oversight

HUD Did Not Have Adequate Oversight of Its Community Compass Technical Assistance and Capacity Building Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-09-28.

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

     Office of Community Planning and
      Development, Washington, DC
        Community Compass Technical Assistance and
               Capacity Building Program




Office of Audit, Region 3      Audit Report Number: 2018-PH-0003
Philadelphia, PA                               September 28, 2018
To:            Lori Michalski, Deputy Assistant Secretary for Operations, DO
               //signed//
From:          David E. Kasperowicz, Regional Inspector General for Audit, Philadelphia
               Region, 3AGA
Subject:       HUD Did Not Have Adequate Oversight of Its Community Compass Technical
               Assistance and Capacity Building Program




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of HUD’s oversight of its Community Compass
Technical Assistance and Capacity Building 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
215-430-6734.
                    Audit Report Number: 2018-PH-0003
                    Date: September 28, 2018

                    HUD Did Not Have Adequate Oversight of Its Community Compass
                    Technical Assistance and Capacity Building Program




Highlights

What We Audited and Why
We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of its
Community Compass Technical Assistance and Capacity Building (Community Compass)
program. We conducted the audit because we received a complaint alleging that HUD did not
ensure that the program operated in compliance with applicable requirements and we had not
audited the program. Our audit objective was to determine whether HUD had adequate oversight
of its Community Compass program to ensure that it complied with applicable requirements.

What We Found
HUD did not have adequate oversight of its Community Compass program to ensure that it
complied with applicable requirements. The allegations in the complaint had merit.
Specifically, HUD did not ensure that (1) expenditures always met program requirements, (2)
services were properly procured, and (3) provider subcontractors were approved with consistent
wage rates. These conditions occurred because HUD did not (1) have adequate policies and
procedures to ensure that providers complied with Federal regulations, (2) believe that the
services it procured were a direct benefit to HUD, (3) perform postaward monitoring reviews,
and (4) have sufficient controls over its wage rate process. As a result, HUD lacked assurance
that providers administered program funds in accordance with requirements as it incurred
ineligible costs of $13,384 and unsupported costs of $845,497. In addition, more than $20.5
million in funds can be put to better use if HUD strengthens its internal controls and awards
contracts according to procurement requirements.

What We Recommend
We recommend that HUD require the providers reviewed to (1) reimburse $13,384 from non-
Federal funds for ineligible costs paid to providers for overcharged labor or travel costs, and (2)
support or repay $845,497 in unsupported wage and travel costs from non-Federal funds. In
addition, we recommend that HUD develop and implement policies and procedures for the
Community Compass program to ensure that providers comply with all applicable requirements,
thereby putting more than $20.5 million to better use.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: HUD Did Not Have Adequate Oversight of Its Community Compass
         Technical Assistance and Capacity Building Program ................................................. 4

Scope and Methodology .........................................................................................10

Internal Controls ....................................................................................................12

Appendixes ..............................................................................................................13
         A. Schedule of Questioned Costs and Funds To Be Put to Better Use ...................... 13

         B. Auditee Comments and OIG’s Evaluation ............................................................. 14

         C. Schedule of Deficiencies Associated With Vouchers Reviewed ............................ 24

         D. Community Compass Awards and Draws Per Provider....................................... 25

         E. Flowchart of Awards and Vouchers Reviewed ...................................................... 26




                                                            2
Background and Objective
The Community Compass Technical Assistance and Capacity Building (Community Compass)
program is designed to help the U.S. Department of Housing and Urban Development’s (HUD)
customers navigate housing and community development challenges by equipping them with the
knowledge, skills, tools, capacity, and systems to implement HUD programs and policies
successfully and be more effective stewards of HUD funding. Recognizing that HUD’s
customers often interact with a variety of HUD programs as they deliver housing or community
development services, Community Compass brings together technical assistance investments
from across HUD program offices. This cross-funding approach allows technical assistance to
address the needs of grantees and subgrantees across multiple HUD programs.
The program funds technical assistance, 1 capacity building, 2 and data research activities to
grantees, public housing agencies, and tribes. It is managed by the Office of Community
Planning and Development’s Technical Assistance Division with involvement from HUD’s other
program offices, including regional and field offices. The Technical Assistance Division plans,
issues, and oversees the program’s annual competitive awards and postaward policies. Activities
performed under the Community Compass program include (1) needs assessments; (2) direct
technical assistance and capacity building engagements; (3) development of products and tools;
(4) self-directed and group learning; (5) knowledge management; and (6) data reporting,
analysis, and management.
HUD awards Community Compass program funds through an annual notice of funding
availability (NOFA). Technical assistance providers apply for funding, and HUD awards funds
based on the selection criteria in the NOFA. Technical assistance providers that are awarded
funds enter into a cooperative agreement with HUD’s Technical Assistance Division. 3 The
postaward administration is based on a demand-response system, in which HUD identifies its
customers’ needs based on departmental, programmatic, and jurisdictional priorities and assigns
a technical assistance provider to administer the technical assistance and build capacity. The
providers are responsible for ensuring that the work performed meets the customer’s needs. The
providers accomplish this by either directly providing the technical assistance or contracting for
the technical assistance services with subcontractors that report back to them. The technical
assistance providers draw funds from HUD’s Line of Credit Control System after HUD has
reviewed and approved the voucher information they submit for completed work.
Our audit objective was to determine whether HUD had adequate oversight of its Community
Compass program to ensure that it complied with applicable requirements.


