Last week I reported good news about the new CARE initiative
, a program where government is actually working effectively and efficiently – some would say a rare win. This week, I’m reporting an area where our city has fallen well short of the mark.
The City of Modesto has been a Housing and Urban Development (HUD) entitlement city for over twenty years. During that time, it has successfully managed over $70 million in HUD program funding, awarding grants to thousands of recipients through such federal programs as the Community Development Block Grant (CDBG), HOME Investment Partnership (HOME), and Emergency Solutions Grants (ESG). While we have been successful in delivering projects, the City has struggled with the administration of these grants, as mandated by HUD rules and regulations.
As the first stop for federal funding, the city routinely is audited by the Office of the Inspector General (OIG) to ensure proper procedures and policies are in place for the utilization of these funds. The city understands it is critical that standards are in place for the use of these federal funds, and we know the residents further expect that these standards are indeed followed.
In September 2017, the OIG notified the city it would be conducting an audit of the CDBG program, and specifically the Rehabilitation Program funds. The results of that audit have recently been shared with me, and although the city has officially responded to the audit, we have taken full responsibility of the findings and have authored a plan with solutions.
Make no mistake, the city has neglected to adequately address the complex nature of HUD federal funds with appropriate policies, staffing, and training. This has been an area of concern for some time, and not enough time and attention has been given to the city’s HUD program.
To be clear, all federal funds used to support this program have been used in accordance with HUD national objectives (in other words, the money was spent on appropriate projects). The audit has placed a spotlight, however, on the manner in which the city facilitates the timelines, agreements, environmental, and procurement components of the projects. For example, some required environmental reviews were not completed before funds were committed and spent, and several projects did not follow city procurement procedures, a deficiency discovered earlier this year.
Though the audit found several deficiencies during the time of the audit, the OIG has acknowledged that since that time, the city has made many improvements. As soon as we became aware of the deficiencies, staff immediately went to work to tighten our control. In response, the OIG “commends the City for its commitment to work with HUD to address the issues identified during the audit.”
Filling key leadership positions in the Community & Economic Development department, which oversees the HUD program, has been a challenge. The OIG acknowledges that changes and vacancies in the department created challenges, and it recognizes the City’s commitment to improving its processes, policies, and procedures. To that end, we now have new leadership in place, and will be filling the top Community & Economic Development Director position in the very near future.
Another recurring deficiency in this and past audits is in the area of procurement; the city has simply not worked hard enough to solicit the bids for work under these programs to a wide enough collection of contractors, and the city has not performed independent cost estimates to ensure work performed was at a reasonable cost. Although we appreciate the OIG’s acknowledgement of the city’s effort to fix these problems, I know there is much work to be done in this area in order to fully grasp the procedures necessary for a successful HUD program.
Often a spotlight on the city’s practices is a difficult, yet necessary component of process improvement, and I welcome the opportunity to be transparent with our staff and community about areas we fall short of being an efficient and effective government.
I can report that our new team is diligently working toward resolution on these improvements, and specifically on the following:
- The HUD division is implementing policies, process flows, and checklists to ensure all projects meet national objectives, and follow both HUD and City of Modesto policies. For example, the city is now using the HUD Environmental Review Online System (HEROS) to ensure all documents are consistent and easy to track.
- Staff has made updates to the city’s HUD policies and procedures to reestablish a policy that ensures costs are reasonable, including an independent cost estimate and detailed scope of work for each project.
- The city’s Community & Economic Development Department has implemented an invoice checklist of items that need to be included in order for an invoice to be processed by the city’s finance department.
- Staff is updating its policies and procedures to outline the process of ensuring the city issues payment to vendors – and obtains reimbursement from HUD – only after the work is verified as complete.
- Staff training is occurring in a divisional meeting twice monthly to ensure the new policies are implemented.
- The city has updated the HUD policies and procedures to include a policy to ensure the city conducts monitoring of all sub-recipients, and selects objective sample items for monitoring.
- With the assistance of the new City Auditor, we will be conducting random audits to ensure we are abiding by the procedures we have put in place.
There will be other improvements along the way, and I look forward to alerting you to the ways this city is being more responsible with the community’s resources.
View the full Office of the Inspector General (OIG) audit report
, which includes the city’s response.