oversight

Hudson County, NJ, Generally Committed and Disbursed HOME Program Funds in Accordance With HUD and Federal Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-01-12.

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

                      Hudson County, NJ
             HOME Investment Partnerships Program




Office of Audit, Region 2        Audit Report Number: 2018-NY-1001
New York, NY                                       January 12, 2018
To:            Annemarie C. Uebbing, Director, Office of Community Planning and
               Development, 2FD

               \\SIGNED\\
From:          Kimberly S. Dahl, Regional Inspector General for Audit, 2AGA
Subject:       Hudson County, NJ, Generally Committed and Disbursed HOME Program Funds
               in Accordance With HUD and Federal 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 Hudson County, NJ’s administration of its 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
212-264-4174.
                       Audit Report Number: 2018-NY-1001
                       Date: January 12, 2018

                       Hudson County, NJ, Generally Committed and Disbursed HOME Program
                       Funds in Accordance With HUD and Federal Requirements




Highlights

What We Audited and Why
We audited Hudson County, NJ’s HOME Investment Partnerships program (HOME) as part of
the activities in our annual audit plan. We selected the County based on a risk analysis that
considered the amount of funding, the risk score assigned to it by the U.S. Department of
Housing and Urban Development (HUD), and our identification of potential issues. Our
objective was to determine whether the County committed and disbursed HOME funds in
accordance with applicable HUD and Federal requirements.

What We Found
The County generally committed and disbursed HOME funds in accordance with HUD and
Federal requirements. However, it did not always maintain sufficient documentation
demonstrating that environmental reviews and environmental review exemptions were
completed before committing funds as required and did not ensure that address information in
HUD’s Integrated Disbursement and Information System1 (IDIS) was updated for one activity.
This condition occurred because the County’s staff was not familiar with the HUD
Environmental Review Online System2 (HEROS) and overlooked the need for data to be updated
in IDIS after purchasing a property. As a result, HUD did not have assurance that the County
always completed environmental reviews in a timely manner and maintained accurate
information on properties assisted with HOME funds.

What We Recommend
We recommend that HUD require the County to strengthen its policies and procedures to ensure
that (1) environmental reviews and environmental review exemptions are completed and
documented before funds are committed and (2) activity address information in IDIS is current.




1
    IDIS is the drawdown and reporting system for HUD’s Office of Community Planning and Development
    formula grant programs, including the HOME program.
2
    HEROS was developed by HUD’s Office of Environment and Energy and is used by grantees to develop,
    document, and manage environmental reviews required by HUD. While use of the system is not mandatory, the
    County began using it to document environmental reviews and environmental review exemptions in 2016.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: Hudson County, NJ, Generally Committed and Disbursed HOME Funds
         in Accordance With HUD and Federal Requirements ...........................................4

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

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

Appendix ...................................................................................................................9
         A. Auditee Comments and OIG’s Evaluation .......................................................9




                                                             2
Background and Objective
The U.S. Department of Housing and Urban Development’s (HUD) HOME Investment
Partnerships program (HOME) was created under Title II of the Cranston-Gonzalez National
Affordable Housing Act, as amended, and is regulated by 24 CFR (Code of Federal Regulations)
Part 92. The program provides formula grants to States and localities that communities use,
often in partnership with local nonprofit groups, to fund a wide range of activities that build, buy,
or rehabilitate affordable housing for rent or home ownership or provide direct rental assistance
to low-income people. It is the largest Federal block grant provided to State and local
governments designed exclusively to create affordable housing for low-income households.

Hudson County is a participating jurisdiction and was awarded more than $1.75 and $1.90
million in HOME funds in fiscal years 2015 and 2016, respectively. The County is governed by a
County executive and a nine-member board of chosen freeholders, and its Community
Development Division administers the County’s HOME program. The funds are used to serve the
Hudson County Consortium, which consists of seven communities in urban Hudson County, along
with the entitlement municipalities of Hoboken, Bayonne, Union City, and North Bergen.

Participating jurisdictions are required to commit HOME funds within 24 months and spend them
within 5 years after the last day of the month in which HUD notifies the participating jurisdiction of
HUD’s execution of the HOME agreement. To commit funds, participating jurisdictions must
reasonably expect construction or rehabilitation to begin within 12 months and ensure that
environmental reviews have been completed if required.