1
    Guidance that enables HUD’s customers to overcome a lack of skills or knowledge of HUD programs
2
    Assistance that increases the ability of HUD’s customers to implement and manage HUD programs
3
    Technical assistance funding typically includes Departmental, McKinney-Vento, National Data Analysis Project,
    Public Housing Administrative Receivership and Recovery, and Native American Housing Assistance and Self
    Determination Act. The Technical Assistance Division serves as the cooperative agreement officer for the
    Departmental, McKinney-Vento, and National Data Analysis Project funds.



                                                        3
Results of Audit

Finding: HUD Did Not Have Adequate Oversight of Its Community
Compass Technical Assistance and Capacity Building Program
HUD did not have adequate oversight of its Community Compass program to ensure that it
complied with applicable requirements. Specifically, it did not ensure that (1) expenditures
always met program requirements, (2) services were properly procured, and (3) provider
subcontractors were approved with consistent wage rates. These conditions occurred because
HUD did not (1) have adequate policies and procedures to ensure that providers complied with
Federal regulations, (2) believe that the services it procured were a direct benefit to HUD, (3)
perform postaward monitoring reviews, and (4) have sufficient controls over its wage rate
process. As a result, HUD lacked assurance that providers administered program funds in
accordance with requirements as it incurred ineligible costs of $13,384 and unsupported costs of
$845,497. In addition, more than $20.5 million can be put to better use if HUD strengthens its
internal controls and awards contracts according to procurement requirements.

Expenditures Did Not Always Meet Program Requirements
HUD did not ensure that its providers properly administered Community Compass funds in
accordance with Federal requirements. We reviewed 15 vouchers with costs totaling nearly $3.9
million from 4 sampled providers and found that each of the 15 vouchers had deficiencies.
Contrary to the requirements of their cooperative agreements, 4 providers did not always (1)
obtain HUD approval of labor rates before they incurred labor costs and requested payment for
unapproved labor rates; (2) ensure that work plans contained a list of proposed staff, including
the name of each staff member; (3) comply with the Federal Travel Regulation; and (4) include a
description of the work performed in their payment requests. These deficiencies resulted in
questioned costs totaling $858,881. The following table shows the deficiencies identified by
voucher reviewed. A complete table of the deficiencies and associated costs is included in
appendix C.




4
    Providers agree to follow all of the program requirements in the cooperative agreements when they execute
    them.



                                                         4
                                                                                               unsupported travel
                                                       Staff not approved
                                   unsupported labor




                                                                                                                                                        requirements not
                                                                            before work plan




                                                                                                                                     wrong work plan
                                                                                                                    Work performed


                                                                                                                                     Costs applied to
                                   Overcharged or




                                                                                               Overcharged or
                                                                            Costs incurred




                                                                                                                    not described
                                                       on work plan
   Sequential      Voucher
      no.          number




                                                                            approved




                                                                                                                                                        Billing
                                   costs




                                                                                               costs




                                                                                                                                                        met
       1              285321           X                 X                      X                   X                                                       X
       2              306426           X                 X                      X
       3              354531           X                 X                                          X
       4              360290           X                 X                      X
       5              314282           X                 X                                          X                                  X
       6              331950           X                 X                      X                   X
       7              335889           X                 X                      X                   X                 X
       8              360667           X                 X                      X                   X
       9              311354           X                 X                      X
       10             321178           X                 X                      X
       11             360572                             X
       12             367697           X                 X
       13             337963           X                                        X                   X
       14             345816           X                 X
       15             364497           X
             Totals                    14               13                       9                  7                 1                 1                    1
The following examples illustrate some of the deficiencies identified during our review.
   •   Voucher 335889 – HUD did not ensure that the provider supported its subcontractor’s
       labor costs. For example, HUD did not question costs charged by one subcontractor as
       the provider invoice did not list the subcontractor’s staff names or wage rates (invoice
       example below). The cooperative agreement required HUD to approve labor rates before
       provider staff, contractors, or consultants incurred labor costs and to not reimburse
       providers for unapproved labor costs. In addition, regulations at 2 CFR (Code of Federal
       Regulations) 200.400(d) require providers to maintain adequate documentation to support
       costs charged to Federal awards. However, HUD did not require the providers to support
       the costs incurred and paid the invoice without verifying that the provider’s
       subcontractor’s wage rates agreed with its approved rates. This deficiency resulted in
       unsupported costs of $8,500.




