Sacramento Housing and Redevelopment Agency Community Development Block Grant Program Office of Audit, Region 9 Audit Report Number: 2018-LA-1006 Los Angeles, CA July 25, 2018 To: Kimberly Y. Nash, Director, San Francisco Office of Community Planning and Development, 9AD //SIGNED// From: Tanya E. Schulze, Regional Inspector General for Audit, 9DGA Subject: The Sacramento Housing and Redevelopment Agency, Sacramento, CA, Did Not Always Use Community Development Block Grant Funds in Accordance With HUD Requirements or Its Own Policies 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 Sacramento Housing and Redevelopment Agency’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-1006 Date: July 25, 2018 The Sacramento Housing and Redevelopment Agency, Sacramento, CA, Did Not Always Use Community Development Block Grant Funds in Accordance With HUD Requirements or Its Own Policies Highlights What We Audited and Why We audited the Sacramento Housing and Redevelopment Agency’s Community Development Block Grant (CDBG) program, based on an Office of Inspector General risk assessment and U.S. Department of Housing and Urban Development (HUD) concerns. The objective of our audit was to determine whether the Agency used the City of Sacramento’s CDBG funds in accordance with HUD requirements and adequately monitored its subrecipients. What We Found The Agency adequately monitored its subrecipients. However, it did not always use CDBG funds in accordance with HUD requirements or its own policies. Specifically, it did not (1) seek competition or maintain adequate documentation for four of its activities, (2) properly classify three capital improvement projects, or (3) ensure that one activity continued to meet national objective requirements. Additionally, the Agency paid for $283 in unallowable costs. This condition occurred because the Agency disregarded HUD regulations and its own procurement policy. As a result, HUD had no assurance that $385,414, which the Agency spent on four activities, was a fair and reasonable cost. Also, the Agency did not properly classify three activities totaling $119,150. What We Recommend We recommend that the Director of HUD’s San Francisco Office of Community Planning and Development require the Agency to (1) provide supporting documentation for four procurements made without adequate competition totaling $385,414; (2) support that three feasibility studies met a final cost objective, reclassify the activities as administration and planning, or repay the program $55,200 from non-Federal funds; (3) reimburse its program $283 from non-Federal funds for unallowable costs; (4) provide training to its employees regarding allowable costs; and (5) provide training on CDBG and procurement regulations to staff involved in CDBG activities. Table of Contents Background and Objective......................................................................................3 Results of Audit ........................................................................................................4 Finding: The Agency Did Not Always Use CDBG Funds in Accordance With HUD Requirements or Its Own Policies ................................................................................... 4 Scope and Methodology ...........................................................................................9 Internal Controls ....................................................................................................11 Appendixes ..............................................................................................................12 A. Schedule of Questioned Costs .................................................................................. 12 B. Auditee Comments and OIG’s Evaluation ............................................................. 13 C. Criteria ....................................................................................................................... 26 2 Background and Objective The Sacramento Housing and Redevelopment Agency receives annual Community Development Block Grant (CDBG) entitlement allocation funds from the U.S. Department of Housing and Urban Development (HUD). The Agency is a joint powers authority created in 1982 to provide common professional staffing to the City and County of Sacramento to administer and manage its housing authorities and the city and county Federal housing and community development entitlement funds. The Agency uses its annual CDBG allocation to fund projects and activities undertaken to address the housing and community development needs of low- and moderate- income persons in the City and County of Sacramento. Federal regulations at 24 CFR (Code of Federal Regulations) 570.200 require that CDBG funds be used for eligible activities that meet one of three national objectives: • provide benefit to low- and moderate-income persons, • aid in the prevention or elimination of slums or blight, or • meet a need having a particular urgency. The Agency is responsible for administering and overseeing the use of the City of Sacramento’s CDBG funds. The CDBG program is guided by 24 Code of Federal Regulations (CFR) Part 570. The Agency’s fiscal year runs from January 1 to December 31 and it received the following City of Sacramento CDBG funds for fiscal years 2015 to 2017. Fiscal year Amount January 1 – December 31, 2015 $4,335,943 January 1 – December 31, 2016 4,420,123 January 1 – December 31, 2017 4,442,443 Total CDBG funds 13,198,509 Our audit objective was to determine whether the Agency used the City of Sacramento’s CDBG funds in accordance with HUD requirements and adequately monitored its subrecipients. 