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.
Page 9 98-PH-101-0001
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.
Page 11 98-PH-101-0001
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.
Page 13 98-PH-101-0001
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.
Page 15 98-PH-101-0001
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
98-PH-101-0001 Page 17
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)