Hotline Complaint, Community for Creative Non-Violence

Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-12-17.

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

                                 U.S. Department of Housing and Urban Development
                                                     Capitol District
                                          Office of Inspector General for Audit
                                         451 Seventh Street, S.W. Room 3154
                                             Washington D.C. 20410-7000

                                        December 17, 1996                     Audit Related Memorandum
                                                                                No. 97-AO-251-1801

MEMORANDUM FOR: Fred Karnas, Acting Director for the Interagency Council for the
                    Prevention of Homelessness [DEO]

FROM: David J. Niemiec, District Inspector General, Capital District, 3GGA

SUBJECT: Hotline Complaint — Community for Creative Non-Violence

This memorandum provides you the results of our review of the use of funds by the Community
for Creative Non-Violence (CCNV) under a subgrant from the Community Partnership for the
Prevention of Homelessness (Community Partnership). The review was performed in response to
a hotline complaint.

The objective for which the grant funds had been awarded — development and implementation of
a computerized case management system — had not been accomplished and only about $223,550
of the $630,421 received from HUD under the grant agreement was spent on case management
related expenses. The remaining funds, about $406,871, were spent on items that were either not
allowable or could not be determined to be allowable under the terms of the grant agreement due
to a lack of supporting documentation. We asked the CCNV Vice President on numerous
occasions to provide documentation to support the questioned items but the information was not
provided. We therefore find it necessary to disallow the expenditures of $406,871 and recommend
termination of the current grant agreement.

On November 20,1996, in response to our draft report, you provided written comments indicating
agreement with our proposed recommendations. We have included your response in it’s entirety
as Appendix B to this report.


In May, 1994, HUD negotiated a memorandum of understanding with the District of Columbia to
transition its homeless care system from a shelter-based system to a continuum of care system. In
accordance with the terms of the understanding, the District was to provide shelter and services
for both the homeless and those at risk of becoming homeless. HUD agreed to provide $20
million over a 3-year period to fund the effort, known as the DC Initiative.
The Community for Creative Non-Violence

In August, 1994, HUD entered into a grant agreement with the District and the Community
Partnership for the Prevention of Homelessness to implement the DC Initiative. The Community
Partnership is a non-profit corporation selected by the District and agreed to by HUD. Among the
specific duties of the Community Partnership was planning, coordinating, monitoring and
contracting for the provision of shelter and support services for homeless individuals and families
in the District. The Partnership agreed to monitor those providers to ensure compliance with the
terms of their contracts.

As part of that initiative, in November 1994, the Community Partnership awarded the Community
for Creative Non-Violence a 3–year, $1,239,705 grant to establish and operate a computerized
case management system. Under the terms of the grant, CCNV agreed to use grant funds only for
activities described in the grant agreement and to maintain separate books for the grant in an up-
to-date and good condition.

Scope of Review

The objective of our review was to determine whether the grant funds CCNV received from the
Community Partnership to develop and implement a computerized case management program
were spent for that purpose. In making this determination, we created a listing of receipts and
disbursements for the period November 21, 1994, the date when the case management checking
account was established, to May 15, 1996, the date the last funds were provided to CCNV by the
Community Partnership. This listing was based on bank statements, canceled checks, duplicate
deposit slips, duplicate certified check receipts, and other supporting documentation. The effort
was necessary because the check register listings provided by CCNV did not contain transactions
such as business/direct access debits and other automated withdrawals listed in the bank
statements. We also used Community Partnership records to determine the amount of grant funds
provided to CCNV. In addition to our review of financial transactions, we interviewed HUD,
Community Partnership, and CCNV representatives.

Our review was performed at CCNV and Community Partnership offices during the months of
July and August 1996. The review was conducted in accordance with applicable government
auditing standards and included such tests as we considered necessary.