3 Results of Audit Finding: The Agency Did Not Always Use CDBG Funds in Accordance With HUD Requirements or Its Own Policies The Agency did not use CDBG funds in accordance with HUD requirements or its own policies. Specifically, it did not (1) always seek competition or maintain adequate documentation for its activities, (2) properly classify three activities, or (3) ensure that one activity met national objective requirements. Additionally, the Agency paid for unallowable costs. This condition occurred because the Agency disregarded HUD regulations and its own procurement policy. As a result, HUD had no assurance that $385,414, which the Agency spent on four activities, was a fair and reasonable cost. Also, the Agency did not properly classify three activities totaling $119,150. The Agency Did Not Always Comply With HUD Procurement Regulations and Its Own Procurement Policy The Agency did not always comply with its own procurement policy or HUD regulations. Specifically, it did not seek adequate competition or maintain adequate documentation for 4 of the 10 activities reviewed. As a result, HUD had no assurance that it received the best value for the activities listed in the following table. Activity Lack of Lack of Conflict of Amount competition documentation interest Emergency repair program x $272,569 Food incubator study x x x 50,000 Colonial Heights Library x 48,895 Boys and Girls Club study x 13,950 Total activities 3 2 1 385,414 Emergency Repair Program The Agency selected contractors from a list of seven prequalified contractors to perform work for its emergency repair program. The Agency developed this list from a request for quotations procurement process. However, it obtained a price quote from only the contractor that performed the work. The Agency did not obtain additional quotes for work over $3,000 as required by its own procurement policy (see criteria in Appendix C). 1 It funded repairs for 59 1 Small purchase procedures - For any amounts above the micropurchase threshold but not exceeding $150,000, the Agency must obtain a reasonable number of quotes (preferably three or more). For purchases of less than $3,000, also known as micropurchases, only one quote is required if the quote is considered reasonable. 4 low-income homeowners in which the cost of the work exceeded $3,000. It restricted competition for these 59 repairs by obtaining a quote from only the vendor that performed the repair. The repairs totaled $272,569. Food Incubator Study The Agency improperly solicited a proposal from only one source for a food incubator feasibility study. The Agency was unable to provide sufficient justification for using noncompetitive procedures. It could not show that the contractor selected was the only contractor capable of performing the work as required by HUD regulations. 2 Also, it did not provide documentation to support efforts made to identify other contractors capable of performing the study as required by its own procurement policy. The Agency based its decision to get only one quote from an outdated procurement policy that did not comply with HUD regulations. Additionally, it awarded the food incubator study contract to the property owner of the proposed food incubator site. This relationship violated the “interests of officials” provision of the contract, which states that the “contractor covenants that he has no interest and will not acquire any interest, direct or indirect, in any portion of the project to which the contract pertains.” The contractor’s ownership interest in the feasibility study property may have influenced the results of the study. Colonial Heights Library The Colonial Heights Library project included rehabilitation work of a kitchen and community room and the construction of a tool shed. The Agency violated procurement requirements and approved change orders totaling $48,895 for disabled parking spaces and work around planter boxes that were not part of the original scope of work and were not bid on by contractors responding to the solicitation. 3 As a result, the $48,895 in change orders for parking spaces and work done around planter boxes was awarded without competition. Boys and Girls Club Study The Agency entered into a subrecipient agreement with the Boys and Girls Club of Greater Sacramento to perform a feasibility study of a freestanding Boys and Girls Club clubhouse in the Del Paso Heights community. The Boys and Girls Club contacted firms to perform the study. However, it did not maintain records sufficient to detail the history of the procurement and had no documentation to support that $13,950 paid for the study was reasonable. 4 The Agency provided the Boys and Girls Club’s written statement, which described its efforts to contact several firms to do the study. This statement, written in response to our audit, said that the price paid was based on estimates and information received from these firms. However, the statement did not include written cost estimates to support the cost of the study. 