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We audited the State of Florida’s Housing Repair and Replacement Program (HRRP), one of the programs that the State developed to address its unmet disaster recovery housing needs because of Hurricane Irma in 2017.  We audited this program due to the large amount of Community Development Block Grant Disaster Recovery (CDBG-DR) funding allocated of $346.2 million.  Our audit objective was to determine whether the State administered its 2017 CDBG-DR funds for its HRRP effectively and efficiently.  Specifically, we focused on determining whether the State (1) effectively used funds for eligible homeowners and properties, (2) effectively ensured that homeowners did not receive duplication of benefits, and (3) administered this housing program in a cost-efficient and prudent manner.

The State administered its HRRP effectively for the seven projects reviewed by ensuring that funds were used for eligible homeowners and properties and duplication of benefits did not occur.  However, the State did not have cost reasonableness analyses for the overhead and profit amounts paid to contractors totaling $107,036 and allowed percentages up to 65 percent of the contract price.  The State also misclassified $134,383 in activity delivery costs that were not eligible to be classified to the HRRP activity.  These deficiencies occurred because the State did not have adequate policies and procedures to ensure the cost reasonableness of overhead and profit and proper classification of expenditures.  As a result, the State could not provide assurance that disaster recovery grant funds were used in a cost-efficient and prudent manner and funds were properly classified in the reporting system for the projects and activity delivery costs reviewed.

We recommend that the Deputy Assistant Secretary require the State to (1) support or reimburse its HRRP for $107,036 in overhead and profit expenditures from non-Federal funds, review the remaining contracts executed under similar circumstances, and support or reimburse overhead and profit expenditures; (2) update policies and procedures to ensure that cost reasonableness analyses are performed on overhead and profit percentages charged by contractors for future contracts; (3) develop and implement procedures to carry out recent changes made to the State’s policy manual; and (4) train staff to ensure the proper classification of expenditures.

Recommendation Status Date Issued Summary
2022-AT-1001-001-A Open March 30, 2022 Provide support for the reimbursement to its housing program of $107,036 from non-Federal funds if justification cannot be provided to support that the overhead and profit amounts paid to the contractors were reasonable.
2022-AT-1001-001-B Open March 30, 2022 Perform a review of the remaining 453 contracts and any additional contracts issued under the old invitations to bid to ensure that overhead and profit amounts charged by contractors were reasonable. The State should either provide justification or support for the reimbursements to its housing program from non-Federal funds for the unsupported amounts.
2022-AT-1001-001-C Closed March 30, 2022 Update policies and procedures to ensure that a cost reasonableness assessment is performed on all cost elements, including the overhead and profit percentages charged by contractors for future contracts.
2022-AT-1001-001-D Closed March 30, 2022 Develop and implement procedures to ensure the execution of newly developed policies that require contractors that work on multiple programs to provide adequate support to distinguish the proper amount of time and cost spent on each program. The State should also be required to provide procedures that implement the policy changes.
2022-AT-1001-001-E Open March 30, 2022 Train staff to ensure that expenditures, including payments made to contractors, are classified to the proper project activity in the DRGR system and provide support for training conducted.