                                                            5
    •    Voucher 331950 – HUD did not ensure that the provider supported subcontractor travel
         costs. One receipt submitted by a provider’s subcontractor was not completely legible,
         and the dates of rental and base charges were not clear. However, the receipt showed that
         the rental costs included a vehicle upgrade of $840 (invoice example below). The
         cooperative agreement required that provider transportation and travel costs not exceed
         the Federal Travel Regulation rates. In addition, regulations at 2 CFR 200.400(d) require
         providers to maintain adequate documentation to support costs charged to Federal
         awards. Further, HUD’s travel policies and procedures, 5 section 3.8, stated that the
         default rental car class for HUD was economy. However, HUD did not obtain the
         supporting documentation to verify that the travel costs were supported. This deficiency
         resulted in the provider’s subcontractor’s charging unsupported vehicle rental costs of
         $2,899.




These conditions occurred because HUD did not have adequate policies and procedures to ensure
that providers and provider subcontractors complied with Federal regulations. Specifically,
HUD did not have policies and procedures that required staff to properly review provider

5
    Business Rules for HUD provides all HUD travelers, administrative and supervisory personnel, and travel
    management service providers with a common set of travel procedures and guidelines.



                                                         6
invoices for overcharged or unsupported labor and travel costs, itemized staff names and hours
worked, and detailed descriptions of work performed. In addition, HUD had not monitored its
technical assistance providers since 2009. HUD management and staff believed that they
monitored the providers on a daily, weekly, and monthly basis when they reviewed invoices and
monthly reports and held discussions with the providers. Further, HUD did not clearly define
oversight roles for the Technical Assistance Division or program office staff responsible for
ensuring that providers complied with the requirements. HUD’s Grants Management Handbook
2210.17, REV-3, section 4-1, states that program offices must perform postaward monitoring to
ensure successful performance, administration, and compliance with the award’s terms and
conditions. The Handbook further states in section 1-7 that HUD must manage and administer
Federal awards to ensure that HUD funding is spent and programs are implemented in
accordance with applicable requirements. HUD stated that it was working on updating and
expanding its policies and procedures related to the program. However, these policies and
procedures had not been finalized or implemented. If HUD strengthens its policies and
procedures to ensure that providers comply with requirements, it will avoid the potential to incur
costs for unapproved personnel, overcharged and unsupported labor rates and travel costs, and
put nearly $15.5 million 6 to better use.

HUD Believed That Services It Obtained Through Cooperative Agreements Were Not a
Direct Benefit to the Agency
HUD did not use the proper procurement process when it obtained services through cooperative
agreements. Federal requirements at 31 U.S.C. (United States Code) 6303 state that agencies
must use a procurement contract when the principal purpose of the instrument is to acquire
property or services for the U.S. Government’s direct benefit or use. HUD used cooperative
agreements instead of procurement contracts to (1) develop, maintain, and operate the HUD
Exchange website and (2) prepare the Annual Homelessness Assessment Report. However, both
of these services were a direct benefit to HUD.

    •    The HUD Exchange website is an online platform for providing program information,
         guidance, services, and tools to HUD’s community partners and is intended for recipients
         of HUD funding and used by HUD staff to manage awards.
    •    The Annual Homelessness Assessment Report is a report that Congress requires HUD to
         submit annually, which provides nationwide estimates of homelessness, demographic
         characteristics of homeless persons, and the capacity to house homeless persons.

This condition occurred because HUD believed that the services obtained through cooperative
agreements were not a direct benefit to HUD. Further, it believed that any concerns with the use
of cooperative agreements for the HUD Exchange website and Annual Homelessness
Assessment Report were resolved with the approval of the Community Compass NOFAs.
However, HUD had a responsibility to ensure that the NOFAs complied with Federal
procurement requirements to ensure that full and open competition was obtained. As a result,
HUD failed to ensure that $15.8 million awarded to providers from October 2014 to September
2017 was correctly procured through contracts for services that were a direct benefit to the

6
    See the Scope and Methodology section for an explanation of the calculation.



                                                         7
agency. By developing and implementing controls to ensure that it uses the correct procurement
method for services that benefit the agency directly, HUD can put nearly $5.1 million 7 to better
use.