Review Results

Finding - The Community for Creative Non-Violence Did Not Develop and Implement a
Computerized Case Management System

As of May 15, 1996, the Community Partnership provided the Community for Creative Non-
Violence (CCNV) with $630,421 in HUD funds to establish and maintain a computerized case
management system at the Federal City Shelter. However, CCNV had not automated the case
management process and case management services were not provided as originally proposed. In

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addition, CCNV, through the actions of its vice president/executive director, used grant funds for
purposes other than those agreed to under the grant agreement. As a result, grant funds intended
to help the homeless were used for ineligible activities. Therefore, we are disallowing $406,871 as
not being spent on grant related items and are recommending the termination of the grant


Case management is comprised of: assessment interviews, case plan development, services
identification, monitoring, follow-up services, and files and records maintenance. The benefits of
an automated case management system is improved record-keeping in order to free time for client
contact; better tracking of client services provided while at the shelter and after they leave; and
improved gathering of statistical information for reporting and evaluation. To achieve this end,
CCNV was awarded grant funds for case management software development, computer and
office equipment, salaries and benefits for case management staff and other case management
related expenses, including a 10 percent administrative fee for overhead expenses.

While grant funds were expended, the goal of implementing an automated case management
system was not achieved. Funds were expended for some case management related expenses such
as staff salaries, some computer hardware, and software development, but the case management
process was never automated as originally planned. We did not evaluate the effectiveness of the
case management services that were being provided without the automated system. A separate
report was prepared by a consultant hired by the Community Partnership assessing the value of
the case management services being provided under the grant. We were provided a briefing of
that study and have allowed the salary costs to remain an acceptable cost of the grant even though
the case management function did not achieve the desired level of service as originally proposed.

Based on our review of receipts and disbursements for the automated case management program
at CCNV, we determined the $406,871 in disallowed costs as follows:

         Money provided to CCNV 1                                     $ 630,421
         Less: Case Management Expenses                                (203,227)
         Less: Overhead of 10%                                          (20,323)
         Total Amount Disallowed                                      $ 406,871

In reviewing the case management checking account, we had to isolate the HUD receipts and the
case management expenses due to some commingling of funds. We reviewed the transactions in

     Only $618,521 was traced to the checking account. An $11,900 check issued
May 15,1996 could not be traced because the May 1996 bank statements were not provided.

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the account for the period November 21, 1994 through April 30, 1996 and were able to determine
the following:

                          HUD                                       $618,521
                          Other 2                                    271,124
                          Total Receipts                            $889,645

                        Case Management                             $203,227
                        Other Expenses 3                             674,485
                        Total Disbursements                         $877,712

During the period we reviewed, on numerous occasions, the case management staff have had their
paychecks returned because of insufficient funds even though the Community Partnership
provided the necessary funds to cover theses expenses. The CCNV also has not paid the income
tax liabilities for either the District of Columbia or the Federal withholding taxes. We were
advised that some taxes were paid in 1994, however we were not provided any documentation
supporting this statement and did not note any payments of these items during our review.

The breakdown occurred because CCNV did not have an adequate system in place to control the
receipt and disbursement of funds. Specifically, there was no separation of duties. CCNV's Vice
President/Executive Director controlled all financial aspects of the case management program. He
prepared the grant drawdown requests, received and deposited the grant funds, approved all
purchases with grant funds, prepared and signed the checks, accessed grant funds through both
manual and automated debit transactions, and established a credit card account using the grant
monies and he was the cardholder. Because of the lack of controls normally provided by
separating duties, the Vice President/Executive Director was able to totally control the case
management program with little or no oversight or input by the CCNV Board of Directors.

Another contributing factor was the lack of a timely audit of CCNV that could have identified and
prevented the further misapplication of the grant funds after the first year of the grant
implementation. An OMB Circular A-133 audit is required for grantees receiving in excess of
$100,000 and is to be submitted within 60 days of the year end. The report was not provided to
the Community Partnership until May, 1996 instead of November 1995, a delay of six months.

