oversight

The Town of Apple Valley, CA, Administered Its Community Development Block Grant Program in Accordance With HUD Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-01-05.

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

              Town of Apple Valley, CA
        Community Development Block Grant Program




Office of Audit, Region 9     Audit Report Number: 2018-LA-1001
Los Angeles, CA                                  January 5, 2018
To:            William Vasquez, Director, Office of Community Planning and Development,
               Los Angeles, CA, 9DD
               //SIGNED//
From:          Tanya E. Schulze, Regional Inspector General for Audit, 9DGA
Subject:       The Town of Apple Valley, CA, Administered Its Community Development
               Block Grant Program in Accordance With HUD Requirements


Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of the Town of Apple Valley’s Community
Development Block Grant 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
213-534-2471.
                   Audit Report Number: 2018-LA-1001
                   Date: January 5, 2018

                   The Town of Apple Valley, CA, Administered Its Community Development
                   Block Grant Program in Accordance With HUD Requirements



Highlights

What We Audited and Why
We audited the Town of Apple Valley’s Community Development Block Grant program due to a
hotline complaint (HC-2016-2372) alleging that the Town did not use its program funds in
accordance with U.S. Department of Housing and Urban Development (HUD) program
regulations and requirements. Specifically, the complainant wrote a letter to the previous HUD
Secretary alleging that the Town misused program funds. Our audit objective was to determine
whether the Town administered its program funds in accordance with HUD regulations and
requirements.

What We Found
We determined that the hotline complaint allegation had no merit. The Town administered its
program funds in accordance with applicable HUD regulations and requirements for the projects
reviewed. The projects reviewed met program national objectives, and project activities were
supported and eligible.

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

Results of Audit ........................................................................................................4
         Finding: The Town Administered Its Program in Accordance With HUD
         Requirements..................................................................................................................... 4

Scope and Methodology ...........................................................................................6

Internal Controls ......................................................................................................8

Appendix .................................................................................................................10
         A. Auditee Comments .................................................................................................... 10




                                                                    2
Background and Objective
The Town of Apple Valley receives annual Community Development Block Grant entitlement
allocation funds from the U.S. Department of Housing and Urban Development (HUD). HUD
allocates annual grants on a formula basis to entitled cities and counties to develop viable urban
communities by providing decent housing and a suitable living environment and by expanding
economic opportunities, principally for low- and moderate-income persons. The program is
authorized under Title 1 of the Housing and Community Development Act of 1974, Public Law
93-383, as amended in 42 U.S.C. (United States Code) 530.1 et seq.

The Town’s Community Development Department helps administer the program to provide
decent housing and a suitable living environment and expand economic opportunities for low-
and moderate-income persons. The Town received more than $1.6 million in program
entitlement funds for fiscal years 2014 to 2016 for the execution of the program.

                                   Program year              Amount
                                       2014                  $531,056
                                       2015                   564,460
                                       2016                   559,270
                                       Total                1,654,786

Our objective was to determine whether the Town administered its program in accordance with
applicable HUD regulations and requirements. Specifically, we wanted to determine whether its
projects complied with program requirements.




                                                 3
Results of Audit

Finding: The Town Administered Its Program in Accordance With
HUD Rules and Requirements
The Town administered its program funds in accordance with applicable HUD regulations and
requirements for two administrative projects, one public service project, two public facility
projects, and one rehabilitation and preservation project reviewed. These projects were eligible
and supported. Further, we determined that the allegations of the Town’s misuse of program
funds were not valid.
Program-Funded Projects Were Eligible and Supported
The Town’s six reviewed program-funded projects were eligible and supported. These six
projects are as follows:

                            Activity
  Project                               Description                              Amount
                            number
  Apple Valley
  Community                             Administration expenses of the
                            555                                                  $106,211
  Development Block                     Town’s program
  Grant administration

  Apple Valley
  Community                             Administration of the Town’s
  Development Block         556         residential rehabilitation loan          71,157
  Grant rehabilitation                  program
  administration program

  Inland Fair Housing                   A program that provides fair housing
  and Mediation Board       565         and landlord tenant mediation            11,010
  Fair Housing services                 services for residents

  Manufactured home                     Access improvement for a disabled
                            588                                                  12,529
  repair program                        resident

  Residential
  rehabilitation loan       590         Repair of a septic drainage line         13,853
  program




                                                4
                                        Inspection of a seismic restraint and
  Manufactured home                     the level setdown of the modular
                            591                                                10,252
  repair program                        home, the replacement of HVAC*
                                        duct, and replacements of circuits and
                                        smoke detectors.
  Totals                                                                        225,012
*Heating, ventilation, and air conditioning

All six projects met at least one of the program national objectives. The Town ensured that these
project activities were eligible and expenses were supported. As a result, $225,012 in program
expenses for the six reviewed projects was eligible and supported.