HUD Did Not Have Sufficient Controls Over Its Wage Rate Process
HUD did not ensure that the providers’ subcontractors had approved wage rates that were
consistent. We compared the four sampled providers’ list of subcontractors to HUD’s approved
wage rate database and found 33 subcontractors associated with more than one provider. We
selected 3 of the 33 subcontractors and found that all three had varying wage rates that were
approved on the same day for multiple providers. For example, one subcontractor’s staff
member had two approved rates: $150 per hour for two providers and $135 per hour for another
provider. All three rates were effective January 1, 2015. Regulations at 2 CFR 200.404 state
that market prices for comparable services must be considered when determining cost
reasonableness.

This condition occurred because HUD did not have sufficient controls to ensure that wage rates
were consistently applied. HUD had an approved wage rate policy that governed staff,
subcontractor, and consultant wage rates. While the policy covered provider and subcontractor
wage request terms and conditions and determining wage rate reasonability, it did not include
controls to ensure that subcontractor wage rates approved for one provider were applied
consistently to all providers that used that subcontractor.

Conclusion
HUD did not have adequate oversight of its program funds and lacked assurance that providers
and provider subcontractors administered technical assistance funds in accordance with
requirements. This condition occurred because HUD lacked policies and procedures and
sufficient controls to ensure that its management and staff, in addition to providers and
subcontractors, administered the technical assistance program in compliance with Federal
requirements. As a result, four providers had ineligible costs of $13,384 and unsupported costs
of $845,497 as they failed to meet the requirements. In addition, by improving its controls and
implementing policies and procedures to ensure compliance, HUD can help ensure that providers
and provider subcontractors use technical assistance funds in accordance with requirements,
thereby putting more than $20.5 million to better use. 8

Recommendations
We recommend that the Deputy Assistant Secretary for Operations

         1A.      Require the four Community Compass providers reviewed to reimburse HUD
                  $13,384 from non-Federal funds for ineligible costs from overcharged labor or
                  travel costs.



7
    See the Scope and Methodology section for an explanation of the calculation.
8
    This amount includes nearly $15.5 million for expenditures that did not meet program requirements and nearly
    $5.1 million for services that HUD incorrectly procured.



                                                         8
1B.   Require the four Community Compass providers reviewed to either provide
      documentation to support $845,497 in unsupported labor and travel costs, for
      personnel not on approved work plans, and for work performed that was not
      described on the payment request or reimburse HUD from non-Federal funds for
      any costs that it cannot support.

1C.   Develop and implement policies and procedures for the Community Compass
      program, to include postaward monitoring, that ensures that providers and
      provider subcontractors comply with applicable requirements to avoid incurring
      expenses for unapproved personnel and overcharged labor and travel costs,
      thereby ensuring that as much as $15,475,981 is put to better use.

1D.   Develop and implement controls for the Community Compass program to ensure
      that it uses procurement contracts for services that directly benefit HUD,
      including the development, maintenance, and operation of the HUD Exchange
      website and preparation of the Annual Homelessness Assessment Report, thereby
      ensuring that as much as $5,060,494 is put to better use.

1E.   Develop and implement controls for the Community Compass program to ensure
      that it consistently applies subcontractor wage rates among all providers that use a
      subcontractor.




                                        9
Scope and Methodology
We conducted the audit from October 2017 through August 2018 at HUD’s offices located in
Washington, DC, and our offices located in Pittsburgh, PA, and Richmond, VA. The audit
covered the period October 1, 2014, through September 30, 2017, but was expanded when
necessary to include funds drawn by the providers from the awards that HUD made during our
audit period.

To accomplish our objective, we reviewed

     •    relevant background information;
     •    applicable legislation, regulations, HUD handbooks, and guidance;
     •    2014, 2015, and 2016 NOFAs and the General section of the NOFAs for the Community
          Compass program;
     •    2014, 2015, and 2016 cooperative agreements and cooperative agreement provisions;
     •    data contained in HUD’s Disaster Recovery Grant Reporting System 9 and HUD’s
          Technical Assistance Portal; 10 and
     •    provider program files.

We interviewed HUD officials located in Washington, DC, and in the field offices responsible
for technical assistance program oversight. We also interviewed provider staff for each of the
four sampled providers.

To achieve our audit objective, we relied in part on computer-processed data from HUD’s
Disaster Recovery Grant Reporting System to select a sample of provider awards and the
associated vouchers 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.

