oversight

Office of the Commissioner of Municipal Affairs, Hato Rey, PR

Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-05-16.

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

                                                   U.S. Department of Housing and Urban Development

                                                   District Office of the Inspector General
                                                   Richard B. Russell Federal Building
                                                   75 Spring Street, SW, Room 700
                                                   Atlanta, GA 30303-3388
                                                   (404) 331-3369




May 16, 1996                                        Audit Related Memorandum
                                                    No. 96-AT-241-1817


MEMORANDUM FOR:            Carmen R. Cabrera, Director, Community Planning and
                            Development Division, Caribbean Office, 4ND


FROM:      Kathryn Kuhl-Inclan
           District Inspector General for Audit-Southeast/Caribbean, 4AGA


SUBJECT:     State Block Grant Program - Commonwealth of Puerto Rico
             Office of the Commissioner of Municipal Affairs
             Hato Rey, Puerto Rico


We completed a limited review concerning the distribution of selected FY 1993 State Bloc k
Grant Program (SBGP) funds by th e Office of the Commissioner of Municipal Affairs (OCMA)
of the Commonwealth of Puerto Rico. The objective of the review was to determine OCMA's
compliance with the Housing and Community Development Act and the State Block Gran t
Program regulations.

We interviewed HUD and OCMA officials and reviewed documentation at those office s
concerning the distribution of SBGP funds allocated during FY 1993. We also reviewe d
subsequent Fiscal Year distributions as needed.

Our emphasis was on the methods and practices of distribution of the Governor's Discretionary
Fund. Our review was not an audit of State activities and our observations are related to th e
limited emphasis and sco pe. While conducting the review, we noted indications of deficiencies
that appear to warrant additional attention by both HUD and OCMA staff. We did not develop
the deficiencies as we normally would to meet reporting standards for generally accepte d
government auditing standards.


                                        SUMMARY


OCMA generally followed the method of distribution described in the Final Statement. However,
we noted five projects in which OCMA did not properly document and justify its fundin g
decisions.
Within 60 days, pleas e give us, for each recommendation in Attachment 1 a status report on (1)
the corrective actions taken; (2) the proposed corrective action and the date to be completed; or
(3) why action is considered unnecess ary. Also, please furnish us copies of any correspondence
or directives issued as a result of this review.

We provided a copy of this report to the auditee.

We appreciate your cooperation during the audit. Sho uld you have any questions, please contact
me or James D . McKay, Assistant District Inspector General for Audit, at (404) 331-3369 o r
Aurora Rodriguez, Senior Auditor, at (809) 766-5879.




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                                                                                 ATTACHMENT 1

Finding 1     Inadequate Documentation to Support Distribution of 1993 Governor's
              Discretionary Funds

OCMA did not properly document some of its funding decisions.

Special Fund/Solid Waste Activities

The original Final Statement submitted to HU D on May 28, 1993 provided for the establishment
of a special fund of $15 million for solid waste disposal act ivities. The State was to distribute the
fund based on recommendations from the Solid Waste Authority of Puerto Rico to assure th e
municipalities' compliance with Subtitle D of the Resource Conservation and Recovery Act of
EPA. To comply with the Act, certain municipalities were required to close their landfill sites
while others had t o rehabilitate theirs. The determination as to which ones were to be closed or
rehabilitated was to be made by the Solid Waste Authority of Puerto Rico.

On June 11 and July 20, 1993 the Final Statement was revised. The revisions identified th e
specific landfills that either must close or be rehabilitated on or before October 9, 1993 t o
conform with Federal requirements. The funds set aside for these activities were to be distributed
based on the specific need of each affected municipality.

OCMA notified the municipalities on April 27 , 1993 (prior to issuance of the Final Statement on
May 28), the amount of funds assigned for solid waste related activities. OCMA could no t
provide documentation evidencing (1) eligibility of selected landfill sites for funding under the
1993 program, and (2) the reasonableness of the distribution of funds for each municipality.

Although OCMA could not provide details on the basis used to distribute the $15 million ,
interviews of representatives of selected municipalities, disclosed that, in general, the fund s
assigned for waste disposal activities were adequate. None of the municipalities were fined for
noncompliance with the Environmental Protection Agency requirements, as it pertains to th e
operations of landfill sites.

Competitive Discretionary Fund

Part II.D of the 1993 Final Statement describes the method of distribution to be used for th e
SBGP Discretionary Fund. This part provided that the 64 non-entitlement municipalities could
compete based on 9 competitive factors for up to $1 million. According to the Final Statement
the proposals submitted were subject to a preliminary review by OCMA to determine eligibility
and compliance with program requirements. The preliminary review also included an assessment
of the project in reference to 9 competitive factors. Upon completion of the preliminar y
evaluation process, the propos als were to be evaluated by a special committee, appointed by the
Governor, for the review of the technical aspects. (The Final Statement did not specify th e
technical aspects to be reviewed by the Special Committee.) Funds were to be assigned to best
rated grants, until the $20,858,720 of available funds were exhausted.




