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. 24 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 26
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)