oversight

Drug Elimination Grant Program, VA State Office, Richmond, VA

Published by the Department of Housing and Urban Development, Office of Inspector General on 1998-06-29.

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

                                                                    Issue Date
                                                                         June 29, 1998
                                                                   Audit Case Number
                                                                         98-PH-101-0001




TO:    Patricia W. Anderson, Program Center Coordinator, Office of Public Housing, Virginia
       State Office, 3FPH

FROM: Edward F. Momorella, District Inspector General for Audit, Mid-Atlantic, 3AGA

SUBJECT:       Drug Elimination Grant Program
               Virginia State Office
               Richmond, Virginia


We audited the Virginia State Office’s monitoring of grant recipients under the Drug Elimination
Program (DEP).

The purpose of the audit was to determine if the Virginia State Office effectively monitored grant
recipients administering their DEP in compliance with the Notice of Funding Availability
(NOFA) and other Federal requirements.

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 the audit.

If you have any questions, please contact Amy Edison, Auditor, at (804) 278-4539, Extension
3202.
Management Memorandum




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98-PH-101-0001                 Page ii
Executive Summary
We completed an audit to determine if the Virginia State Office effectively monitored grant
recipients administrating their DEP in compliance with the NOFAs and applicable Federal
requirements. We selected four Housing Authorities that had received Drug Elimination Grants
during Fiscal Years 1994 to 1996. The Authorities selected were the Richmond, Portsmouth,
Petersburg, and Norfolk Redevelopment and Housing Authorities. We reviewed the Authorities
administration of their DEP to determine whether grant funds were expended for eligible activities
and whether they effectively monitored subgrantees.


                                Our review of Drug Elimination Grants for fiscal years 1994 to
   Virginia State Office of
                                1996 for Richmond, Petersburg, Portsmouth and Norfolk
   Public Housing did not
                                disclosed the following deficiencies:
   adequately monitor grant
   recipients
                                •   Grant recipients did not support baseline of law enforcement
                                    services prior to the awarding of the grants (Richmond,
                                    Petersburg and Portsmouth).

                                •   Grant recipients incurred ineligible, unsupported, and
                                    questionable costs (Norfolk and Portsmouth).

                                The Office of Public Housing did not have adequate staffing
                                resources to effectively monitor the program, providing
                                assurance that program funds were properly spent and intended
                                objectives were achieved. Consequently, recipients were unsure
                                of and/or disregarded program requirements and regulations. As
                                a result, ineligible and unsupported costs of $21,481 and
                                $2,091,717, respectively, were paid or budgeted from program
                                funds.

                                We recommend the Office of Public Housing effectively monitor
                                grant recipients under the DEP to determine if grant funds were
                                spent properly and to ensure recipients follow requirements
                                under the NOFAs and Federal regulations. Also, we
                                recommend that grant recipients repay ineligible costs and/or
                                justify the unsupported costs.

                                We discussed the applicable deficiencies with Authority
                                representatives during the audit and where appropriate their
                                comments are summarized in the finding. We discussed the draft
                                finding issues with the Virginia State Office representatives
                                during the audit. They concurred with our finding and declined
                                an exit conference.



                                              Page iii                             98-PH-101-0001
Executive Summary




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98-PH-101-0001                   Page iv
Table of Contents

Management Memorandum                                                    i


Executive Summary                                                       iii


Introduction                                                            1


Finding

1    The Virginia State Office of Public Housing Needs to
     Improve Monitoring of the Drug Elimination Program                 3



Management Controls                                                     9


Follow Up On Prior Audits                                              11

Appendices
      A Schedule of Ineligible And Unsupported Costs                   13

      B Ineligible And Unsupported Costs                               15

      C Distribution                                                   17




                                Page v                      98-PH-101-0001
Table of Contents




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98-PH-101-0001                   Page vi
Introduction
HUD’s Virginia State Office of Public Housing is responsible for conducting local oversight of federal
financial assistance provided to Housing Authorities administering development and management
activities for low-income housing programs within the Commonwealth of Virginia, excluding
Northern Virginia.

