oversight

Utilization of American Recovery and Reinvestment Act of 2009 (ARRA) Funds by the Housing Authority of the City of Fort Myers, Florida

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-12-09.

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

                           U.S. Department of Housing and Urban Development
                                  Office of Inspector General
                                        451 Seventh Street, SW
                                       Washington, DC 20410-4500
                                  Phone: (202) 708-0390 Fax: (202) 708-1354



                                            December 9, 2010


MEMORANDUM FOR:              John P. McCarty, Assistant Inspector General for Investigation, GI

              //signed//
FROM:         Jennifer L. Sorenson, Director, Inspections and Evaluations Division, Office of
              Investigation, GIH

SUBJECT:      Utilization of American Recovery and Reinvestment Act of 2009 (ARRA) Funds
              By the Housing Authority of the City of Fort Myers, Florida, IED-11-003M

                                      INTRODUCTION

The Office of Inspector General, Inspections and Evaluations Division (IED), conducts
independent, objective examinations of U.S. Department of Housing and Urban Development
(HUD) activities, programs, operations, and organizational issues.

An article published in the Fort Myers Florida Weekly, dated June 2, 2010, raised concerns about
the Housing Authority of the City of Fort Myers’ (HACFM) use of ARRA funds to construct a
new administration building. Consequently, we performed an inspection to address the
following questions from OIG senior management:

   I. Could HACFM use ARRA funds to construct a new administration building?

   II. Did HACFM use ARRA funds to purchase furniture and equipment for the new
       administration building? If yes, was this an eligible activity?

We determined that HACFM could utilize ARRA funds and its fiscal year public housing capital
funds for the construction of a new administration building. Additionally, we noted that the
HACFM did not use ARRA funds to purchase furniture and equipment for the new
administration building. These purchases were made from other eligible funding sources.
                                                                            IED-11-003M


                                       BACKGROUND

American Recovery and Reinvestment Act of 2009 (ARRA) Appropriations

ARRA includes a $4 billion appropriation for the Public Housing Capital Fund, to be used for
capital and management activities for public housing agencies (PHAs), as authorized under
Section 9 of the United States Housing Act of 1937, as amended. ARRA requires that $3 billion
of these funds be distributed as formula funds, and the remaining $1 billion be distributed
through a competitive process.

   •   Public Housing Capital Fund – Formula Grants: ARRA requires that $3 billion of these
       funds be distributed by the same formula used for amounts made available in fiscal year
       2008, except that the Secretary of HUD has the discretion not to allocate funding to
       public housing agencies currently designated as troubled or to public housing agencies
       that elect not to accept such funding. ARRA requires that PHAs use these funds on
       eligible capital fund activities and give priority to capital projects that can award
       contracts based on bids within 120 days from the date the funds are made available to the
       PHAs. Under this program, PHAs will give priority consideration to the rehabilitation of
       vacant rental units, and prioritize projects that are already underway or included in their
       Five-Year Capital Fund Action Plans required by 42 U.S.C. 1437c-1(a).

   •   Public Housing Capital Fund – Competitive Grants: The purpose of this program is to
       provide an additional $995 million to PHAs for capital and management activities as
       authorized under Section 9 of the 1937 Housing Act in accordance with four funding
       categories: (1) improvements addressing the needs of the elderly and/or persons with
       disabilities; (2) public housing transformation; (3) gap financing for projects that are
       stalled due to financing issues; and (4) creation of energy efficient, green communities.
       During September 2009, the Office of Public and Indian Housing (PIH) awarded $995
       million to PHAs in the form of 396 capital fund recovery competitive grants.

The Housing Authority of the City of Fort Myers (HACFM)

HACFM owns and manages 502 conventional public housing units located at four different sites.
It also manages 200 Section 8 project-based units, 180 market rate units, and 120 elderly mixed
finance units. The current occupancy rates are as follows: public housing units - 99 percent,
Section 8 Project Based development - 99 percent, market rate development - 64 percent, and
elderly mixed finance - 100 percent. HACFM has approximately 60 full-time employees with an
annual budget of $24.6 million.

According to the HUD Miami Office of Public Housing (OPH), HACFM is a “standard
performer” under HUD’s PHAS (Public Housing Assessment System) scoring system. They
stated that HACFM “has become an aggressive, entrepreneurial, creative, and results driven
organization”, and its accomplishments “over the course of the past several years has been
striking.” The Miami OPH conducted two reviews of HACFM’s utilization of ARRA funds. The
first one was a remote review, completed on December 22, 2009, which identified only one
deficiency relating to the Buy American provisions of ARRA. HACFM corrected this deficiency

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by executing a contract amendment to further clarify compliance with the Buy American
provisions. The second review was an on-site review, completed on January 27, 2010. The
review concluded that HACFM was administering the ARRA grant in accordance with all
applicable regulatory and programmatic requirements, and no corrective actions or issues were
noted.

HACFM was awarded two ARRA stimulus capital fund grants consisting of a formula grant of
$2,219,810 and a competitive grant of $3,635,000, totaling $5,854,810. HACFM used the ARRA
Capital Fund formula grant for the construction of a new administration building that was
identified in its Annual Statement, and its Five-Year Capital Fund Action Plan required by 42
U.S.C. 1437c-1(a). The ARRA Capital Fund competitive grant was used for infrastructure
improvements at HACFM’s approved HOPE VI site, which is also the site of the new
administration building.