2 2 CFR 200.320(f) 3 2 CFR 200.319(a) 4 2 CFR 200.318(i) 5 The Agency Did Not Properly Classify Three Activities The Agency classified three activities reviewed as capital improvement project scoping activities. It classified capital improvement project scoping activities as activity delivery costs for activities that had not been fully developed. Activity delivery costs are those allowable costs incurred for implementing and carrying out eligible CDBG activities. The table below identifies these three activities. Activity Amount Entrepreneur center feasibility study $55,200 Food incubator feasibility study 50,000 Boys and Girls Club feasibility study 13,950 Total unsupported 119,150 HUD requirements state that a grantee must be aware of the risk associated with initiating a project that does not materialize or reach fruition and, therefore, does not meet a national objective or final cost objective. In such cases, the incomplete activity will most likely be determined ineligible and the staff costs disallowed or possibly considered general administrative costs. 5 It is unclear whether the three feasibility studies met a national objective or their respective final cost objectives. The Agency stated that it had no specific plan to proceed with the construction of a new Boys and Girls Club but it planned to proceed with the food incubator and entrepreneur center. The Agency had not entered an activity into HUD’s Integrated Disbursement and Information System (IDIS) 6 for the three projects, which would support the final cost objectives. Without meeting a national objective or final cost objective, the costs for the three studies were ineligible as activity delivery costs. For this reason, the Agency will need to reclassify these costs. If the Agency reclassifies these costs to program administrative costs, it will need to ensure that the reclassification does not cause the planning and administration cost objective to exceed the 20 percent cap. 7 The Agency Did Not Ensure That One Activity Met an Ongoing National Objective The installation of a tool shed at the Colonial Heights Library initially met a national objective. The national objective for the project was low-moderate area benefit. The Agency was able to support that the library was located in a low- to moderate-income area. However, HUD 5 Notice CPD [Office of Community Planning and Development] 13-07(III)(A)(6) 6 IDIS is a nationwide database that provides HUD with current information regarding the program activities across the Nation. IDIS provides timely information on grantee performance, needs, and trends that allows HUD to monitor grantee expenditures and accomplishments. Grantees can use system reports to manage their CPD formula grant programs more effectively. 7 24 CFR 570.200(g) 6 regulations 8 state that the activity must provide benefits that are available to all of the residents in a particular area. We performed a site visit to the library and observed that the tool shed was securely boarded up and not available for residents to use. The circulation supervisor at the library stated that the library boarded up the shed shortly after completion because individuals kept breaking into it. We determined that the tool shed did not provide a benefit to the residents of this particular area as required. As a result, the $29,704 spent on building the shed was unsupported. 9 Because of our audit, the Agency promptly contacted the Sacramento Public Library to determine the library’s plan for the tool shed going forward. The library stated that it had attempted to implement security measures but the vandalism continued. The library stated that the best and safest course of action was to reimburse the Agency for the cost of the shed. The library reimbursed the Agency the $29,704 spent to build the shed. The Agency Paid for Unallowable Costs The Agency reimbursed one of its subrecipients for the delivery of bottled water during our audit period. Only costs necessary and reasonable for the performance of the Federal award are allowed. 10 The bottled water service was not necessary for the performance of the Federal award. As a result, the $283 that the Agency spent on bottled water was not an allowable cost. Conclusion The Agency did not always seek competition or maintain adequate documentation for its activities, properly classify three activities, or ensure that one activity met national objective requirements. Further, the Agency paid for unallowable costs. This condition occurred because the Agency disregarded HUD CDBG requirements and its own policies. In one case, the Agency ignored its current procurement policy and used an outdated policy to justify a noncompetitive procurement action. As a result, HUD had no assurance that $385,414, which the agency spent on four activities, was a fair and reasonable cost. Also, the agency did not properly classify three activities totaling $119,150. Recommendations We recommend that the Director of HUD’s San Francisco Office of Community Planning and Development require the Agency to 1A. Support that the 59 contracts awarded for the emergency repair program were fair and reasonable or repay its program $272,569 from non-Federal funds. 1B. Obtain technical assistance from HUD to revise its Emergency Repair Program to meet CDBG requirements. 8 24 CFR 570.208(a)(1)(i) 9 This amount is separate from the $48,895 in Colonial Heights Library change orders questioned above. 10 24 CFR 200.403(a) 7 1C. Support that the contract awarded for the food incubator study was fair and reasonable and met a final cost objective or repay its program $50,000 from non- Federal funds. 1D. Support that change orders executed outside the scope of the Colonial Heights Library contract were fair and reasonable or repay its program $48,895 from non- Federal funds. 