One of the low-income housing programs includes the DEP. The Anti-Drug Abuse Act of 1988, as
amended, authorizes the DEP. Under the program, HUD makes grants to Housing Authorities,
Resident Management Corporations, and owners of assisted housing for activities such as (1)
employment of security personnel; (2) reimbursement of police for additional security and
protective services; (3) physical improvements to enhance security; (4) training and equipping
voluntary tenant patrols acting in cooperation with police; (5) innovative anti-drug programs;
and (6) funding nonprofit resident management corporations and tenant councils for the
development of security and drug abuse prevention programs. For fiscal years 1994 through
1996 the Virginia State Office awarded 34 grants totaling $13,410,621.


                                       Our audit objectives were to determine if the Virginia State
   Audit Objectives
                                       Office effectively monitored grant recipients administering
                                       their DEP in compliance with the Notice of Funding
                                       Availability (NOFA) and other Federal requirements. The
                                       audit focused on reviewing DEPs for the four selected
                                       Housing Authorities.

                                       The Housing Authorities selected for review had the
   Audit Scope and                     following Drug Elimination Grant funding for the fiscal years
   Methodology                         under review:

                                   AUTHORITY          1994         1995          1996       TOTALS
                                    Richmond        $1,109,015   $1,102,999    $1,045,783   $3,257,797
                                    Portsmouth         476,500      476,250       475,250    1,428,000
                                    Petersburg         143,881      239,847                    383,728
                                      Norfolk        1,034,750    1,031,750     1,006,000    3,072,500
                                     TOTALS         $2,764,146   $2,850,846    $2,527,033   $8,142,025



                                       We reviewed pertinent HUD, Housing Authority and
                                       subgrantee records. We interviewed HUD, Housing
                                       Authority and subgrantee staff, and visited eight
                                       subgrantees under two Housing Authorities during our
                                       review.

                                       Audit work was performed from June 1997 to April 1998.
                                       The audit covered the period July 1994 to June 1996.



                                                 Page 1                               98-PH-101-0001
Finding 1


                 When appropriate, the review was extended to include
                 other periods.

                 We conducted the audit in accordance with generally
                 accepted government auditing standards.




98-PH-101-0001       Page 2
                                                                                           Finding 1




   The Virginia State Office Of Public Housing
   Needs To Improve Monitoring Of The Drug
              Elimination Program
The Virginia State Office of Public Housing did not adequately monitor recipients of drug elimination
grants as required. Our review of drug elimination grants awarded to Richmond, Portsmouth,
Petersburg, and Norfolk Redevelopment and Housing Authorities for fiscal years 1994 to 1996
disclosed the following deficiencies:

   •   $1,847,962 was awarded to local law enforcement agencies without properly establishing the
       baseline of law enforcement services already provided, (Richmond, Portsmouth, and
       Petersburg); and

   •   $21,481 and $243,755 was expended for ineligible and unsupported costs (Norfolk and
       Portsmouth).

The Virginia State Office did not have sufficient staff monitoring the program to provide assurance
that program funds were properly spent and intended objectives were achieved. Consequently,
recipients were unsure of and/or disregarded program requirements resulting in ineligible and
unsupported costs of $21,481 and $2,091,717, respectively.


                                       24 CFR 761.15(c) Continuation of current program
                                       activities states:

                                       “For the purpose of … drug elimination programs, the
                                       Department will evaluate an applicant’s performance
                                       under any previous Drug Elimination Program grants
                                       within the past five years. Subject to evaluation and
                                       review are the applicant’s financial and program
                                       performance; reporting and special condition compliance;
                                       accomplishment of stated goals and objectives under the
                                       previous grant; and program adjustments made in
                                       response to previous ineffective performance.”

                                       Baseline Law Enforcement Services

                                       Richmond, Portsmouth, and Petersburg did not properly
                                       establish the baseline of law enforcement services already
                                       provided, or maintain documentation supporting existing
                                       baseline services.

