Federal Reports

We audited the Commonwealth of Massachusetts’ (State) Small Cities Community Development Block Grant (CDBG) program because the State was the largest recipient of CDBG funds in New England. HUD awarded the State more than $88 million in CDBG funding for program years 2015, 2016, and 2017. In addition, we had not audited any of the State’s community planning and development programs in the last 10 years. Our audit objective was to determine whether the State provided adequate oversight and monitoring to ensure that its grantees complied with applicable State and Federal laws and requirements regarding (1) procurement, (2) conflict of interest, (3) program delivery, and (4) indirect cost rates.The State did not always ensure that its grantees complied with applicable State and Federal laws and requirements. Specifically, grantees did not always (1) properly conduct and document environmental reviews, (2) obtain independent cost estimates, (3) properly charge program delivery costs, and (4) obtain the State’s approval for projects that exceeded program limits.These deficiencies occurred because the State did not provide adequate oversight to ensure that its grantees complied with applicable State and Federal laws and requirements. As a result, we identified more than $1.5 million in questioned costs charged to the program, and HUD did not have assurance that all costs were eligible and supported.We recommend that the Director of HUD’s Massachusetts Office of Community Planning and Development require State officials to (1) repay $665,920 in ineligible program costs; (2) support or repay $896,387 in unsupported program costs; and (3) provide additional guidance to their grantees and strengthen controls over procurement, site-specific environmental reviews, and the definition of which expenses are considered program delivery costs.

The Office of the Inspector General conducted a review of the Hydro Generation, South Western Region (Hydro SW) to identify operational and cultural strengths and risks that could impact Hydro SW’s organizational effectiveness. Our report identified strengths within Hydro SW related to (1) organizational alignment, (2) positive interactions within and outside of Hydro SW, (3) effective leadership, and (4) positive ethical culture. However, we also identified risks that could hinder Hydro SW’s effective execution and its continued ability to meet its responsibilities in support of the PO mission. These were comprised of risks related to (1) inadequate resources including training, materials, and staffing and (2) perceptions of upper management support including spending and lack of hydro experience.

To evaluate internal controls over the accounting and reporting of administrative costs and determine whether the administrative costs claimed by the District of Columbia Disability Determination Division (DC-DDD) for Fiscal Years (FY) 2016 and 2017 were allowable and properly allocated.

Amtrak (the company) contracted with the independent public accounting firm of Ernst & Young LLP to audit its consolidated financial statements as of and for the fiscal year then ended, September 30, 2018, and to provide a report on internal control over financial reporting and compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters, which they issued on January 28, 2019.1 Because the company receives federal financial assistance, it must obtain an audit performed in accordance with U.S. generally accepted government auditing standards.The contract also required Ernst & Young to perform a Single Audit of the company’s federal financial assistance for the fiscal year ended September 30, 2018, in accordance with the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The objective of the Single Audit was to test internal control over compliance with major federal program award requirements and determine whether the company complied with the laws, regulations, and provisions of contracts or grant agreements that may have a direct and material effect on its major federal programs.

A review by the Office of Inspector General (OIG) did not identify evidence to corroborate allegations that a Transportation Security Administration (TSA) supervisor at the Orlando airport directed TSA air marshals or other TSA personnel to use behavior detection techniques to racially discriminate against travelers between 2005-2010. This review was requested by members of Congress based on allegations made in the news media by former members of TSA’s Federal Air Marshal Service (FAMS).In a letter to Rep. Bennie G. Thompson, Chairman of the House Committee on Homeland Security, Rep. Val Butler Demings, Rep. Bonnie Watson Coleman and Rep. Darren Soto, the OIG reported that apart from the testimony of the three complainants, it did not identify any additional evidence that substantiated the allegations. During the course of the review, OIG found no previous record of similar complaints against the TSA supervisor. Although some witnesses relayed other prior instances of alleged racial profiling in the behavior detection program, none of the approximately 30 current and former personnel OIG interviewed confirmed the complainants’ specific allegations. TSA has since eliminated the behavior detection officer position, and has largely stopped referring travelers for additional screening using behavior detection techniques.

We issued this to report internal control weaknesses, noncompliance issues, and unallowable costs identified in the single audit to the Social Security Administration (SSA) for resolution.

We audited the Charlottesville Redevelopment and Housing Authority’s use of public housing operating and capital funds because (1) we received a hotline complaint alleging that the Authority mismanaged its procurement activities and improperly awarded an internet services contract for more than $200,000 without receiving competitive bids and (2) we had never audited the Authority. Our audit objective was to determine whether the Authority procured products and services using U.S. Department of Housing and Urban Development (HUD) operating and capital funds in accordance with applicable procurement requirements.Although the allegation that the Authority improperly awarded an internet services contract for more than $200,000 without receiving competitive bids had no merit, the allegation that the Authority mismanaged its procurement activities had merit. The Authority did not follow procurement requirements for acquiring products and services totaling $728,516 using operating and capital funds. It also did not execute appropriate written agreements for some services it received. These conditions occurred because the Authority (1) lacked controls to ensure that it complied with Federal, HUD, and State procurement requirements and its own procurement policy and (2) misinterpreted Federal procurement requirements. As a result, HUD lacked assurance that the Authority purchased products and services totaling $728,516 at fair and reasonable prices.We recommend that the Director of HUD’s Richmond Office of Public Housing require the Authority to (1) provide documentation to show that it purchased products and services totaling $728,516 at fair and reasonable prices or reimburse either its Public Housing Operating or Capital Fund from non-Federal funds for any amounts that it cannot support, (2) provide documentation to show that it had contracts for dumpster rentals and pest control services or reprocure these services, (3) obtain written agreements with the originating public bodies for its ongoing awards procured through intergovernmental agreements or reprocure these services, and (4) develop and implement controls to ensure that it complies with all applicable procurement requirements. We also recommend that the Director of HUD’s Richmond Office of Public Housing provide technical assistance to the Authority to ensure that it understands Federal procurement requirements, including the proper use of intergovernmental agreements.