1E. Support that the contract awarded for the Boys and Girls Club feasibility study was fair and reasonable and met a final cost objective or repay its program $13,950 from non-Federal funds. 1F. Provide procurement training to its staff members who work on CDBG program activities and ensure that staff members comply with HUD requirements and use its current procurement policy. 1G. Support that the entrepreneur center feasibility study met a final cost objective or repay its program $55,200 from non-Federal funds. 1H. Reimburse its program $283 from non-Federal funds for unallowable bottled water costs. 1I. Review all invoices provided from its minor repair subrecipient between January 1, 2015, and December 31, 2017, and repay the program from non-Federal funds for all bottled water service payments not identified in this audit report. 1J. Provide training to its employees regarding allowable costs to ensure that all costs submitted by contractors and subrecipients are eligible for reimbursement. 8 Scope and Methodology We performed our audit fieldwork at the Agency’s offices located at 801 12th Street, Sacramento, CA, from November 2017 through March 2018. Our audit period covered January 1, 2015, to December 31, 2017, and was expanded when necessary. To accomplish our objective, we • Reviewed applicable CDBG program requirements and applicable Federal regulations. • Reviewed relevant background information, including organizational charts and grant agreements. • Reviewed relevant Agency policies and procedures. • Reviewed audited financial statements, consolidated and annual action plans, and consolidated annual performance evaluation reports. • Interviewed appropriate Agency personnel and HUD staff. • Reviewed HUD monitoring reports. • Reviewed reports from IDIS to obtain CDBG disbursement information for the period tested. • Reviewed drawdowns (vouchers) and supporting documentation for sampled program expenditures. Sampling Information The audit universe consisted of 52 vouchers amounting to almost $16 million in drawdowns during fiscal years 2015, 2016, and 2017. We selected a nonstatistical audit sample of three vouchers, choosing one voucher from each year. The total amount of the three vouchers selected was almost $3.5 million, which represented 21.62 percent of the dollar amount of the total universe. Based on our review of the vouchers, we requested additional documentation for six activities to support the eligibility, national objective, and procurement of each activity. We selected these six activities based on dollar amount and concerns HUD had regarding the program. We also selected 100 percent of the construction contracts to review. The dollar amount of the three construction contracts totaled more than $1.4 million. Our audit results were limited to the vouchers in our sample and cannot be projected to the universe. 9 We determined that data contained in source documentation provided by the Agency agreed with data contained in IDIS. We, therefore, assessed the computer data to be sufficiently reliable for our use during the audit. We conducted the audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective(s). We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. 10 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 adequately support program expenditures. • Compliance with applicable laws and regulations – Implementation of policies and procedures to ensure compliance 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. Significant Deficiency Based on our review, we believe that the following item is a significant deficiency: • The Agency lacked adequate controls to ensure that its employees fully complied with HUD regulations or its own procurement policies (finding). 11 Appendixes Appendix A Schedule of Questioned Costs Recommendation Ineligible 1/ Unsupported 2/ number 1A $ 272,569 1C 50,000 1D 48,895 1E 13,950 1G 55,200 1H $ 283 Total 283 440,614 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. In this case, the Agency reimbursed its subrecipient for bottled water, which was not reasonable or necessary for the performance of the award. 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. The unsupported amount in this case includes $385,414 in awards without documentation to support competition and reasonableness of final cost and $55,200 spent on a feasibility study with no documentation showing a final cost objective. 12 Appendix B Auditee Comments and OIG’s Evaluation Ref to OIG Evaluation Auditee Comments Comment 1 Comment 2 Comment 3 Comment 4 13 Comment 5 Comment 6 14 Comment 7 Comment 8 Comment 9 Comment 10 Comment 11 Comment 6 Comment 9 15 Comment 12 Comment 13 16 Comment 14 Comment 15 Comment 16 17 Comment 17 Comment 18 Comment 19 Comment 20 Comment 21 18 19 Comment 10 Comment 12 Comment 14 Comment 17 Comment 22 20 Comment 22 Comment 22 Comment 22 Comment 22 21 OIG Evaluation of Auditee Comments Comment 1 We agree that the Agency must provide supporting documentation for the unsupported costs identified in Appendix A. However, the unsupported costs total $440,614, not $385,000. Comment 2 We updated some of the bold headings in the report as discussed during the exit conference. Comment 3 We removed the statements that the Agency was unaware of HUD regulations and replaced it with the statement that the Agency disregarded HUD regulations and its own procurement policy. Comment 