instead of using
        actual redwood as required by the contract specifications. See illustration 4.


8
    Ten HOME-funded contracts totaled $324,096, and 10 CDBG-funded contracts totaled $313,325.



                                                      8
   •   Contractors did not obtain appropriate permits as required by the Parish. Specifically, for
       16 contracts reviewed, the contract file did not contain documentation to support that the
       contractors filed the necessary permit applications or obtained the necessary inspections.




Illustration 3: Mold and mildew identified on newly installed drywall and water damage closet
after the roof was repaired




Illustration 4: Plywood used for base molding and pine frieze board with redwood stain used
Further, the Parish did not effectively address program participants’ complaints. The Parish’s
policies and procedures required its housing rehabilitation supervisor, specialist, and housing
counselors to investigate and resolve complaints in accordance with the complaint process.
Additionally, the program manager was required to train and supervise the rehabilitation
program staff. However, based upon a review of file documentation and interviews with 19
program participants, 14 expressed concerns with the contractors’ work and performance. Of
these 14,

   •   Three submitted written complaints to the Parish, which the Parish had not fully resolved.
   •   Three verbally complained to the Parish; however, the Parish did not have documentation
       for these complaints. For example, one participant stated that he expressed issues with
       the contractor’s work to his housing counselor, but the Parish did not resolve his
       complaints.
   •   Eight had complaints but communicated the concerns to the contractor instead of the
       Parish. Although they did not communicate to the Parish, the contractor’s work
       deficiencies should have been identified and resolved by the Parish during its monitoring
       inspections.


                                                 9
In addition, the Parish did not maintain complaint forms, a log of complaints received, actions
taken, or the results of any action taken.

The Parish Did Not Have Adequate Written Procedures and Lacked Adequate Staffing
Levels, and Its Staff Members Were Not Always Aware of Their Responsibilities
The Parish did not have adequate written policies and procedures and lacked adequate staffing
levels. The Parish’s departmental policies and procedures had not been updated for 15 years and
included positions that no longer existed. In addition, while the Parish’s policy stated that it
would investigate and resolve program participant complaints in accordance with the complaint
process, this policy did not detail a step-by-step complaint process. Further, while some files
included a complaint process document signed by the participants as part of the contract, the
document was not consistently included as part of all rehabilitation contracts, and the Parish did
not always follow this outlined process.
Regarding the staffing levels, the Parish relied on one departmental inspector to conduct
reasonableness assessments for change orders, complete independent cost estimates, and perform
monitoring for all of its rehabilitation work. According to the code enforcement department
director, the Parish had also stopped using the code enforcement department to conduct
inspections and relied on its departmental inspector to perform the task. In addition, based upon
the job descriptions, the departmental inspector performed the duties of both the project
coordinator and the housing rehabilitation specialist, putting the Parish at an increased risk of
policy circumvention.
The Parish suspended its property rehabilitation program in January 2016 in an effort to hire
additional staff, reestablish a relationship with the code enforcement department, and revise
program policies and procedures. However, the Parish continued to be understaffed in
comparison to the departmental organizational chart and policies. For example, key positions
associated with the property rehabilitation program remained vacant, including the housing
rehabilitation program manager position.
Further, the Parish’s staff members were not always aware of their responsibilities regarding
handling complaints and monitoring the contractors. Although the Parish’s policies and
procedures required the housing counselors to assist in the resolution of complaints, when asked,
they stated that handling complaints was not a part of their job responsibilities.
Without adequate policies and procedures, adequate staffing levels, and an understanding of staff
responsibilities related to contractor monitoring and handling participant complaints, the Parish
could not ensure that contactors performed rehabilitation work in accordance with program
requirements or provided safe and sanitary living conditions for program participants.