To select a sample of technical assistance provider awards and the associated vouchers, we
obtained data as of October 31, 2017, to determine the number of providers, the number of
awards received per provider, the amount of funds awarded per provider, and the amount of
funds drawn per provider during the audit period. Our universe consisted of 96 awards from 26
technical assistance providers that were awarded $128.3 million and had drawn $57.9 million
between October 1, 2014, and October 31, 2017 (appendix D). We selected for review the three
providers with the highest amount of funds awarded and the provider that was specifically
mentioned in the complaint. From these 4 providers, we selected for review a nonstatistical

9
     The Disaster Recovery Grant Reporting system is an electronic reporting and payment system that providers use
     to access grant funds and report on their performance accomplishments. HUD uses the system to review grant-
     funded activities, prepare reports, and monitor program compliance.
10
     The Technical Assistance Portal is a part of the HUD Exchange website that is used by HUD and the providers
     to manage, coordinate, and report on technical assistance activities.



                                                          10
sample of 12 awards that totaled nearly $43 million awarded and $23.3 million drawn. Of the 12
awards, we reviewed documentation from 15 vouchers 11 that totaled nearly $3.9 million drawn
and included one voucher from each of the 12 awards selected with the most funds drawn. The
three additional vouchers were selected from the three highest awarded providers that included a
variety of costs charged (appendix E). This approach did not allow us to make a statistical
projection to the population, but it allowed us to select a large proportion of the funds drawn
from our four selected providers and ensure that the vouchers had a variety of cost categories for
us to review for compliance. We believe that this sample was sufficient to meet our audit
objective.

We obtained and reviewed the files for each of the 15 vouchers selected to determine whether
program funds were used in accordance with the requirements and that the costs were supported
with adequate documentation.

To calculate the amounts reported as funds to be put to better use, we identified unsupported and
ineligible costs related to overcharged labor costs, travel costs, and personnel not on approved
work plans, which totaled $858,881. The total cost of the 15-voucher universe was nearly $3.9
million. This resulted in a 22 percent 12 deficiency rate of the universe reviewed. The total
program funds awarded but not drawn by the providers as of October 2017 was more than $70.3
million. By preventing this condition from occurring again, we estimate that HUD can put 22
percent, or nearly $15.5 million,13 of its program funds to better use.

In addition, we identified nearly $15.2 million in program awards for the development,
maintenance, and operation of HUD Exchange and the preparation of the Annual Homelessness
Assessment Report submitted to Congress, which HUD procured incorrectly. HUD awarded the
funds from 2014 to 2016. The average annual amount awarded for these 3 years was nearly $5.1
million.14 By preventing this condition from occurring again, we estimate that HUD can put
nearly $5.1 million to better use.

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.




11
     Each sampled award had multiple vouchers.
12
     The actual amounts involved were $858,881 and $3,854,676 (rounded to nearly $3.9 million). Dividing
     $858,881 by $3,854,676 produced a quotient of 22.3 percent, which we rounded to 22 percent.
13
     The actual amounts involved were $70,345,368 (more than $70.3 million) and $3,854,676 (nearly $3.9 million).
     Multiplying $70,345,368 by 22 percent resulted in a product of $15,475,981, which we reported as nearly $15.5
     million.
14
     The actual amount involved was $15,181,481 (rounded to nearly $15.2 million). Dividing $15,181,481 by 3
     award years produced a product of $5,060,494, which we reported as nearly $5.1 million.



                                                          11
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 – Policies and procedures that
    management has implemented to reasonably ensure that a program meets its objectives.
•   Compliance with applicable laws and regulations – Policies and procedures that management
    has implemented to reasonably ensure that program participants comply with laws and
    regulations.
•   Safeguarding resources – Policies and procedures that management has implemented to
    reasonably ensure that resources are safeguarded from unauthorized use.
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 Deficiencies
Based on our review, we believe that the following items are significant deficiencies:

•   HUD did not have adequate policies and procedures for administering Community Compass
    program funds.
•   HUD lacked controls to ensure that its headquarters and field offices monitored technical
    assistance providers for compliance with applicable regulations.




                                                  12
Appendixes

Appendix A


           Schedule of Questioned Costs and Funds To Be Put to Better Use
        Recommendation                                     Funds to be put to
                            Ineligible 1/  Unsupported 2/     better use 3/
            number
                1A                $13,384
                1B                                   $845,497
                1C                                                      $15,475,981
                1D                                                       5,060,494

              Totals               13,384             845,497           20,536,475



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 these cases, the funds to be put to better use represent
     undisbursed Community Compass funds HUD will not pay providers for personnel that
     were not on approved work plans and overcharged and unsupported labor or travel costs.
     In addition, if HUD ensures that the procurement process is followed and competitively
     awarded funds through contracts, it can put these funds to better use over the next year.