      Other income includes private donations and a $75,000 grant from the DC
Government(restricted funds) for the Hypothermia Program.
         The Other expenses are classified In Appendix A.

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The report, prepared by CCNV's CPA firm for the 15 months ended September 30, 1996
questioned over $200,000 of the Year 1 funds of $319,456. The questioned funds were used for
operations, fundraising, or were disbursed to the Executive Director and could not be supported.
Had the report been timely the Community Partnership could have prevented CCNV from
receiving additional funds for that six month period. Even though the Community Partnership sent
numerous letters threatening the cutoff of funds if the financial reviews and audit were not
received, the Community Partnership still continued to send funds even though the CCNV did not
have the audit conducted.

Since the time of our initial inquiry CCNV has not had access to the remaining grant funds. The
last grant funds provided to CCNV were in May 1996. The Community Partnership has been
maintaining the case management program through the use of an outside administrator.


We recommend that your office:

        - reduce the funds to the Community Partnership by an amount equal to our disallowed

        - instruct the Community Partnership to seek reimbursement for the expenses from the
        CCNV from non-federal funds and cancel the remaining grant.

        - suspend CCNV and its Vice President/Executive Director from receiving additional
        HUD funding and initiate debarment actions.

        - instruct the Community Partnership, for future grantees, to conduct some type of
        evaluation prior to the release of Funds to ensure that the subgrantees have adequate
        accounting controls, and data collection systems in place to account for and control the
        receipt of funds.

        - instruct the Community Partnership to perform additional onsite monitoring of the
        grantees including reviews of the grant financial records.

        - meet with the Community Partnership and make a determination as to whether the case
        management services at CCNV should be continued or terminated. If terminated, the
        Community Partnership should seek to obtain the physical items purchased by the grant
        funds. These items should include the computers that were charged to the grant and the
        case management software that was developed.

These recommendations are consistant with those actions that you stated would be taken in

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response to our draft report and are being restated for audit follow-up purposes.

                                          *   *     *     *

Within 60 days, please give us, for each recommendation made in the report, a status report on:
(1) the corrective action taken; (2) the proposed corrective action and the date to be completed;
or (3) why action is considered unnecessary. Also, please furnish us copies of any
correspondence or directives issued because of this audit.

We appreciate your cooperation during this review. If you have any questions, please contact
Donald W. Cairns, Assistant District Inspector General for Audit at (202) 708-0351.

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                                                                      Appendix A

             Other Expenses Category in the Case Management Account

 General Shelter Expenses                                      $177,984
 Unidentified Miscellaneous Expenses                              98,699
 Fundraising and/or 25th Anniversary Celebration                 120,145
 Payments made to Vice President/Executive Director               40,865
 Rental Payments for Vice President/Executive Director             3,876
 Unidentified Withdrawal Items on Bank Statements                 56,400
 Medical Insurance for Vice President/Executive Director           2,004
 Credit Card -Vice President/Executive Director (Signator)        30,705
 Unidentified Checks Made out to Cash                             92,157
 Unidentified Automated Withdrawals on Bank Statements            51,650
                                      Total Other Expenses:    $674,485

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                                                     Appendix B
                                                     Page 1 of 5

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                                                     Appendix B
                                                     Page 2 of 5

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                                                      Appendix B
                                                      Page 3 of 5

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                                                      Appendix B
                                                      Page 4 of 5

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                                                      Appendix B
                                                      Page 5 of 5

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                                                                               Appendix C


Deputy Assistant Secretary for Economic Development, DE (Room 7204)
Director, Interagency Council on the Homeless, DEO (Room 7204)
Audit Liaison Officer, Office of Community Planning and Development, DG (Room 7214)
Assistant to the Deputy Secretary for Field Management, SDF, (Room 7106)
Chief Financial Officer, F, (Room 10164) (2)
Deputy Chief Financial Officer for Operations, FF, (Room 10166) (2)

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