Our objective was to determine whether the County committed and disbursed HOME funds in
accordance with applicable HUD and Federal requirements.




                                                   3
Results of Audit

Finding: Hudson County, NJ, Generally Committed and Disbursed
HOME Funds in Accordance With HUD and Federal Requirements
The County generally committed and disbursed HOME funds in accordance with HUD and
Federal requirements. However, it did not always maintain sufficient documentation
demonstrating that environmental reviews and environmental review exemptions were
completed before committing funds as required and did not ensure that address information in
HUD’s Integrated Disbursement and Information System3 (IDIS) was updated for one activity.
This condition occurred because the County’s staff was not familiar with the HUD
Environmental Review Online System4 (HEROS) and overlooked the need for data to be updated
in IDIS after purchasing a property. As a result, HUD did not have assurance that the County
always completed environmental reviews in a timely manner and maintained accurate
information on properties assisted with HOME funds.

Funds Were Generally Committed in Accordance With Requirements
The County generally committed its HOME funds in accordance with requirements. The $4.98
million in commitments for six activities reviewed were supported by commitment letters,
financing documents, and environmental reviews. However, the County did not submit
environmental review documentation into HEROS before committing funds for two activities.
While use of the system is not currently mandatory, the County began using it to document
environmental reviews and environmental review exemptions in 2016 after HUD encouraged
grantees to use the system.

                                                                          Date environmental
     IDIS
                                                             Commitment       review was      Amount
    activity                Activity type
                                                                date        submitted into   committed
       #
                                                                                HEROS
     2179             Home-buyer acquisition                  7/29/2016         8/8/2016          $214,986
     2180      Home-buyer acquisition & rehabilitation        7/29/2016         8/8/2016           214,986
                                              Total                                                429,972

Although the environmental reviews performed for the activities were sufficient, the County did
not adequately document that the reviews were completed before committing the funds as



3
      IDIS is the drawdown and reporting system for HUD’s Office of Community Planning and Development
      formula grant programs, including the HOME program.
4
      HEROS was developed by HUD’s Office of Environment and Energy and is used by grantees to develop,
      document, and manage environmental reviews required by HUD.



                                                         4
required by 24 CFR 92.352(b)5 and did not ensure that current address information was
maintained in IDIS for one activity (2180) as required by an IDIS training manual for
participating jurisdictions receiving HOME funds. This condition occurred because the County’s
staff was not familiar with HEROS and had overlooked the need for data to be updated in IDIS
after purchasing the property. As a result, HUD did not have assurance that the County always
completed environmental reviews before committing HOME funds and maintained accurate
information in IDIS on properties assisted with HOME funds.

Funds Were Disbursed in Accordance With Requirements
The County disbursed its HOME funds in accordance with requirements. The County used the
$735,740 in nonadministrative disbursements reviewed for eligible expenses related to
construction costs of a senior residence and acquisition of a property, and its files contained
adequate documentation to support the expenses. Further, the County complied with the 10
percent limit on administrative costs for program years 2013 through 2016 and used the
$254,838 in administrative and planning drawdowns reviewed for eligible costs, such as staff
training, salaries, and fringe benefits.

Conclusion
The County generally committed and disbursed HOME funds in accordance with HUD and
Federal requirements but did not always maintain sufficient documentation demonstrating that
environmental reviews and environmental review exemptions were completed before committing
funds as required and ensure that address information in IDIS was updated. This condition
occurred because the County’s staff was not familiar with HEROS and overlooked the need for
data to be updated in IDIS after purchasing a property. As a result, HUD did not have assurance
that the County always completed environmental reviews in a timely manner and maintained
accurate information on properties assisted with HOME funds.

Recommendations
We recommend that the Director of HUD’s Newark, NJ, Office of Community Planning and
Development require the County to
         1A.      Strengthen its policies and procedures to ensure that environmental reviews and
                  environmental review exemptions are completed and documented before HOME
                  funds are committed.
         1B.      Strengthen its policies and procedures to ensure that activity address information
                  in IDIS is current as required.




5
    Regulations at 24 CFR 92.352(b) state that no funds may be committed to a HOME activity or project before the
    completion of the environmental review except as authorized by 24 CFR part 58. Regulations at 24 CFR 58.38
    state that the responsible entity must maintain written determinations of environmental reviews undertaken and
    of other review findings such as determinations that a project is exempt and categorically excluded from
    environmental review requirements.