                                               13
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1




Comment 1




                               14
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 2


Comment 3




Comment 3




Comment 3




                               15
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 4




Comment 4




Comment 5




                               16
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 5




Comment 6




Comment 6




Comment 6




Comment 6




                               17
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 6




Comment 7




Comment 8




Comment 8




                               18
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 9




                               19
                         OIG Evaluation of Auditee Comments


Comment 1   HUD stated that it was committed to revisiting the expenses in question and that
            we did not provide specifics for each deficiency by voucher. HUD stated that it
            would have to reexamine each voucher in question to assess its agreement with
            the recommendation and would ask the providers to repay any ineligible costs
            from non-Federal funds. We appreciate HUD’s willingness to reexamine the
            vouchers and seek repayment from the providers for ineligible expenses. The
            vouchers and supporting documents were voluminous, in some cases consisting of
            several hundred pages. During the audit, we provided HUD examples of the
            specific issues for each deficiency identified in the report to obtain feedback from
            HUD. As part of the audit resolution, we will provide HUD details for each
            deficiency by voucher to assist it in its reexamination of the vouchers. We will
            work with HUD to resolve the questioned costs identified in the audit report and
            reach a timely resolution with management decisions.
Comment 2   HUD stated that it appreciated our feedback on optimizing HUD’s internal
            controls for administering the Community Compass Technical Assistance
            program. HUD also stated that it intends to critically assess the concerns we
            identified as it works to update its program policies and procedures. We are
            encouraged by HUD’s intention to assess the concerns identified in the audit
            report and that it will update its program policies and procedures to ensure
            compliance with applicable requirements.
Comment 3   HUD stated that it did not agree with our determination of funds to be put to
            better use because the amount produced was based on costs identified through a
            nonrepresentative and nonstatistical sample. Specifically, HUD believed that the
            sampling technique used in the audit was insufficient to produce conclusions that
            could be projected to the population of providers and awards that were not
            included in the audit sample. Therefore, HUD stated that we lacked justification
            to produce a funds to be put to better use amount. HUD requested that the
            statement, “thereby ensuring that as much as $15,475,981 is put to better use” be
            removed from recommendation 1C and the $15,475,981 costs amount be removed
            from the table in appendix A.
            We disagree with HUD’s statement that the sampling technique was insufficient
            or that the funds to be put to better use amount was not justified. As stated in the
            audit report, HUD did not have adequate policies and procedures to ensure that
            providers complied with Federal regulations and did not perform postaward
            monitoring reviews. HUD management and staff believed that they monitored the
            providers on a daily, weekly, and monthly basis when they reviewed invoices and
            monthly reports and held discussions with the providers. Recommendations that
            funds be put to better use are estimates of amounts that could be used more
            efficiently if an OIG recommendation is implemented. During the audit we
            reviewed 15 vouchers from 4 different providers. All 15 vouchers reviewed



                                              20
            contained deficiencies that resulted in questioned costs. The four providers
            reviewed were awarded nearly $75.4 million (59 percent) from a total of nearly
            $128.3 million in awards. The same four providers had nearly $38.1 million (54
            percent) from a total of more than $70.3 million in funds that had not been drawn
            as of October 31, 2017. Since we reviewed providers that received 59 percent of
            the total award dollars, identified questioned costs on all 15 vouchers reviewed,
            and HUD did not monitor the providers postaward, it is reasonable to quantify and
            report an estimate of the efficiency that HUD will gain by implementing our
            recommendations. The funds to be put to better use identified in the audit report
            represent a percentage of undisbursed Community Compass funds that HUD will
            not pay to providers for personnel who were not on approved work plans and
            overcharged and unsupported labor or travel costs.
Comment 4   HUD stated that it understands that we believed the HUD Exchange should not
            have been funded through cooperative agreements based on an OIG legal opinion
            and that the OIG legal opinion was based on limited information. HUD requested
            that we reconsider the recommendation in light of HUD’s explanation and the
            legal opinion it received from HUD program counsel. HUD provided a copy of
            the legal opinion with its written comments. HUD believed that the use of the
            cooperative agreement was appropriate as the HUD Exchange was not developed
            or intended for HUD’s use but, rather, to provide technical assistance, training,
            tools, and program resources to HUD’s grantees and customers.
            We disagree that the HUD Exchange was not a direct benefit to HUD. As stated
            in the audit report, we determined that HUD used cooperative agreements instead
            of procurement contracts to develop, maintain, and operate the HUD Exchange
            website. We determined that HUD used the HUD Exchange to supplement the
            HUD.gov website and to house mandatory HUD databases. Specifically, the
            provider that operated the HUD Exchange referenced the migration of documents
            from HUD.gov to the HUD Exchange to resolve duplication issues. Further, the
            provider recommended making changes to the content on the HUD.gov website
            and was providing privacy assessments and information on website security for
            HUD’s review. In addition, the public users of HUD.gov are redirected to the
            HUD Exchange for many types of information, to include HUD field directory
            information, HUD rules and policies, program information, and database access.
            We believe our recommendation is reasonable based on the finding and the legal
            opinion from the OIG Office of Legal Counsel. We did not include the legal
            opinion in the audit report because HUD’s written comments incorporated its
            substance. The opinion was an internal document between HUD’s Office of
            General Counsel and the Deputy Assistant Secretary for Operations. HUD’s
            Office of General Counsel has a mechanism to make its legal opinions available
            to the public if it chooses to do so.
Comment 5   HUD stated that we opined that the Annual Homelessness Assessment Report
            should not be funded through a cooperative agreement as it directly benefited
            HUD. HUD stated that the primary purpose of the report was to educate


