We audited the City of Margate’s Neighborhood Stabilization Program (NSP) grants 1 and 3 in accordance with our audit plan to improve the U.S. Department of Housing and Urban Development’s (HUD) execution of and accountability for grant funds. In addition, HUD requested that we review this auditee because a forensic investigation initiated by the City found issues with record keeping, misappropriation of funds, and overages regarding City, State, and Federal funds. Our objective was to determine whether the City (1) administered its NSP1 and NSP3 funds in accordance with HUD requirements and (2) followed appropriate procurement procedures.
The City did not administer its NSP1 and NSP3 in accordance with program regulations. Specifically, it did not ensure that (1) services were properly procured, (2) a property acquired met the national objective to benefit income eligible households, (3) rehabilitation costs were allowable and supported, and (4) program income and properties were adequately reported in HUD’s Disaster Recovery Grant Reporting (DRGR) system. These deficiencies occurred because the City did not provide adequate oversight of the program and lacked sufficient internal controls. In addition, the former grants manager contributed to the overall mismanagement of program funds and allowed its contractors to violate regulations. As a result, it spent $811,571 on ineligible costs and could not support costs totaling $8,919.
We recommend that the Director of HUD’s Miami, FL Office of Community Planning and Development require the City to (1) repay $811,571 to the program from non-Federal funds, (2) provide support for the $8,919 in NSP funds spent on rehabilitation costs, (3) report program income and properties correctly in HUD’s DRGR system, and (4) update policies and procedures to ensure that HUD programs are properly administered.
We also recommend that the Director of the Departmental Enforcement Center initiate appropriate administrative actions and debarments against parties who contributed to the mismanagement of program funds.
Recommendations
Community Planning and Development
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Status2018-AT-1005-001-AOpenClosed$457,192.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Repay to the program from non-Federal funds the $457,192 ($380,526 $48,420 $28,246) in NSP funds spent for the construction, air conditioning, and engineering services in instances in which procurement activities were not adequately performed.
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Status2018-AT-1005-001-BOpenClosed$280,979.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Repay to the program from non-Federal funds $280,979 in NSP funds spent for property 1012 and identify and repay any additional costs spent on this property, including maintenance costs and any program income generated.
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Status2018-AT-1005-001-COpenClosed$73,400.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Repay to the program from non-Federal funds the $73,400 in NSP funds spent for mold and asbestos remediation work.
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Status2018-AT-1005-001-DOpenClosed$8,919.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Provide documentation to support the $8,919 in NSP funds spent on rehabilitation costs or repay to the program from non-Federal funds.
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Status2018-AT-1005-001-EOpenClosedClosed on September 14, 2023
Provide documentation to support a reconciliation between financial records and DRGR and report in HUD’s DRGR system the appropriate amount of program income generated from all NSP1 and NSP3 funds from the inception of the grants.
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Status2018-AT-1005-001-FOpenClosedClosed on July 20, 2023
Provide documentation to support that all NSP properties are properly classified and recorded in HUD’s DRGR system.
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Status2018-AT-1005-001-GOpenClosedClosed on September 14, 2023
Develop and implement policies and procedures to include but not be limited to oversight, effective internal controls, separation of duties, procurement, and overall administration of the program.
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Status2018-AT-1005-001-HOpenClosed$59,510.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Conduct a review of the remaining 10 properties not reviewed during our audit to ensure compliance with HUD requirements and identify and repay costs related to ineligible or unsupported activities (see appendix C).
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Status2018-AT-1005-001-IOpenClosedClosed on August 24, 2020
For Property 1504, provide documentation to support the recording in HUD’s DRGR system, the repayment of $144,004 in NSP funds and $1,120 in program income.
General Counsel
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Status2018-AT-1005-001-JOpenClosedClosed on December 12, 2018
Initiate appropriate administrative actions and debarments against parties, including the former grants manager and contractors, who contributed to the mismanagement of program funds.