Conclusion
Because the Parish did not have adequate written procedures and lacked adequate staffing levels
and its staff members were not always aware of their responsibilities, it did not ensure that
contract payments were eligible, supported, and reasonable and adequately monitor its
contractors. As a result, the Parish could not provide reasonable assurance to HUD that its
program met its purpose or that it followed HUD and other requirements, putting more than




                                                 10
$216,000 in allocated HOME funds at risk of mismanagement. In addition, the Parish paid more
than $1 million in questioned costs, left homeowners in unsafe and unsanitary living conditions.
Recommendations
We recommend that the Director of HUD’s New Orleans Office of Community Planning and
Development require the Parish to
         1A.      Develop and implement a HUD-approved written plan and procedures and take
                  actions that will correct and prevent the deficiencies noted in the finding, improve
                  program administration effectiveness, strengthen the control environment, ensure
                  compliance with HUD regulations and its own policies and procedures, and
                  ensure that it has the continuing capacity to carry out its HOME program
                  activities as required. Implementing this recommendation should ensure that the
                  $216,663 9 in HOME funding allocated for the Parish’s property rehabilitation
                  program is better used.
         1B.      Repay its program from non-Federal funds for $9,849 in payments made to
                  contractors for duplicate payments and overpayments.
         1C.      Support or repay its program from non-Federal funds $1,020,121 for payments
                  made (1) for work that the contractor(s) did not perform and excessive material
                  costs; (2) that lacked adequate supporting documentation for change orders,
                  independent cost estimates, and invoice documentation; or (3) for the 10 HOME-
                  funded rehabilitated homes not brought up to code.
         1D.      Establish and implement desk and onsite monitoring policies and procedures to
                  ensure that documentation is maintained to support that (1) adequate supporting
                  documentation for payments is filed, tracked, and maintained; (2) the necessity
                  for all change orders is verified and reasonableness of the costs is assessed; (3)
                  cost estimates are completed before the bidding process; (4) work is completed
                  before pay requests are approved and payments are made to the contractor; and
                  (5) contractors are properly monitored throughout the rehabilitation process,
                  including progress and final inspections.
         1E.      Correct the property deficiencies identified during the onsite inspections related to
                  the 20 contracts as applicable.
         1F.      Inspect the remaining 33 homes for compliance with the contract specifications
                  and HUD requirements and correct deficiencies as applicable.
         1G.      Establish and implement complaint policies and procedures and ensure that its
                  staff is aware of the procedures to ensure that participant complaints are properly
                  handled in a timely manner.




9
    See the Scope and Methodology section for the calculation of this amount.



                                                         11
1H.   Review and adjust staffing levels as needed to ensure adequate coverage.
1I.   Provide training to staff members to ensure that they are aware of policies and
      procedures and their responsibilities related to expenditures, monitoring, and
      addressing participant complaints.




                                       12
Scope and Methodology
We performed our audit from May through November 2017 at the Parish’s office located at 1221
Elmwood Park Boulevard, Suite 605, Jefferson, LA; our office in New Orleans, LA; and
participants’ homes for onsite inspections. The audit generally covered the period July 1, 2013,
through April 30, 2017. We expanded our audit scope as determined necessary.

To meet the audit objective, we reviewed

     •    Relevant laws, regulations, and program guidance.
     •    HUD and Parish grant agreements.
     •    HUD’s onsite review reports.
     •    IDIS reports PR02, PR05, and PR07. 10
     •    The Parish’s consolidated plans which covered years 2010 to 2017.
     •    The Parish’s organizational structure and written policies for the rehabilitation program.
     •    The Parish’s 2013, 2014, and 2015 single audit reports.
     •    The Parish’s action plans.
     •    The Parish’s files and documentation related to expenditures, contracting, onsite
          monitoring, and property inspections.

We also interviewed the Parish’s and HUD’s staff and program participants.

Using a universe of 53 (37 CDBG and 16 HOME) contracts, 11 with disbursements totaling
$1,313,958, 12 and contract payments between July 1, 2013, and April 30, 2017, we selected the
following samples:

     •    For the expenditure and monitoring reviews, we selected a 100 percent sample of the 53
          contracts to determine whether the Parish (1) ensured that costs were reasonable and
          obtained adequate supporting documentation for invoices submitted by contractors for
          rehabilitation expenditures and (2) properly monitored the rehabilitation work to ensure
          that contractors met the contract requirements under its rehabilitation program.