                                             21
            stakeholders at the national, State, and local level and inform policy and planning
            decisions around the larger homeless assistance system. HUD acknowledged that
            the report was a congressionally mandated report. HUD requested that we
            consider revising the recommendation to allow HUD to reduce the scope of the
            activity in the notice of funding availability to only those activities that provide
            the critical data analysis that supports communities but removes the report writing
            portion and moves the final report compilation and authorship to a procurement
            contract.
            We are encouraged by HUD’s decision to move the Annual Homelessness
            Assessment Report to a procurement contract. Therefore, we did not consider a
            change to the recommendation to be necessary. As part of the audit resolution,
            we will work with HUD to reach a timely management decision, including
            identifying the documentation necessary to show that it has implemented the
            agreed-upon actions.
Comment 6   HUD did not concur with the finding and related recommendations in the draft
            report regarding subcontractors that were not registered in the System for Award
            Management and requested that we delete them from the final report. HUD stated
            that it was only responsible for verifying that the grant recipient complied with
            the System for Award Management requirement. It also provided a legal opinion
            from its Office of General Counsel. We reviewed the information and the opinion
            HUD provided and removed the finding and related recommendations from the
            final report because the information provided addressed our concerns.
Comment 7   HUD acknowledged that there were instances in which subcontractor wage rates
            approved in HUD’s Disaster Recovery Grant Reporting system varied across
            providers. HUD stated that it concurred with the recommendation and would
            consider our recommendations in further updates to its wage rate approval
            process. We are encouraged by HUD’s statements. As part of the audit
            resolution, we will work with HUD to reach a management decision, including
            identifying the documentation necessary to show that it has implemented the
            agreed-upon actions.
Comment 8   HUD requested that the language in the report be changed to reflect that the
            section’s focus was on the type of funding instrument rather than the integrity of
            the competition. Specifically, HUD requested that we remove the second part of
            the sentence that stated, “…to ensure that full and open competition was
            obtained.” HUD contended that the integrity of the competition it used for its
            cooperative agreements was not the subject of the finding.
            We agree that the integrity of the competition HUD used for its cooperative
            agreements was not the subject of the finding; however, we did not assess the
            competition’s competitiveness. As stated in the audit report, HUD had a
            responsibility to ensure that the notice of funding availability complied with
            Federal procurement requirements to ensure that it acquired services that were a
            direct benefit to HUD in an environment with full and open competition. Further,


                                              22
            regulations at 2 CFR 200.319(a) state that all procurement transactions must be
            conducted in a manner providing full and open competition. Therefore, we did
            not consider a change to the report or our recommendation to be necessary. We
            will work with HUD to resolve the recommendation and reach a timely resolution
            with a management decision.
Comment 9   HUD stated that it will address the recommendations provided in the draft report
            when it submits its proposed management decisions in accordance with the Audits
            Management System Handbook, which permits proposed management decisions
            to be entered within 120 days of the issuance of the final audit report. We will
            work with HUD to resolve the recommendations identified in the audit report and
            reach a timely resolution with management decisions.




                                            23
Appendix C
               Schedule of Deficiencies Associated With Vouchers Reviewed
Seq.                             Violations noted during         Amount      Unsupported   Ineligible
       Provider (voucher)
no.                                      review*                  drawn         costs        costs
                             1     2    3 4     5        6   7
  1    Provider A (285321)   X     X    X       X            X   $149,843      $11,840
  2    Provider A (306426)   X     X            X                 318,250       35,391      $8,311
  3    Provider A (354531)   X     X    X                         310,611      150,632      1,327
  4    Provider A (360290)   X     X            X                  91,351        6,544
  5    Provider B (314282)   X     X    X                X        146,143        9,753
  6    Provider B (331950)   X     X    X       X                 163,431       10,075       1,129
  7    Provider B (335889)   X     X    X X     X                 103,040       18,517         30
  8    Provider B (360667)   X     X    X       X                  86,325       13,438        206
  9    Provider C (311354)   X     X            X                 546,488      131,279
 10    Provider C (321178)   X     X            X                 853,243      235,453
 11    Provider C (360572)         X                              358,638       28,534
 12    Provider C (367697)   X     X                              525,627      109,706       1,939
 13    Provider D (337963)   X          X       X                  74,234       20,283        442
 14    Provider D (345816)   X     X                               47,341        4,236
 15    Provider D (364497)   X                                     80,111       59,816
          Totals             14    13   7   1   9        1   1   3,854,676     845,497      13,384