98-PH-101-0001                              Page 3
Finding 1



                 24 CFR Part 761.15 (b)(2)(i) Reimbursement of local law
                 enforcement agencies for additional security and protective
                 services states:

                 “Additional security and protective services to be funded
                 must be over and above those that the tribal, State, or
                 local government is contractually obligated to provide
                 under its Cooperation Agreement with the applying
                 Housing Authority HA (as required by the HA’s Annual
                 Contribution Contract). An application seeking funding
                 for this activity must first establish a baseline by
                 describing the current level of services (in terms of the
                 kinds of services provided, the number of officers and
                 equipment, and the actual percent of their time assigned to
                 the developments proposed for funding) and then
                 demonstrate to what extent the funded activity will
                 represent an increase over this baseline.”

                 As detailed below, Richmond and Portsmouth failed to
                 maintain documentation supporting the baselines and
                 Petersburg failed to submit a baseline of services in their
                 grant applications.

                 Richmond Redevelopment Housing Authority

                 Richmond awarded the City Police Department $687,992
                 for additional law enforcement services.          The law
                 enforcement services were designed to identify and remove
                 the major supplies of drugs in the communities utilizing the
                 police department’s uniformed drug enforcement unit and
                 other tactical units until major suppliers are removed and
                 community policing efforts can be sustained. The baseline
                 of existing law enforcement services included in
                 Richmond’s application stated that a four person street
                 enforcement unit equipped with two vehicles spend
                 approximately 5% of their time in the east end communities
                 (Creighton, Fairfield, Mosby, and Whitcomb). According
                 to the Authority, supporting baseline documentation was
                 maintained by the Police Department.            The Police
                 Department could not locate the information used to
                 support the baseline. Additionally, a police official stated
                 that the Housing Authority communities listed in the
                 baseline would have (and still do) occupy much more than


98-PH-101-0001       Page 4
                                                                               Finding 1


                              5% of the street enforcement unit’s time, and fifty percent
                              would be a conservative estimate.

                              Portsmouth Redevelopment Housing Authority
   Supporting
   documentation not          Portsmouth’s application budgeted a total of $1,004,570
   maintained                 for the purpose of funding six community officers and
                              additional patrols from the FY 1994, 1995 and 1996
                              program grants.         Portsmouth failed to maintain
                              documentation supporting the establishment of the baseline
                              of services. The Assistant Director of Resident Initiatives
                              said that the information concerning the baseline had been
                              obtained during telephone calls to the Police Department
                              and no written information had been maintained. In
                              addition, records obtained from the police department do
                              not support the costs awarded to Portsmouth for their
                              Drug Elimination Grants. For example, Portsmouth
                              received $301,000 for their 1994 grant for 6 police
                              officers, yet their contract with the police department for
                              the same service was for $228,000. Portsmouth’s 1995
                              and 1996 grants included over $230,000 of additional night
                              and weekend patrols, however, their contract with the
                              police department remained at $228,000 and did not
                              contemplate additional night and weekend patrols.

                              Petersburg Redevelopment Housing Authority

   Baseline of services not   Petersburg’s applications budgeted $78,200 and $77,200
   submitted                  for FY 1994 and FY 1995, respectively for reimbursement
                              of law enforcement community policing which included
                              housing officers at two of the projects. However,
                              Petersburg did not submit a baseline of services in either
                              year’s application. The Executive Director stated although
                              they had not submitted the baseline for either year, HUD
                              had approved the application and had awarded the grants.

                              Because Richmond and Portsmouth did not maintain
                              documentation supporting the establishment of the baseline
                              of services and Petersburg did not include the required
                              baseline information in their application, there is no
                              assurance that $1,847,962 of funds provided, represented
                              an increase of police service over normal activity in the
                              designated communities.




98-PH-101-0001                    Page 5
Finding 1


                               Ineligible and Unsupported Expenditures
   Grant funds expended        Norfolk and Portsmouth expended grant funds for
   for ineligible activities   ineligible activities, and did not administer their grants
                               according to HUD requirements. As a result, ineligible and
                               unsupported costs of $21,481 and $243,755 respectively,
                               were charged to the program (Ineligible and Unsupported
                               Costs are Detailed in APPENDIX B).