     •    For the onsite inspection review, using a nonstatistical sample, we selected 20 (10 CDBG
          and 10 HOME) contracts associated with 19 participant properties 13 totaling more than
          $637,000 14 to determine whether the Parish ensured that the contractors completed

10
     PR-02 – activities by program year and project, PR-05 – drawdown report by project and activity, and PR-07 –
     drawdown report by voucher number.
11
     These 53 contracts were associated with 10 actual contractors as some contractors had multiple contracts.
12
     The rehabilitation cost for the 53 contracts totaled more than $1 million, including $799,923 in CDBG funds for
     the 37 contracts and $514,035 in HOME funds for the 16 contracts.
13
     One participant had two contracts funded with CDBG funds.
14
     CDBG contract payments totaled $313,325, and HOME contract payments totaled $324,096.



                                                           13
       rehabilitation work in accordance with contract and HUD requirements for its CDBG-
       and HOME-funded rehabilitation programs. We selected these contracts based upon
       program participant availability for an onsite inspection.

Through a comparison of file documentation, HUD voucher data, and Parish payment data, we
assessed the reliability of the computer-processed data regarding the contract payment amounts
for the rehabilitation contracts and determined that the data were generally reliable. Although
this approach did not allow us to project the results of the sample to the population, it was
sufficient to meet the audit objective.

To determine the amount of funds to be put to better use, we used the Parish’s HUD-approved
2015-2017 consolidated plan to determine the amount of HUD funding that the Parish planned to
allocate toward its property rehabilitation program. According to the consolidated plan, the
Parish budgeted $216,663 in HUD HOME funds with a target date for completion of December
31, 2018.

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.




                                                14
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

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

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

•   Effectiveness and efficiency of policies and procedures used to ensure that program
    requirements are met.
•   Reliability of data for accurately reporting in HUD reports.
•   Compliance with applicable Federal requirements.
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 Parish did not have sufficient policies and procedures, lacked adequate staffing levels,
    and its staff members were not always aware of their responsibilities, as needed to ensure that
    payments to contractors were eligible, supported, and reasonable and that it adequately
    monitored its contractors (finding).




                                                  15
     Appendixes
Appendix A


           Schedule of Questioned Costs and Funds To Be Put to Better Use
        Recommendation                      Unsupported 2/ Funds to be put
            number          Ineligible 1/                    to better use 3/
                1A                                                     $216,663
                1B               $9,849
                1C                                  $1,020,121
               Total              9,849             1,020,121           216,663


1/    Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
      that the auditor believes are not allowable by law; contract; or Federal, State, or local
      policies or regulations.
2/    Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
      or activity when we cannot determine eligibility at the time of the audit. Unsupported
      costs require a decision by HUD program officials. This decision, in addition to
      obtaining supporting documentation, might involve a legal interpretation or clarification
      of departmental policies and procedures.
3/    Recommendations that funds be put to better use are estimates of amounts that could be
      used more efficiently if an Office of Inspector General (OIG) recommendation is
      implemented. These amounts include reductions in outlays, deobligation of funds,
      withdrawal of interest, costs not incurred by implementing recommended improvements,
      avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
      that are specifically identified. In this instance, requiring the Parish to develop and
      implement written policies and procedures and management controls and take actions
      that would correct and prevent the deficiencies noted in the finding would better ensure
      that the Parish spends its budgeted $216,663 in HOME funds in accordance with the
      requirements for local building codes and housing property standards.