*Violations noted during review

The violations in these columns resulted in questioned costs:
       1.      Provider overcharged or did not support labor costs.
       2.      Personnel were not approved on the provider’s work plan.
       3.      Provider overcharged or did not support travel costs.
       4.      No description of work performed was in the payment request.

The violations in these columns did not result in questioned costs:
       5.      Provider incurred costs before work plans were approved.
       6.      Costs applied to an incorrect work plan.
       7.      Monthly billing requirements were not met.




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Appendix D
                 Community Compass Awards and Draws Per Provider
 Seq.                                               No. of    Amount        Amount
                        Provider
 no.                                               awards     awarded       drawn
  1     ICF Incorporated                             11      $36,935,338   $21,030,363
  2     Abt Associates Inc.                          11       22,400,819    9,376,501
  3     Cloudburst Consulting Group                   8       12,765,000    5,644,965
  4     American Institutes for Research              4        7,050,000    5,506,483
  5     Corporation for Supportive Housing            7        6,875,000    2,514,209
  6     Partnership Center Ltd                        4        2,525,000    1,903,375
  7     Econometrica, Inc.                            3        5,240,000    1,810,100
  8     Enterprise Community Partners, Inc.           4        7,600,000    1,770,020
  9     HomeBase Center for Common Concerns           5        5,200,000    1,659,433
 10     TDA Consulting, Inc.                          5        3,279,000    1,270,876
 11     C V R Associates Inc.                         4        3,100,000    1,191,945
 12     Technical Assistance Collaborative            5        3,400,000    1,144,290
 13     BCT Partners                                  1        1,000,000     807,643
 14     Collaborative Solutions Inc.                  6        2,675,000     612,154
 15     Inland Fair Housing & Mediation Board         1        1,500,000     579,424
 16     Advocates for Human Potential                 1         500,000      311,138
 17     National Association for Latino Com           2        1,050,000     204,813
 18     FirstPIC Inc.                                 2         872,475      170,684
 19     National American Indian Housing              2         500,000      169,551
 20     The National Development Council              3        1,075,000     161,347
 21     Corporate F.A.C.T.S. Inc.                     1         250,000       58,858
 22     Mosaic Urban Partners LLC                     1         500,000       24,093
 23     Innovative Emergency Management, Inc.         2        1,150,000         -
 24     Capital Access Inc.                           1         325,000          -
 25     AECOM Technical Services, Inc.                1         250,000          -
 26     Fair Housing Council of Riverside County      1         250,000          -
        Totals                                       96      128,267,632   57,922,265




                                            25
Appendix E
                        Flowchart of Awards and Vouchers Reviewed

                                            26 providers
                                             96 awards
                                       $128.3 million awarded
                                        $57.9 million drawn


                                  4 providers selected for review
     Provider A                Provider B                   Provider C              Provider D
      11 awards                 8 awards                     11 awards               5 awards
$22.4 million awarded     $12.8 million awarded        $36.9 million awarded   $3.3 million awarded
 $9.4 million drawn        $5.6 million drawn           $21.0 million drawn     $1.3 million drawn


                                  12 awards selected for review
  3 awards selected          3 awards selected           3 awards selected       3 awards selected
$8.7 million awarded       $7.6 million awarded        $23.9 million awarded   $2.8 million awarded
 $4.5 million drawn         $3.8 million drawn          $13.9 million drawn     $1.1 million drawn


                                 15 vouchers selected for review
   Voucher 285321            Voucher 314282              Voucher 311354          Voucher 337963
   $149,843 drawn            $146,143 drawn              $546,488 drawn          $74,234 drawn

   Voucher 306426            Voucher 331950              Voucher 321178          Voucher 345816
   $318,250 drawn            $163,431 drawn              $853,243 drawn          $47,341 drawn

   Voucher 354531            Voucher 335889              Voucher 360572          Voucher 364497
   $310,611 drawn            $103,040 drawn              $358,638 drawn          $80,111 drawn

   Voucher 360290            Voucher 360667              Voucher 367697
   $91,351 drawn             $86,325 drawn               $525,627 drawn




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