OIG AUDITS. A Grantee s Perspective. Heather Lagrone, Texas General Land Office

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1 OIG AUDITS A Grantee s Perspective Heather Lagrone, Texas General Land Office

THE PROCESS OIG notifies the grantee of an upcoming visit. Grantee notifies HUD Disaster Recovery. Grantee provides any requested pre-visit materials to OIG.

2 THE PROCESS OIG notifies the grantee of an upcoming visit. Grantee notifies HUD Disaster Recovery. Grantee provides any requested pre-visit materials to OIG. Review materials and prepare subgrantees that OIG will review; prepare subgrantees for visit. OIG comes on site for review. Exit conference. OIG issues a draft report. Grantee has an opportunity to respond with written comments.

3 THE PROCESS OIG issues a final report with grantee comments and the OIG rebuttal. Grantee and HUD Disaster Recovery determine what action, if any, is needed. HUD Disaster Recovery drafts a management decision outlining any corrective actions necessary. OIG agrees or disagrees. HUD Disaster Recovery works with the grantee to satisfy negotiated corrective actions.

4 OIG AUDIT - JULY 2014 The State of Texas Contractor Did Not Perform Adequate Hurricane Dolly Damage Inspections and Failed To Meet Critical Performance Benchmarks.

5 OIG AUDIT - JULY 2014 The State of Texas Contractor Did Not Perform Adequate Hurricane Dolly Damage Inspections and Failed To Meet Critical Performance Benchmarks. Except for assisting ineligible homes, we could not substantiate the allegations." "However, our testing showed the State s contractor did not adequately document Hurricane Dolly damages for 15 assisted homes costing $1.6 million." "Projecting the results of our statistical sample to the 700 homes that the State expects to complete by December 31, 2014, showed that the State could fund at least 84 ineligible homeowners, costing at least $8.6 million.

6 OIG AUDIT - JULY 2014 State of Texas Response The Land Office strongly disagrees with the OIG s Finding The Land Office would like to point out that there are no federal guidelines for assessing and documenting damage caused by a disaster. The only federal requirement is in the Federal Register and it states that expenses have to be related or affected by an event.

7 OIG AUDIT - JULY 2014 State of Texas Response Photographic evidence is not the only proof Texas uses to qualify a homeowner. Documentation includes a combination of: - Applicant certification of damage - FEMA or insurance award letters or data - 3rd Party Inspections - Other case-by-case information

8 OIG AUDIT - JULY 2013 The Management and Board of Commissioners of the Harris County Housing Authority Mismanaged the Authority

9 OIG AUDIT - JULY 2013 The Management and Board of Commissioners of the Harris County Housing Authority Mismanaged the Authority The Authority used a prohibited costplus-a-percentage-of-cost contract for its Cypresswood Estates housing development." "We did not consider the entire prohibited cost-plus contract to be ineligible because the Authority received goods and services under it. We only considered the plus part of it to be ineligible." "Both general conditions and overhead were ineligible markups and totaled 8% of the Federal funds in the contract, or about $720,000 ($400,000 in CDBG- DR and $320,000 in NSP funds)."

10 OIG AUDIT - JULY 2013 State of Texas Response The Land Office conducted a review subsequent to your letter and identified $337, in actual disallowable costs rather than the $400,000 identified in the HUD OIG report. The contract with the contractor was for eligible expenses that were within industry norms; the amount of federal funding was fixed.

11 OIG AUDIT - JULY 2013 HUD CPD Management Decision HUD reviewed the exhibits and concurs with the GLO s determination of the repayment amount ($337,727.01). The contract executed by the Harris County Housing Authority was a cost-plus contract and funds associated with general conditions and overhead must be repaid.

12 LESSONS LEARNED Monitor your subgrantees often; be present at OIG reviews. Document every process and all eligibility guidelines. Keep HUD Disaster Recovery informed of how audits are progressing; include them in the exit if possible. Know that OIG and CPD often have different interpretations of the same regulations. Take the opportunity to respond to every audit. Continue discussions if the OIG is not understanding your response or process. Give your leadership a heads up; OIG audit titles make great headlines. Help HUD Disaster Recovery draft their management decision and work with them toward resolution. This is a long process and can take years to resolve; document the details so anyone can pick it up to continue the effort.

Monitoring of Grantees by HUD

U.S. Department of Housing and Urban Development Monitoring of Grantees by HUD Tuesday, May 3, 2011 2:00 PM 4:00 PM Community Planning and Development Introductions Jessie Handforth Kome, HUD John Laswick,