                                               16
Appendix B
             Auditee Comments and OIG Evaluation


             Auditee Comments



Ref to OIG
Evaluation




Comment 1




                              17
Ref to OIG   Auditee Comments
Evaluation




Comment 2




Comment 3




                            18
Ref to OIG   Auditee Comments
Evaluation




Comment 4




Comment 5




Comment 6




                            19
Ref to OIG   Auditee Comments
Evaluation




Comment 7




Comment 8




                            20
Ref to OIG   Auditee Comments
Evaluation


Comment 9




Comment 10




Comment 11




                            21
Ref to OIG   Auditee Comments
Evaluation


Comment 11




Comment 12




Comment 13




                            22
Ref to OIG   Auditee Comments
Evaluation




Comment 14




                            23
Ref to OIG   Auditee Comments
Evaluation




Comment 15




Comment 16




                            24
                         OIG Evaluation of Auditee Comments


Comment 1   The Parish stated that it has included detailed documentation that was questioned
            as unsupported, as well as corrective measures that will be implemented by the
            current administration. However, as noted throughout our evaluation, the Parish
            did not provide this additional documentation with its response. As such, we
            could not substantiate the Parish’s statements and we stand by our original
            conclusions. The Parish will need to provide any additional supporting
            documentation to and work with HUD to resolve the finding and
            recommendations during the audit resolution process..
Comment 2   The Parish stated that as a result of the HUD OIG’s audit report issued in
            September 2014, it informally suspended its rehabilitation program, and
            completed only ongoing projects, with the exception of five LRA properties,
            which refutes the assertion that the program was suspended in January 2016.
            However, the Parish did not provide documentation to support that it informally
            suspended its rehabilitation program in or near September 2014 rather than
            January 2016, as stated during the audit. In addition, based upon contract
            documentation, the Parish executed homeowner rehabilitation contracts in
            October 2014 and September 2015, after the September 2014 audit report.
            Therefore, we could not substantiate the Parish’s statement and we did not make
            any changes to the report.
Comment 3   The Parish stated that the last payments for 11 of the sampled contracts were
            made within the review period of a prior HUD OIG audit report and that
            payments for another 31 contracts were made prior to that report’s September
            2014 issuance. The Parish further stated that HUD CPD reviewed and accepted
            file documentation regarding the September 2014 audit report and thus the Parish
            disagreed with the finding.
            We disagree. The review period for this current audit covered activities between
            July 2013 through April 2017 while the review period from the prior audit
            covered activities between October 1, 2011 through September 30, 2013. Our
            sample of 53 contract files during this current audit included only 5 contract files
            reviewed during the previous audit. We did not question the costs for the five
            contract files in the previous audit since the files included a cost analysis.
            However, during this current audit, the inspector admitted that he had not
            conducted the cost analyses and simply copied the contractors’ proposed costs,
            thus resulting in questioning the costs as unsupported. As such, we stand by our
            original conclusions. The Parish will need to work with HUD to resolve the
            finding and recommendations during the audit resolution process.
Comment 4   The Parish stated that it entered into a subrecipient agreement with a nonprofit to
            provide full project implementation services for owner occupied rehab projects;
            and that it had met to address previous concerns and drafted policies and
            procedures for the rehabilitation program. The Parish stated that it had attached