No Merit to Allegations of Program Misuse
The complainant wrote a letter to the former HUD Secretary alleging that the Town misuses
program funds. Specifically, the complainant had concerns about how the Town disbursed it
program funds for projects. Based on the review of sampled projects, we determined that the
allegation had no merit.

Conclusion
The Town administered program funds for reviewed projects in accordance with applicable HUD
regulations and requirements. There was no merit to the allegation that the Town misused
program funds.
Recommendations
There are no recommendations.




                                                5
Scope and Methodology
We performed our audit work at the Town’s office in Apple Valley, CA, from September 27 to
November 16, 2017. Our review covered the period October 1, 2013, to September 30, 2016,
and was expanded as necessary.

To accomplish our objective, we

    •    Reviewed relevant background information, including grant agreements, HUD
         monitoring reports, and the Town’s consolidated and action plans.

    •    Reviewed and analyzed the Town’s policies and procedures and internal controls relating
         to its program.

    •    Reviewed the Town’s audited financial statements for fiscal years 2014, 2015, and 2016.

    •    Reviewed applicable HUD program rules and requirements.

    •    Reviewed information from HUD’s Line of Credit Control System. 1

    •    Reviewed information from HUD’s Integrated Disbursement and Information System. 2

    •    Reviewed project files for sampled program expenses.

    •    Interviewed Town personnel responsible for administering the program.

We relied on data maintained by the Town. Specifically, we relied on the accuracy of data taken
from HUD’s Integrated Disbursement and Information System for the period July 1, 2014,
through June 30, 2016. This system is the drawdown system used for the disbursement of
program funds. Therefore, we used source documents from sample project files and the amounts
disbursed to determine the reliability of data in the Integrated Disbursement and Information
System. We relied on the accuracy of data from this system to provide information, such as
project names, project numbers, amounts obligated, and amounts spent. Specifically, we
compared data from source documents of sample projects to data in the Integrated Disbursement
and Information System. Based on our testing, we determined that the data maintained in the
system were reliable for meeting our audit objective.



1
    The Line of Credit Control System is HUD’s primary grant disbursement system for handling disbursements for
    the majority of HUD programs.
2
    The Integrated Disbursement and Information System provides HUD with current information regarding the
    program activities underway across the Nation, including funding data.


                                                        6
The audit universe consisted of 101 projects totaling more than $2 million in project
expenditures for the Town’s program period July 1, 2014, through June 30, 2017. For our
review, using Audit Command Language 3 software’s random generator, we selected six projects
with transactions totaling $225,012 in project expenditures for the period. Overall, our sample
represented 11 percent of the expenditures for the period. Although this approach did not allow
us to make a projection to the population, it was sufficient to meet the audit objective.

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.




3
    Audit Command Language software provides data analytics and sampling of computerized information.


                                                        7
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

•   effectiveness and efficiency of operations,

•   reliability of financial reporting, and

•   compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.

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

•   Effectiveness and efficiency of program operations – Implementation of policies and
    procedures to ensure that program funds are used for eligible purposes.

•   Reliability of financial information – Implementation of policies and procedures to
    reasonably ensure that relevant and reliable information is obtained to support eligible
    program expenditures.

•   Compliance with applicable laws and regulations – Implementation of policies and
    procedures to ensure that the monitoring of and expenditures for program activities comply
    with applicable HUD rules and 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.

We evaluated the internal controls related to the audit objective in accordance with generally
accepted government auditing standards. Our evaluation of internal controls did not identify




                                                  8
significant deficiencies related to our audit objective. Accordingly, we do not express an opinion
on the effectiveness of the Town’s internal control.




                                                9
Appendix
Appendix A



                                     Auditee Comments


The Town declined the opportunity to provide a written response.




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