4 We disagree that the findings presented are not supported. The City did not always use CDBG funds in accordance with requirements. The findings in the report are factual and supported by documentation and information obtained during the audit. Comment 5 We acknowledge the Agency’s participation in various HUD programs. However, this audit was limited to the Agency’s CDBG program. Comment 6 We agree that the agency went through a procurement process that resulted in a qualified list of contractors. However, the existence of a qualified contractors list does not eliminate the need to seek competition and ensure cost reasonableness. Regulations at 24 CFR 200.319(d) states that the non-Federal entity must ensure that all prequalified lists of persons, firms, or products which are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition. The Agency developed the qualified list, ensured that it was current, but did not seek competition from the list. Comment 7 We disagree that the clients’ needs rise to a level of urgency that allows the agency to bypass obtaining multiple quotes. In one case reviewed, the client reported problems with her heating and air conditioning on June 1, 2016. The Agency did not send a fax to the contractor to evaluate the needs of the client until July 12, 2016, more than 30 days after the client reported the problem. We agree the needs of the clients are important. However, as shown by the Agency’s response in this case, it was not an emergency that would justify only receiving one quote. Comment 8 The contracts do contain bid price schedules developed by the Agency. However, the bid price schedule does not include all types of work performed under the Emergency Repair Program. For example, in two of the three client files reviewed, the Agency approved the replacement of air conditioning and heating units at prices that were not included in the bid price schedule. Instead, the Agency obtained a single quote greater than $3,000 without seeking additional quotes in violation of both HUD regulations and its own procurement policy. Comment 9 We acknowledge that the Agency faces challenges in administering the Emergency Repair Program as currently designed. We added an audit report recommendation 22 to have the Agency work with HUD to ensure the Emergency Repair Program meets CDBG requirements. Comment 10 We are encouraged that the Agency has reviewed the costs for the 59 Emergency Repair Program contracts and determined that the costs were reasonable. The Agency should provide that support to HUD during the audit resolution process. Comment 11We were unable to determine which two projects were duplicates. As a result, the Agency should provide evidence of duplication to HUD during the audit resolution process. Comment 12 We disagree that the qualifications of the partners awarded the food incubator study were sufficient to justify a non-competitive procurement. Regulations at 24 CFR 200.320(f) states that procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source and may be used only when one or more of the following circumstances apply. 1. The item is available only from a single source; 2. The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; 3. The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or 4. After solicitation of a number of sources, competition is determined inadequate. The agency did not ensure the procurement met any of the above requirements for awarding a noncompetitive contract. The food incubator study did not result from an emergency, the Agency did not provide evidence it received prior approval from HUD and the Agency never issued a solicitation for the services. The contractor’s unique qualifications described by the Agency might show that the contractor was qualified to perform the study. However, it does not support that they were the only contractor that could do the study. As a result, the Agency inappropriately restricted competition. Comment 13 The draft report does state the ownership interest may have influenced the results of the study. The study was to determine whether the food incubator was feasible at a specific location. We assert that because the contractor who performed the study also owned the proposed site, he may have benefitted financially based on the results of the feasibility study. As a result, this created a conflict of interest that could have affected the conclusion of the study. Comment 14 We disagree that the ADA parking spaces were part of the scope of the project. Regulations at 2 CFR 200.319(c) states that the Agency must ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. It further states that the solicitation must identify all requirements, which the offerors must fulfill 23 and all other factors to be used in evaluating bids and proposals. Because the agency did not obtain the required permits ahead of the procurement, it was unable to develop a solicitation that contained a clear and accurate description of the technical requirements and did not identify all requirements, which the offerors must fulfill. In addition, the contract documentation did not contain an independent cost estimate for the additional concrete work, supporting that the amount spent on the additional work was fair and reasonable. Comment 15 We are encouraged that the Agency reviewed the cost of the ADA work. The agency should submit all supporting documentation showing cost reasonableness to HUD during the audit resolution