                                              25
            the new Owner Occupied Rehabilitation Program policies and procedures in its
            response.
            We acknowledge the Parish for taking steps to address the issues identified in the
            audit report. However, the Parish did not provide documentation of its new
            policy with its response and we could not substantiate the Parish’s statement. The
            Parish will need to provide final documentation to and work with HUD to resolve
            the finding and recommendations during the audit resolution process.
Comment 5   The Parish stated that it reviewed each invoice for accuracy and eligibility and
            that it will provide all documentation to HUD CPD to remove the finding. We
            acknowledge the Parish for taking steps to address the issues identified in the
            audit report. The Parish will need to provide final documentation to and work
            with HUD to resolve the finding and recommendations during the audit resolution
            process.
Comment 6   The Parish stated that it refuted the assertion that for 17 files reviewed contractors
            did not perform work and had excessive material costs based upon attached
            invoices signed by the homeowner acknowledging that the line items were
            completed and the Final Acceptances of Building Contract indicating that the
            contractor had satisfactorily performed everything required of the contractor.
            We disagree. Signed invoices and contracts acceptance documents executed by
            the homeowners did not relieve the Parish, as HUD’s grantee, of ensuring that the
            contractors’ work was done properly and that grant funds were expended in
            accordance with the requirements. We cannot reasonably conclude that
            homeowners had the skill or ability to verify the proper completion of a
            contractor’s work. In addition, the OIG onsite inspections supported its findings
            with property calculations, and detailed onsite observations with pictures, which
            were tested for compliance with HUD rules and regulations, Parish code
            requirements, and contract specifications requirements. Further, as stated in the
            report, the Parish did not adequately monitor its contractors throughout the
            contracting period and for the final inspection. Lastly, the Parish did not provide
            any additional documentation with its response to substantiate its statements.
            Therefore, we stand by our original conclusions. The Parish will need to provide
            the additional supporting documentation to and work with HUD to resolve the
            finding and recommendations during the audit resolution process
Comment 7   The Parish asserted that for $294,351 it had reviewed the files and located many
            of the missing documents and that it withheld retainage from each invoiced
            amount. The Parish stated that it attached documents to its response to support its
            assertions. However, the Parish did not provide the documentation with its
            response. Therefore, we could not substantiate the Parish’s assertions and we
            stand by our original conclusions. The Parish will need to provide the additional
            supporting documentation to and work with HUD to resolve the finding and
            recommendations during the audit resolution process.



                                               26
Comment 8     The Parish stated that it reviewed the applicant files and files of former employees
              to locate documents to allay concerns that in house cost estimates were not
              completed; and that it attached files totaling $453,636 to document that in house
              cost estimates were requested and completed prior to the bidding of the projects.
              The Parish did not provide the documentation with its response. Therefore, we
              could not substantiate the Parish’s assertions and we stand by our original
              conclusions. The Parish will need to provide the additional supporting
              documentation to and work with HUD to resolve the finding and
              recommendations during the audit resolution process.
Comment 9     The Parish stated that it refuted the assertion that 6 files did not contain invoices
              resulting in $48,978 of questioned costs and attached those invoices. The Parish
              did not provide the documentation with its response. Therefore, we could not
              substantiate the Parish’s assertions and we stand by our original conclusions. The
              Parish will need to provide the additional supporting documentation to and work
              with HUD to resolve the finding and recommendations during the audit resolution
              process.
Comment 10 The Parish refuted that five properties were not brought up to code as the
           properties were inspected by the Parish inspector and Code Enforcement
           department. The Parish stated that it attached permits which certified that the
           properties were brought up to code and that in most instances the HUD OIG
           inspections were up to three years after the Certificate of Completion was issued.
           The Parish further stated that any code issues found may have occurred after the
           program completed the repairs to the home and the program should not be held
           responsible for these claims. The Parish also stated that it attached invoices
           signed by the 10 homeowners that the scope of work item were completed and
           Final Acceptances of Building contract indicating that the contractor had
           satisfactorily performed everything required of the contractor.
              We disagree. The Parish did not provide the requested permits during the audit,
              despite repeated requests, or with its response for the 10 properties in question. In
              addition, all items noted within the report and onsite inspection findings, were
              specifically based on contract line items that the contractor did not complete
              properly and not due to wear and tear. Further, signed invoices and contracts
              acceptance documents executed by the homeowners did not relieve the Parish, as
              HUD’s grantee, of ensuring that the contractors’ work was done properly and that
              grant funds were expended in accordance with the requirements. We cannot
              reasonably conclude that homeowners had the skill or ability to verify the proper
              completion of a contractor’s work. Further, as stated in the report, the Parish did
              not adequately monitor its contractors throughout the contracting period and for
              the final inspection. Therefore, we stand by our original conclusions. The Parish
              will need to provide the additional supporting documentation to and work with
              HUD to resolve the finding and recommendations during the audit resolution
              process.




