Audit finds $450K repaid to HUD
BY LINDELL JOHN KAY
Tuesday, May 14, 2019
Due to turnover, inadequate administration and lack of oversight, Rocky Mount has paid back nearly half a million dollars in HUD funding in the past six years — however, the city has turned a corner toward improvement, an internal city audit has determined.
The review, concluded in late April by Lori Cairo, the city's chief internal auditor, found the city to be making progress despite being short handed in the Community and Business Development Department.
"Our HUD representative indicated that we were short staffed and Internal Audit agrees," Cairo states in the April 26 report. "By having the proper staffing and policies and procedures in place to administer the grants properly, the city would be in a better position to use the HUD grant awards as intended."
Cairo presented her report to the City Council during Monday's Committee of the Whole meeting.
"What we found is good news," Cairo said.
In all, $450,000 has been repaid by the city to HUD minus $130,000 that Cairo just learned didn't have to be repaid.
Councilwoman Lois Watkins pointed out it was the current staff that corrected mistakes of previous staff.
The U.S. Department of Housing and Urban Development conducted on-site monitoring of the city's CBD Department in early August of fiscal year 2015 activities.
Not mentioned in the report is City Manager Rochelle Small-Toney's expressed relief the HUD review didn't dig deeper.
"The Auditor pulled that file and thankfully he did not pull others!! It probably would have been worse!!!" Small-Toney states in an Aug. 12 email to a city staff member.
Since the monitoring in August, community and business development staff has trained with HUD, the N.C. School of Government and a consultant.
HUD programs have many rules and regulations and without trained, experienced staff the city could be in jeopardy of losing grant funding and may be required to pay back more HUD money, according to the audit report.
"Refunds will continue to occur if the programs are not administered properly," Cairo states.
The city doesn't have a full-time compliance officer, according to the audit report.
"Adding staff who have experience managing HUD grants would be ideal," Cairo states.
CBD Department Director Landis Faulcon stated in a Sept. 7 memo that in February 2018 she met with Matthew King, director of HUD's Greensboro field office.
"According to our HUD colleagues, the city of Rocky Mount is considered a high-risk locality due to high turnover among staff, frequently missed reporting deadlines and regulatory violations," Faulcon states in the memo in which she used terms like "major problem" and "red flag issue" to describe paperwork snafus.
Cairo states in her report that on March 13 she spoke with Michael Johnson, HUD's community planning representative in Greensboro. According to Cairo's report, Johnson had no concerns regarding the resolution of the HUD review findings.
"(Johnson) mentioned that the staff went beyond HUD's requirements of responding to the findings and addressed all of the concerns that HUD had identified," Cairo said.
On Oct. 2 HUD issued a monitoring report with four findings and five concerns. HUD gave the city 30 days to reply with the city responding Nov. 5.
Cairo said the primary objective of her review was to determine the status of the HUD findings and the city's standing with HUD. To that end, Cairo and her staff interviewed city employees and HUD officials in the Greensboro Field Office.
The internal audit provided updates to the HUD monitoring report's findings and concerns.
■ HUD Finding No. 1: The city didn't have the proper agreements with Rocky Mount-Edgecombe Community Development Corp. Audit Update: On March 28, the city and CDC completed an agreement, which is awaiting HUD approval.
■ HUD Finding No. 2: The city's policies didn't include procedures to insure it complied with federal requirements. Audit Update: A new policy manual was sent for HUD review March 28.
■ HUD Finding No. 3: The city failed to include principal residency requirements in all its loan agreements. Audit Update: A revised homeowner agreement was sent to the city March 28. HUD continues to monitor situation.
■ HUD Finding No. 4: City didn't maintain records of an environmental review for an Elm Street property. Audit Update: City repaid $47,425 to HUD and sent newly created Environmental Review Policy to HUD on March 28.
■ HUD Concern No. 1: Due to staff turnover, the city couldn't locate needed documents. Audit Update: City has created a library to contain copies of all needed documents.
■ HUD Concern No. 2: The city failed to get a homebuyer to sign proper paperwork. Audit Update: Since it cannot legally force the homebuyer to sign papers, the city repaid $130,761.50 to HUD.
■ HUD Concern No. 3: Inadequate oversight of CDC. Audit Update: The city and CDC reached a new developer agreement March 28. The city will conduct a compliance visit May 1.
■ HUD Concern No. 4: The city doesn't document results of site reviews. Audit Update: The city created site review policy and site reviews are scheduled for May.
■ HUD Concern No. 5: The city's accounting system doesn't track housing activities. Audit Update: The city has developed a spreadsheet to track housing activities in the general ledger.
Cairo suggested adding the general ledger numbers to the spreadsheets.
Housing activities not being recorded in the city's general ledger was first reported in the April 14 edition of the Telegram.