process. Comment 16 We adjusted the report to state that the tool shed initially met a national objective. However, the library boarded up the shed shortly after it was built and the shed did not provide a service to the low to moderate income community as intended. Comment 17 We disagree that this is a mischaracterization. Regulations at 24 CFR 570.501 states that the Agency is responsible for ensuring that CDBG funds are used in accordance with all program requirements. The use of a designated public agencies, subrecipients, or contractors does not relieve the recipient of this responsibility. In addition, in its response the Agency stated that it worked closely with the subrecipient before and during this CDBG-funded activity. Despite the close contact with the subrecipient, the agency was unable to produce supporting documentation for the procurement of the Boys and Girls Club feasibility study. Comment 18 This explanation of the procurement provided by the Agency was not provided to the audit team during the audit process. The Agency should provide all documentation to support its explanation to HUD during the audit resolution process. Comment 19 We are encouraged that the Agency reviewed the reasonableness of the cost of the study. The Agency should provide documentation supporting the reasonableness of the study to HUD during the audit resolution process. Comment 20 We agree that written quotes are not required. However, 2 CFR 200.318(i) requires the non-Federal entity to maintain records sufficient to detail the basis for the contract price. The Agency was unable to provide documentation to support how it developed the contract price and that the contract price was fair and reasonable. Comment 21 We disagree that the lack of bottled water created a health and welfare concern for the employees of the repair program. The subrecipient’s office contained a kitchen area with potable water. The audit team provided an opportunity to the Agency to support that the potable water at the subrecipient’s site posed a health concern to the subrecipient’s employees. The Agency did not provide documentation to support that the potable water was a health hazard. 24 Comment 22 During the audit resolution process, the Agency should provide supporting documentation to HUD for all actions taken to clear the report recommendations. 25 Appendix C Criteria 2 CFR 200.318(i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. 2 CFR 200.319(a) All procurement transactions must be conducted in a manner providing full and open competition. 2 CFR 200.320(b) Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. 2 CFR 200.320(f) Procurement by noncompetitive proposals. Procurement by noncompetitive proposals through solicitation of a proposal from only one source and may be used only when one or more of the following circumstances apply: (1) The item is available only form a single source; (2) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (3) The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or (4) After solicitation of a number of sources, competition is determined inadequate. 2 CFR 200.403(a) Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award 24 CFR 570.200(g) No more than 20 percent of any origin year grant shall be expended for planning and program administrative costs. 26 24 CFR 570.208(a)(i) Area benefit activities include activities, the benefits of which are available to all the residents in a particular area, where at least 51 percent of the residents are low and moderate income persons. HUD Notice CPD [Office of Community Planning and Development] 13-07(III)(A)(6) A grantee must be aware of the risk associated with initiating a project that does not materialize or reach fruition and, therefore, does not meet a CDBG national objective or a final cost objective. In such cases, the incomplete activity will most likely be determined ineligible and the staff costs disallowed. HUD Notice CPD 13-07(III)(B)(1) Activity delivery costs (ADCs) are those costs not subject to the 20 percent limitation for program administrative costs. Accordingly, they are treated as part of the total cost for delivering a final cost objective under the CDBG program. This is the only limiting requirement – that the ADCs are incurred in order to implement and carry out specific CDBG-assisted activities. At times, the initial costs for an eligible CDBG activity may be treated as administrative costs; however, in the activity’s final accounting, it may be more appropriate to treat these costs as ADCs. Where an activity is not completed, or the activity does not meet a CDBG national objective, the up-front costs must be allocated as PACs [program administrative costs] because they cannot be associated with achieving a final cost objective. Sacramento Housing and Redevelopment Agency, Procurement Policy 2016 Small Purchase Procedures For any amounts above the Micro Purchase threshold, but not exceeding $150,000, SHRA may use small purchase procedures. Under small purchase procedures, SHRA shall obtain a reasonable number of quotes (preferably three or more). For purchases of less than $3,000 only one quote is required. 27
The Sacramento Housing and Redevelopment Agency, Sacramento, CA, Did Not Always Use Community Development Block Grant Funds in Accordance with HUD Requirements or Its Own Policies
Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-07-25.
Below is a raw (and likely hideous) rendition of the original report. (PDF)