                                                27
Comment 11 The Parish stated that it has taken various corrective actions to ensure that its
           rehabilitation program is in accordance with Federal and HUD program
           requirements. We acknowledge the Parish for taking steps to address the issues
           identified in the audit report. The Parish will need to provide final documentation
           to and work with HUD to resolve the finding and recommendations during the
           audit resolution process.
Comment 12 The Parish stated that HUD OIG completed inspections on properties where
           rehabilitation was completed by the Parish up to three years prior and many of the
           deficiencies may have occurred after the program warranty period or were not a
           part of the scope of repairs provided by the Parish. The Parish stated that it would
           meet and determine which repairs are necessary to correct.
              We disagree. Our onsite property inspection took into account the timeframe to
              which contractors completed required work items. In addition, all items noted
              within the report and onsite inspection findings, were specifically based on
              contract line items that the contractor did not complete properly and not due to
              wear and tear. Therefore, we stand by our original conclusions. The Parish will
              need to work with HUD to resolve the finding and recommendations during the
              audit resolution process.
Comment 13 The Parish stated that its homeowners signed Final Acceptances of Building
           Contract indicating that the contractor had satisfactorily performed everything
           required of the contractor. The Parish also stated that it addressed all claims
           received during the warranty period, but will work with the Department of
           Inspection and Code Enforcement to determine is additional inspections are
           necessary. Further, the Parish stated that it must be cautious to complete
           additional repairs, ensure that it is appropriately managing the expectations of the
           homeowners, and that it could not continue to allocate funds for constant
           inspection after the warranty period.
              Signed contracts acceptance documents executed by the homeowners did not
              relieve the Parish, as HUD’s grantee, of ensuring that the contractors’ work was
              done properly and that grant funds were expended in accordance with the
              requirements. We cannot reasonably conclude that homeowners had the skill or
              ability to verify the proper completion of a contractor’s work. In addition, had the
              Parish properly monitored its contractors and program, we would not question the
              adequacy or eligibility of the completion of work items as detailed throughout the
              report. As such, we stand by our original conclusions. The Parish will need to
              work with HUD to resolve the finding and recommendations during the audit
              resolution process.
Comment 14 The Parish stated that it provided documentation, with its response, that all
           program participants were provided with the Parish complaint process and it
           should not be negatively viewed for participants who failed to avail themselves on
           the process on how to make a complaint. The Parish also stated that each
           applicant executed a Final Acceptance noting their acceptance of the work and


                                                28
              deficiencies noted by the HUD OIG were due to lack of homeowner maintenance
              which the Parish cannot be held to applicants who determined their dissatisfaction
              three years after the completion of their job.
              We disagree. All participants did not execute a signed document related to the
              complaint process and the Parish did not provide any additional documentation
              with its response to support its statement. In addition, all items noted within the
              report and onsite inspection findings, were specifically based on contract line
              items that the contractor did not complete properly and not due to wear and tear.
              Further, signed invoices and contracts acceptance documents executed by the
              homeowners did not relieve the Parish, as HUD’s grantee, of ensuring that the
              contractors’ work was done properly and that grant funds were expended in
              accordance with the requirements. We cannot reasonably conclude that
              homeowners had the skill or ability to verify the proper completion of a
              contractor’s work. Further, as stated in the report, the Parish did not adequately
              monitor its contractors throughout the contracting period and for the final
              inspection. Therefore, we stand by our original conclusions. The Parish will need
              to provide the additional supporting documentation to and work with HUD to
              resolve the finding and recommendations during the audit resolution process.
Comment 15 The Parish stated that since receiving this monitoring report, it is working with the
           Personnel Board on up to three new hires for the Parish staff and that it executed a
           subrecipient agreement to administer its Owner-Occupied Rehab Program for FY
           2017.
              We issued an audit report, not a monitoring report. We acknowledge the Parish
              for taking steps to address the issues identified in the audit report. The Parish will
              need to provide final documentation to and work with HUD to resolve the finding
              and this recommendation during the audit resolution process.
Comment 16 The Parish stated that since January 2016, it has taken a proactive approach to
           ensuring all staff understand their roles and responsibilities in the department and
           that it had provided training in various subjects areas and that it will continue the
           planned quarterly trainings in 2018. We acknowledge the Parish for taking steps
           to address the issues identified in the audit report. The Parish will need to provide
           final documentation to and work with HUD to resolve the finding and this
           recommendation during the audit resolution process