                                  SCOPE AND METHODOLOGY

To address the questions asked we reviewed applicable HUD regulations, criteria and other
guidance. We interviewed HUD staff from the Miami OPH, and reviewed the information and
documents obtained from HACFM to support its sources of funds for the construction of the new
administration building and for the purchase of furniture and equipment.

We conducted the inspection in accordance with the Quality Standards for Inspections issued by
the President’s Council on Integrity and Efficiency.

                                                RESULTS

I. Could HACFM use ARRA funds to construct a new administration building?

Yes. The construction of a new administration building is an eligible use of ARRA and fiscal
year capital funds per HUD regulations and guidance. 1 At our request, HACFM provided the
sources of funds used for the construction of the new administration building, which is outlined
below.
                                                                                          2
                 ARRA capital fund (formula grant)                         $2,019,810
                 Fiscal year 2008 capital fund                              $625,000
                 Fiscal year 2009 capital fund                              $476,139
                 HOPE VI demolition only                                      $36,000
                 Total amount budgeted for construction                    $3,156,949
                 Total final construction cost                             $3,023,367
                                                                                          3
                 Budget amount versus final cost (excess)                   $133,582

1
  Notice PIH-2009-12( HA); PIH Low-Rent Technical Accounting Handbook 7510.1; Section 9 of the United States
Housing Act of 1937; 24 CFR Part 990; and American Recovery and Reinvestment Act of 2009.
2
  This amount is exclusive of HACFM’s administration fee of $200,000.
3
  According to HACFM, the FY 2009 budget line item for the administration building will be reduced and the
excess will be budgeted to other PHA projects.

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Except for the eligible demolition costs funded from HOPE VI, the construction costs for the
new administration building came from capital funds and were charged to the budget line item,
Account 1470-Non Dwelling Structure. This was reported to HUD on HACFM’s annual
statements for ARRA, and fiscal years 2008 and 2009 capital funds. We interviewed the Miami
OPH director, senior engineer, and HOPE VI grant manager for HACFM who all stated that the
construction costs were an eligible use of ARRA and fiscal year capital funds.

We verified that HACFM was not considered a troubled PHA by HUD, and the plan to construct
a new administration building was included in HACFM’s Five-Year Capital Fund Action Plan
submitted to HUD. Furthermore, as stated in HUD’s additional guidance to Notice PIH 2009-12
(HA), Information and Procedures for Processing American Recovery and Reinvestment Act
Capital Fund Formula Grants, ARRA funds are restricted for public housing rental and
homeownership units and non-dwelling structures. The administration building is considered a
non-dwelling structure according to the PHA’s Chart of Accounts 4 provided in HUD’s
accounting guidelines. The Miami OPH staff stated that headquarters staff were well aware of
HACFM’s activities, plans, and use of ARRA funds, and did not take any exceptions.

II. Did HACFM use the ARRA funds to purchase furniture and equipment for the new
    administration building? If yes, was this an eligible activity?

No. HACFM did not use any ARRA funds to purchase furniture and equipment for the new
administration building. All payments to the vendors for the purchase of furniture and equipment
were processed through HACFM’s PHA operating account. The total disbursements, in the
amount of $317,595.88, from the PHA operating account were reimbursed through the following
sources of funds:

                  Remaining asset - repositioning fee (AMP 06)           $210,743     66%
                  Housing Choice Voucher                                  $51,710     16%
                  Fiscal year 2009 capital fund                           $55,143     18%
                  Total cost of furniture and equipment                  $317,596    100%

      •   Remaining Asset - Repositioning Fee (ARF): This represents the transition funding
          remaining in an asset management project (AMP), where the old administration building
          was located. According to the Miami OPH staff, there is nothing contained in the current
          HUD regulations and guidance that prevents a housing authority from utilizing the
          remaining ARF for other eligible low rent activities.

      •   Housing Choice Voucher: The amount charged to the Section 8 program was based on
          the actual cost of the furniture and equipment items assigned to the Section 8 offices and
          rooms in the new administration building.

      •   Fiscal Year 2009 Capital Fund: This amount represents the cost of building a high
          density filing system which is a structural component of the new administration building.
          This amount was included as part of the construction cost of the new administration

4
    PIH Low-Rent Technical Accounting Guide 7510.1, Chart of Accounts.

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        building and was paid by LOCCS (Line of Credit Control System) as non-dwelling
        structure.

Based on research of HUD regulations and guidance, 5 and review of vendor invoices, journal
vouchers, and other documents provided by HACFM, we took no exceptions to the source of
funds used for the purchase of furniture and equipment.




5
 Notice PIH-2009-20 (HA); Frequently Asked Questions (FAQ), Financial Reporting Under the New Operating
Fund Rule, June 27, 2008; Calculation and Submission of 2007 Operating Subsidy, Frequently Asked Questions
(No. 2), September 8, 2006; and 24 CFR 990-190.

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