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We reviewed OCMA's process used in rating 43 projects and found that OCMA generall y
complied with th e method of distribution described in the Final Statement. However, we noted
instances in which OCMA did not adequately document it's reasons for not funding som e
activities or funding less than the amount requested. As a result, some applications may not have
been properly considered or may have been improperly reduced. The projects were:


     Project Name                                    Municipality            Amount

     Reconstruction of Basketball Court              Peñuelas                $ 250,000
     Reconstruction of curbs and sidewalks           Coamo                     300,000
     Construction of a Cemetery                      Guayama                   224,762
     Construction of Athletic field                  Guayama                   380,128
     Acquisition of Vacant Lot                       Cabo Rojo                 415,000

             Total                                                         $ 1,569,890


PEÑUELAS - Reconstruction of a Basketball Court

OCMA considered the project as maintenance of public facilities and therefore, ineligible fo r
funding. However, the project application described the installation of new seats, th e
constructions of dugouts, etc. The files did not document why OCMA considered the application
as maintenance of public facilities.

COAMO - Reconstruction of Curbs and Sidewalks

This project was not funded. OCMA reviewed and evaluated the project app lication and assigned
40 points (we noted a mathematical error and the total sho uld have been 44 points) to the project.
OCMA claimed that the activity was not funded because of its low rating and because th e
proposal indicated that the project was near completion at a cost of $474,199.20. Th e
municipality had been awarded $526,057 from 1990-1992 SBGP funds for this activity and the
municipality requested $300,000 of additional funds to complete the activity.

Our review disclosed that the proj ect could have received about 20 more points for a total rating
of 64 points. The project received "0" points in the factor dealing with planning or adequate use
of resources. OCMA assigned a "0" rating based on a document submitted by the municipality
which showed that only $8,500 of the $526,057 of funds previously assigned for the activity had
been expended. However, another document included in the proposal showed that 89 percent
of the funds had been expen ded. Also, OCMA assigned a "0" rating for project continuity even
though the $300,000 requested was to complete the last phase of the project. Although th e
municipality submitted conflicting information regarding the use of funds previously awarded,
the files do not document a careful review of the proposal to resolve the issues.




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GUAYAMA - Construction of a Cemetery and Athletic Field

1.   Construction of a Cemetery ($224,762). The project received a rating of 47 points .
     However, OCMA did not award any funds because the project did not fall within th e
     Discretionary Fund priorities. This reason was not properly supported because the priority
     was only one of nine rating factors. The fa ilure to meet one rating factor did not constitute
     acceptable grounds to disqualify the project.

2.   Construction of an Athletic Field at the Sports Complex Center, Machete Ward. Th e
     municipality requested $380,128, but was awarded $150,000. The file does not contain
     documentation justifying the reduction in the funds approved for this activity.

CABO ROJO - Acquisition of a Vacant Lot

The municipality submitted an application for acquisition of a vacant lot for the futur e
development of a housing project. OCMA gave the project a rating of 43 points, but did not fund
the project.

Although the project received a rating of 43 points, it was not included on OCMA's ranking list.
This list included projects that received 39 points or more. We were informed that most projects
ranking 42 or more points were funded. The files did not explain why the project was no t
included on the list.

In a letter dated June 13, 1994, OCMA inf ormed the Mayor of Cabo Rojo that the reason for not
awarding funds to this project was that the proposal did not identify any efforts to obtai n
additional financial resources to develop the project. Efforts to obtain additional financia l
resources was only on e of nine rating factors. The files do not explain why this project was not
funded while other projects which received 42 points were funded. The municipality wa s
subsequently awarded $300,000 of 1995 SBGP funds for costs related to this activity.

Recommendation:

We recommend your office:

1-A Advise OCMA that it must maintain proper documentation to support and justify it s
    funding decisions. OCMA is responsible for maintaining proper documentation eve n
    though some parts of the review and recommendations are made by other parties.




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                                                                        ATTACHMENT 2


                                     DISTRIBUTION


Secretary's Representative, 4AS
Comptroller, 4AF
Audit Liaison Officer, 4AFI
Director, Field Accounting Division, 4AFF
Area Coordinator, San Juan, PR, 4NS
Director, Community Planning and Development Division, 4ND
Assistant to the Deputy Secretary for Field Management, SDF, (Room 7106)
Comptroller, Office of Technical Assistance and Management, DOT (Room 7228)
 ATTN: Audit Liaison Officer (3)
Chief Financial Officer, F, Room 10164 (2)
Director, Office of Internal Control and Audit Resolution, FOI (Room 10176) (2)
Associate Director, US GAO, 820 1st St. NE Union Plaza, Bldg. 2, Suite 150,
 Washington, DC 20002, (2)
Office of the Commissioner for Municipal Affairs




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