                                                 29
          Appendix C
                                               Contract File Issues




                                                  Issues identified                                        Questioned costs
                                  Excessive
                                   material       No cost                                   Property
                      Duplicate    costs or   reasonableness     Lacked         No            not
           Contract    or over-    work not   assessment for    adequate   independent      brought
Count      number     payments    completed   change orders      invoice   cost estimate   up to code   Ineligible   Unsupported
    1   55-00014310                   X             X               X            X             X                          $40,108
    2   55-14069                      X             X               X            X                                        $57,197
    3   55-00014487      X                          X                            X             X           $2,890         $31,566
    4   55-13940         X           X              X                            X                            500         $25,872
    5   55-13985         X           X              X                            X                            365         $22,265
    6   55-13675         X                          X                            X                          2,890         $52,417
    7   55-13951         X                          X                            X                          1,200         $36,100
    8   55-13805         X           X              X                                                       1,500         $15,820
    9   55-00014637                  X              X                                          X                          $37,905
   10   55-00014532                  X              X                                          X                          $31,670
   11   55-00014533                  X              X                                          X                          $24,959
   12   55-00012577                  X              X                                          X                          $30,995
   13   55-13986                     X              X                           X                                         $11,546
   14   55-13444                     X              X                           X                                         $29,917
   15   55-14527                     X              X                           X                                          $5,400
   16   55-00014313                                 X                           X              X                          $54,691
   17   55-00014486                                 X                           X              X                          $20,317
   18   55-13953                                    X              X            X                                         $40,474
   19   55-14224                                    X              X            X                                         $20,530
   20   55-13356         X                          X                                                         144          $5,170
   21   55-00014360                  X              X                                                                     $30,235
   22   55-13357                     X              X                                                                      $5,400
   23   55-13952                                    X                           X                                         $25,187
   24   55-14229                                    X                           X                                         $19,680
   25   55-13543                                    X                           X                                         $25,230




                                                           30
         Appendix C (continued)
                                               Contract File Issues



                                                   Issues identified                                       Questioned costs
                                   Excessive
                                    material       No cost                                 Property
                       Duplicate    costs or   reasonableness    Lacked         No            not
            Contract    or over-    work not   assessment for   adequate   independent      brought
Count       number     payments    completed   change orders     invoice   cost estimate   up to code   Ineligible   Unsupported
   26    55-13987                                    X                           X                                        $38,605
   27    55-15287                                    X                           X                                        $16,125
   28    55-14118                                    X                           X                                        $13,300
   29    55-13781                                    X                           X                                         $3,028
   30    55-13782                                    X                           X                                         $3,200
   31    55-13722                                    X                           X                                         $4,600
   32    55-13682                                    X                           X                                        $13,050
   33    55-13783                                    X                           X                                         $2,900
   34    55-13984                                    X                           X                                        $21,225
   35    55-13988                                    X                           X                                        $20,305
   36    55-13349                                    X                           X                                        $12,855
   37    55-13349                                    X                           X                                        $15,000
   38    55-13348                                    X                           X                                         $3,604
   39    55-00012706                                 X                           X                                        $38,056
   40    55-00014485                                 X             X                                                      $30,074
   41    55-12761                                    X             X                                                      $13,281
   42    55-00014315                                 X                                         X                           $4,020
   43    55-00014311                                 X                                                                     $2,450
   44    55-13354                                    X                                                                     $5,432
   45    55-13355                                    X                                                                     $4,064
   46    55-14361                                    X                                                                     $6,150
   47    55-00014317                                 X                                                                     $8,365
   48    55-00014314                                 X                                                                       $980
   49    55-13344                                    X                                                                     $2,400
   50    55-13347                                    X                                                                     $3,170
   51    55-00012736                                                                           X                          $18,760
   52    55-13346                                                               X                                         $14,473

Totals                    7           14            50             6            32            10            9,489       1,020,121




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