                               The Drug Elimination Program’s Notice of Funding
                               Availability (NOFA) for Fiscal Years 1994, 1995 and 1996
                               list ineligible activities and state that each recipient is
                               responsible for ensuring that grant funds are administered
                               in accordance with 24 CFR part 85 and OMB Circular A-
                               87.

                               Due to limited personnel resources, program monitoring
                               responsibility was assigned to a Virginia State Office of
                               Public Housing Program Assistant. This responsibility was
                               an additional duty not included in the employee’s job
                               description. Although monitoring visits were made, they
                               were limited because monitoring was generally conducted
                               in conjunction with reviews in other public housing areas.
                               Staff shortages and limited availability of travel funds
                               precluded the Virginia State Office from conducting
                               effective oversight of the program.

                               Because recipients were not adequately monitored,
                               deviations from Federal requirements went undetected and
                               the Virginia State Office had no assurances that program
                               funds were obligated and used for eligible activities and
                               that intended program results were realized. As a result,
                               grant recipients incurred ineligible and unsupported costs
                               (APPENDIX B) of $21,481 and $2,091,717, respectively.



                               The auditee agreed with the finding.
  Auditee Comments




98-PH-101-0001                     Page 6
                                                                   Finding 1


 Recommendations   We recommend you:

                   1A.     Provide the necessary oversight of recipients
                   performance that includes annual on-site testing and
                   evaluation of program activities.

                   1B.    Require the Richmond, Petersburg and Portsmouth
                   to document the baseline of law enforcement services for
                   your staff’s review and approval. In the absence of
                   supporting documentation by any recipient, they will repay
                   HUD from non-Federal sources for spent funds, and
                   reprogram unspent funds for any portion of the
                   $1,847,962.

                   1C.     Direct Norfolk to reimburse HUD the ineligible
                   costs of $21,481 from non-Federal funds.

                   1D.     Require Norfolk and Portsmouth to document
                   support of costs totaling $228,555 and $15,200
                   respectively for your staff’s review and approval, or
                   reimburse HUD from non-Federal funds any costs not
                   supported.




98-PH-101-0001         Page 7
Finding 1




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98-PH-101-0001                Page 8
Management Controls
In planning and performing our audit, we obtained an understanding of the management controls that
were relevant to our audit. Management is responsible for establishing effective management controls.
Management controls, in the broad sense, include the plan of organization, methods, and procedures
adopted by management to ensure that its goals are met. Management controls include the processes
for planning, organizing, directing and controlling program operations. They include the systems for
measuring, reporting, and monitoring program performance.


                                      We determined that the following management controls were
 Relevant Management
                                      relevant to our audit objectives:
 Controls

                                      ·   HUD monitoring of grant recipients

                                      ·   Grant recipients monitoring of subgrantees

                                      ·   Costs incurred under Drug Elimination Grants

                                      We evaluated all of the relevant control categories identified
                                      above by determining the risk exposure and assessing control
                                      design and implementation.

                                      It is a significant weakness if management controls do not give
                                      reasonable assurance that resource use is consistent with laws,
                                      regulations, and policies; that resources are safeguarded against
                                      waste, loss, and misuse; and that reliable data is obtained,
                                      maintained, and fairly disclosed in reports.

                                      Based on our review, we believe HUD monitoring of grant
 Significant Weaknesses
                                      recipients, grant recipients monitoring of subgrantees, and costs
                                      incurred under Drug Elimination Grants are significant
                                      weaknesses.




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Management Controls




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98-PH-101-0001                  Page 10
Follow Up On Prior Audits
This was the first OIG audit of DEP under the Virginia State Office jurisdiction.




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Follow-Up On Prior Audits




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98-PH-101-0001                   Page 12
                                                                                    Appendix A


Schedule Of Ineligible And Unsupported Costs

       Finding Number                             Ineligible 1/   Unsupported 2/

                 1                                $21,481         $2,091,717
                                                  $21,481         $2,091,717




1/   Ineligible amounts are clearly not allowed by law, contract, or HUD policies or regulations.

2/   Unsupported amounts were not clearly eligible or ineligible but warrant being contested for
     various reasons, such as the lack of satisfactory documentation to support eligibility.




