We audited the Municipality of San Juan’s HOME Investment Partnerships Program (HOME). We selected the Municipality for review as part of our strategic plan based on the large amount of HOME funds approved. The objectives of the audit were to determine whether the Municipality met HOME program objectives and its financial management system complied with U.S. Department of Housing and Urban Development (HUD) requirements.
The Municipality disbursed more than $3.48 million for four activities that showed signs of slow progress without assurance that the activities would generate the intended benefits. In addition, it failed to ensure that more than $2.49 million of a community housing development organization’s proceeds was used for housing efforts. The Municipality also disbursed more than $766,000 for two activities that were not carried out and failed to reprogram more than $1.14 million in unexpended HOME funds for these terminated activities. As a result, HUD had no assurance that funds were used solely for eligible purposes and that HOME program objectives were met.
The Municipality’s financial management system did not support the eligibility of more than $2.3 million in disbursements and allowed the use of more than $2.2 million for ineligible expenditures. In addition, it failed to disburse more than $2.8 million in HOME funds in a timely manner and did not account for $14,732 in HOME receipts. As a result, HUD lacked assurance that funds were adequately accounted for, safeguarded, and used for authorized purposes and in accordance with HUD requirements.
The Municipality did not monitor the accuracy of commitments and other information reported in HUD’s Integrated Disbursement and Information System. It reported to HUD more than $8.7 million in HOME commitments without executing written agreements and failed to reprogram and put to better use more than $1.6 million in unexpended HOME funds associated with terminated activities or for which additional disbursements were no longer needed. In addition, it provided inaccurate information on the amount of program income generated, amount of funding awarded, and program accomplishments. As a result, HUD had no assurance that the Municipality met HOME objectives, commitments, and disbursement requirements.
We recommend that HUD determine the eligibility of more than $4.8 million disbursed from HOME funds on activities that showed signs of slow progress and for unsupported program costs. HUD should require the Municipality to reimburse the HOME program more than $3 million for ineligible project costs and activities that failed to meet program objectives. HUD should also require the Municipality to recapture or reprogram and put to better use more than $11.3 million in unexpended obligated funds, overstated commitments, and unexpended HOME funds maintained in its local bank account.
We also recommend that HUD require the Municipality to develop and implement an internal control plan to ensure that (1) its HOME-funded activities meet the program objectives, (2) its HOME program has a financial management system that complies with HUD requirements, and (3) the program has controls and procedures which ensure that HOME requirements are followed and accurate information is reported to HUD. In addition, HUD should reassess the Municipality’s annual commitment compliance and recapture any amounts that have not been committed within HUD-established timeframes.
Recommendations
Community Planning and Development
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Status2011-AT-1018-001-AOpenClosed$2,399,428.00Questioned 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.
Determine the eligibility of the $2,399,428 disbursed for four projects with signs of slow progress and reevaluate the feasibility of the activities. Total disbursements of $3,483,086 were adjusted to consider $713,008 questioned in recommendation 2C and $370,650 in recommendation 2A. The Municipality must reimburse its HOME program from non-Federal funds for activities that HUD determines to have been terminated.
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Status2011-AT-1018-001-COpenClosed$766,480.00Questioned 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.
Require the Municipality to reimburse its HOME program from non-Federal funds $766,480 for disbursements associated with terminated activities that did not meet HOME objectives.
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Status2011-AT-1018-002-BOpenClosed$46,213.00Questioned 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.
Require the Municipality to submit supporting documentation showing the allocability of $39,338 and any additional payroll costs charged to the HOME program between July 1, 2009, and June 30, 2011, associated with the three employees performing other functions not related to the program, or reimburse the program from non-Federal funds.
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Status2011-AT-1018-002-COpenClosed$4,629,347.00Questioned 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.
Require the Municipality to reimburse the HOME program from non-Federal funds $2,263,799 paid for ineligible costs.
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Status2011-AT-1018-002-DOpenClosed$2,854,395.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Require the Municipality to put to better use $2,854,395 associated with unexpended funds maintained in its local bank account.
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Status2011-AT-1018-002-FOpenClosed$17,081.00Questioned 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.
Require the Municipality to update its accounting records and ensure that receipts and expenditures are properly accounted for, are reconciled with HUD’s information system, and comply with HUD requirements.
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Status2011-AT-1018-002-GOpenClosed
Require the Municipality to develop and implement a financial management system in accordance with HUD requirements, including that HOME funds can be traced to a level which ensures that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes and that funds are disbursed in a timely manner.