                                                         5
Scope and Methodology
We performed our audit work from April through September 2017. We conducted the audit
onsite at the County’s office located at 830 Bergen Avenue, Jersey City, NJ. The review covered
the period July 2014 through December 2016 and was expanded as necessary.

To accomplish our audit objective, we reviewed relevant background information on the
program and County; applicable laws, regulations, HUD handbooks, guidebooks, and notices;
the County’s policies and procedures; the County’s consolidated annual plan; HUD risk
assessments; and the independent public accountant audit report. We also interviewed key HUD
and County officials.

To determine whether the County committed and disbursed HOME funds in accordance with
applicable HUD and Federal requirements, we selected three samples for review as discussed
below.
      The County committed $5.83 million in HOME funds to 10 activities from February
       2014 through December 2016. We selected a sample of six activities for which the
       County had committed funds within the same month as its commitment deadline. These
       six activities represented $4.98 million, or 85 percent, of the $5.83 million committed.
       We reviewed commitment letters, financing documents, and environmental reviews for
       the activities to determine whether the County complied with applicable commitment
       requirements.
      The County drew down $3.43 million in HOME funds for nonadministrative and
       planning activities from July 2014 through December 2016. We selected a sample of two
       drawdowns with the highest dollar amount from 2015 and 2016. These two draws
       represented $735,740, or 21 percent, of the $3.43 million drawn for nonadministrative
       and planning activities during our audit period. We reviewed contracts, invoices, and
       architect certificates for these draws to determine whether the County complied with
       applicable requirements when disbursing funds.
      The County drew down $619,224 in HOME funds for administrative and planning costs
       related to 20 vouchers from July 2014 through December 2016. We selected all vouchers
       paid in 2016 for review. These draws represented $254,838, or 41 percent, of the
       $619,224 drawn for administrative and planning costs during our audit period. We
       reviewed supporting documentation, such as payroll documentation, employee
       reimbursement documentation, and staff training invoices, to determine whether the
       County complied with applicable requirements when drawing down funds for
       administrative and planning costs.

The results of our sampling apply only to the items reviewed. Although our sampling
approaches did not allow us to make projections to the full $5.83 million committed and $4.05
million disbursed, they were sufficient to meet our objective.



                                               6
To achieve our objective, we relied in part on computer-processed data generated by the County
as well as data maintained in HUD’s IDIS and HEROS. We used these data as background
information and to select a sample of commitments and disbursements for review. Although we
did not perform a detailed assessment of the reliability of the data, we performed a minimal level
of testing and found the data to be adequate for our purposes. The testing included comparing
the data in HUD’s systems to the data in the County’s financial reporting system and supporting
documentation as discussed above. We based our conclusions on the source documentation
obtained from the County.

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.




                                                 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 operations - Policies and procedures that management has
    implemented to reasonably assurance that a program meets its objectives, while considering
    cost effectiveness and efficiency.
   Validity and reliability of data - Policies and procedures that management has implemented
    to reasonably ensure that valid and reliable data are obtained, maintained, and fairly
    disclosed in reports.
   Compliance with laws and regulations - Policies and procedures the management has
    implemented to reasonably ensure that program implementation is in accordance with laws
    and regulations.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
We evaluated internal controls related to the audit objective in accordance with generally
accepted government auditing standards. Our evaluation of internal controls was not designed to
provide assurance regarding the effectiveness of the internal control structure as a whole.
Accordingly, we do not express an opinion on the effectiveness of the County’s internal controls
as a whole.




                                                  8
Appendix A
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1




                               9
                         OIG Evaluation of Auditee Comments


Comment 1   The County indicated that it had implemented the two recommendations
            contained in the report. Specifically, the County indicated that it updated internal
            policies to ensure that proper documentation of completed environmental reviews
            are maintained prior to committing funds, and that any amendments to projects
            are promptly updated in IDIS. The County also noted that it would continue to
            participate in available HOME, IDIS, and HEROS trainings. These actions are
            responsive to our recommendations. However, because the County did not
            complete these actions prior to the end of our audit fieldwork, we did not obtain
            or review documentation related to them. As part of the normal audit resolution
            process, HUD will need to assess any documentation provided by the County to
            ensure that it fully implemented the actions noted in its response.




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