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Appendix A




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98-PH-101-0001               Page 14
                                                                                      Appendix B


Ineligible and Unsupported Costs
Recipient            Ineligible      Unsupported Explanation
Norfolk                    $21,481               Ineligible Activity 1/
Norfolk                                 $206,174 Inadequate Supporting Documentation 2/
                                          22,381 Questionable Program Benefit 3/
Norfolk
Richmond                                 687,992 Baseline Law Enforcement Services Not
                                                 Supported 4/
Petersburg                               155,400 Baseline Law Enforcement Services Not
                                                 Supported 4/
Portsmouth                             1,004,570 Baseline Law Enforcement Services Not
                                                 Supported 4/
Portsmouth                                15,200 Questionable Program Benefit 3/

Total                      $21,481    $2,091,717


        1/ Ineligible Activity
        Ineligible activities are listed in the applicable NOFAs.    These activities include the
        following:

               •      Costs of leasing any facility space in a building or unit.
               •      Funds for organized fund raising, advertising, financial campaigns,
                      endowment drives, solicitation of gifts and bequests, rallies, marches,
                      community celebrations and similar expenses.
               •      Indirect costs as defined in OMB Circular A-87.

        2/ Inadequate Supporting Documentation
        24 CFR Part 85.20(b)(6) states that:
        “grantees and subgrantees’ accounting records must be supported by such source
        documentation as cancelled checks, paid bills, payrolls, time and attendance records,
        contract and subgrant award documents, etc.”

        3/ Questionable Program Benefit
        Recipients failed to provide documentation justifying that the costs incurred were program
        related and dealt with drug education and drug abuse prevention.

        4/ Baseline Law Enforcement Services Not Supported
        Recipients did not establish baseline services to demonstrate to what extent the funded
        activity represented additional services.




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Appendix B




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98-PH-101-0001               Page 16
                                                                                    Appendix C

Distribution
Secretary's Representative, Mid-Atlantic, 3AS
Internal Control & Audit Resolution Staff, 3AFI
Director, Office of Public Housing, 3FPH
Director, Administrative Service Center, 2AA
Director, Field Accounting Division, 6AF
Director, Administrative Service Center - Contracting Division, 2AAC
Assistant to the Deputy Secretary for Field Management, SDF (Room 7106)
Comptroller, Public And Indian Housing, PF (Room 5156)
Acquisitions Librarian, Library, AS (Room 8141)
Chief Financial Officer, F (Room 10164)
Deputy Chief Financial Officer for Finance, FF (Room 10164)
Director, Office of Budget Locator, FO (Room 3270)
Director, Policy Development Division, RPP (Room 8110)
Director, Office of Press Relations, WR (Room 10138)
Director, Office of Policy Support, WS (Room 10130)
Acting Deputy Secretary, SD (Room 10100)
General Deputy Secretary for Public & Indian Housing, P (Room 4100)
Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120)
Acting Assistant Secretary for Public Affairs, W (Room 10132)
Chief of Staff, S (Room 10000)
Counselor to the Secretary, S (Room 10234)
Senior Advisor to the Secretary for Communications and Policy, S (Room 10222)
Deputy General Counsel, CB (Room 10214)
Deputy Chief of Staff for Programs & Policy (Room 10226)
Chief Procurement Officer, A (Room 5184)
Director, Housing and Community Development Issue Area, U.S. GAO, 441 G Street N.W.,
    Room 2474, Washington DC 20548
The Honorable John Glenn, Ranking Member, Committee on Governmental Affairs,
    United States Senate, Washington DC 20515-4305
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs,
    United States Senate, Washington DC 20510-6250
The Honorable Dan Burton, Chairman, Committee on Government Reform and Oversight,
    United States House of Representatives, Washington DC 20515-6143
Mr. Pete Sessions, Government Reform and Oversight Committee, Congress of the United States,
    House of Representatives, Washington, DC 20515-4305
Ms. Cindy Sprunger, Subcommittee on General Oversight and Investigations, Room 212,
    O'Neil Office Building, Washington DC 20515




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