BCC Meeting CliftonLarsonAllen LLP Consultant Report H.O.M.E. - - PowerPoint PPT Presentation

BCC Meeting CliftonLarsonAllen LLP Consultant Report H.O.M.E. Program Income January 14, 2014 Dwight E. Brock

TIMELINE

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In a meeting with H.O.M.E. and County HHVS representatives, the Clerk’s Office requested invoices, bank statements, and financial statements supporting program income and expenditures from both H.O.M.E. and HHVS. 03/15/11 Internal Audit again requested of HHVS invoices, bank statements, and financial statements. 03/22/11 Email from Internal Audit to HHVS requesting HUD closing statements for the purchase and sale of each house utilizing grant funds. 03/29/11

From 3/15/11 to 3/31/11, Internal Audit did not receive any requested documentation.

TIMELINE (continued)

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Internal Audit received HUD closing statements for the purchase and sale of 11 of 13 properties receiving public monies from HHVS. 03/31/11 Email from Internal Audit to HHVS requesting additional invoices supporting expenditure documentation to validate program income and property information previously discussed at March 15th meeting. 05/09/11 Internal Audit met with HHVS to discuss Management Alert dated 6/17/11. After the meeting, HHVS delivered QuickBooks summary documents provided by H.O.M.E. 06/30/11

TIMELINE (continued)

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Internal Audit received reconciliation of program income from an OMB Grant Coordinator. Grant Coordinator used QuickBooks summary ledgers provided by H.O.M.E. to complete the reconciliation, instead of detailed supporting documentation such as invoices and bank statements. 07/11/11 Internal Audit sent letter dated 07/18/11 to H.O.M.E. requesting documentation to support program income and expenditures. County Staff informed of the letter via email. 07/20/11 Email from H.O.M.E. to County Staff suggesting to disregard the letter sent by Internal Audit on 7/20/11. 07/21/11

TIMELINE (continued)

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Follow-up letter from Internal Audit to H.O.M.E. once again requesting documentation related to the expenditure of grant funds. 08/18/11 Letter from H.O.M.E. to Internal Audit via email stating copies of canceled checks supporting expenditures for 11 of the 13 properties will be provided by H.O.M.E. H.O.M.E.’s position is that all other relevant documentation has already been provided. 08/22/11 Internal Audit met with John Barlow, Vice President, and Mike Pettit, Secretary, of H.O.M.E. to discuss availability of records. Mr. Pettit suggested the requested documentation be given to Internal Audit to conclude the review. 08/25/11

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TIMELINE (continued)

Copies of some, but not even close to all, cancelled checks and related invoices hand delivered to Internal Audit by John Barlow. Internal Audit was advised by John Barlow, again, that he had provided all of the records Audit needed to complete the review. 09/22/11 Emails from Internal Audit to H.O.M.E. requesting backup for missing information; some records provided via email the same

• day. John Barlow’s e-mail from 11/08 stated he would have to

check storage for additional records, such as cancelled checks, responses to RFPs, and IRS 990s. Obtaining these records from John Barlow is like pulling teeth. 11/08/11

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TIMELINE (continued)

Records (bid documents, related proposals, and additional cancelled checks) that H.O.M.E. was willing to share hand delivered by John Barlow to Internal Audit. 12/06/11 Between 12/06/11 and 5/09/12, Internal Audit did not receive any financial records requested and therefore issued Audit Report 2011-4 citing the inability to calculate program income due to the lack of financial records. 05/09/12 H.O.M.E. provided bank statements covering grant period for “CDBG” account. These statements showed the existence of two additional bank accounts, for which we had no records. H.O.M.E. subsequently provided bank statements for these two accounts on 10/17/13 - 1 ½ years after discovery. 05/18/12

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TIMELINE (continued)

Collier County BCC approved motion directing “all officers of H.O.M.E. provide the County Manager the documentation by Friday, April 26, 2013 and the County Manager to in turn provide them to the County Clerk for auditing …”. Documentation such as bank statements, HUD statements, and invoices needed to determine program income. 04/23/13 County manager provided to the Clerk additional documentation via e-mail indicating the documentation was submitted by H.O.M.E. 04/26/13 Clerk of Courts engaged CliftonLarsonAllen LLP to perform an independent analysis of the H.O.M.E. program with specific emphasis to determine the amount of program income. 05/30/13

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TIMELINE (continued)

CliftonLarsonAllen LLP met with former H.O.M.E. Directors, Internal Audit staff, and HHVS staff to discuss preliminary results of

• analysis. H.O.M.E. offered to provide additional documentation,

including debt instruments used to purchase properties and bank

• statements. BCBE agreed to provide their subcontractor invoices

for work completed on each home to support their payments. To date, these invoices have never been received, as noted in the CliftonLarsonAllen, LLP report. 10/07/13 Internal Audit received e-mail from H.O.M.E. with a copy of a $500k LOC promissory note in the name of H.O.M.E. and guaranteed by the John Barlow Trust. 10/08/13

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TIMELINE (continued)

Internal Audit emailed letter to former H.O.M.E. Directors and HHVS staff summarizing documentation agreed to be provided during 10/07/13 meeting, including the BCBE subcontractor invoices . 10/09/13 Internal Audit received from H.O.M.E. copies of bank statements related to accounts with Bank of America and Bank of Florida, as referenced on 5/18/12. 10/17/13 HHVS provided copies of H.O.M.E. applications for $150k SHIP grant and $427k CDBG grant, as requested at the initial 3/15/11 meeting and again during 10/07/13 meeting. 10/17/13

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TIMELINE (continued)

HHVS provided Internal Audit a copy of the Initial Award Letter addressed to H.O.M.E. 10/22/13 Internal Audit received from H.O.M.E. a spreadsheet detailing the use of CDBG funds by H.O.M.E. 10/24/13 Internal Audit received from HHVS a copy of a letter dated 3/09/09 sent from Marcy Krumbine to H.O.M.E. addressing program

• income. The letter incorrectly stated “Per the sub-recipient

agreement … a portion of the CDBG funds were going to remain in the property in order to keep it affordable and the remainder was going to come back to H.O.M.E., Inc. as program income.” 10/24/13

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TIMELINE (continued)

Internal Audit received from H.O.M.E. a letter and spreadsheet dated 3/15/09 sent to HHVS documenting a plan for the use of program income and HHVS acknowledging receipt of the plan. H.O.M.E.’s original application included home buyer’s assistance, which was not approved by the Board. The amount awarded to H.O.M.E. and approved by the Board was for $427,473, which did not include home buyer’s assistance. 10/25/13

CliftonLarsonAllen LLP identified:

• Program income not returned to the County
• Insufficient Support of Construction Costs
• Potential Conflicts of Interest among H.O.M.E.

Directors

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CliftonLarsonAllen Report

Program Generated Income (PGI)

• CliftonLarsonAllen calculated $75,675 in

PGI from H.O.M.E. activities

• PGI amount is net of $427,473 used for

home-buyer assistance

• H.O.M.E. returned $644.37 to County

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Agreement - PGI

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OMB Circular A-110

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Agreement – Exhibit “A”

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H.O.M.E. Grant Application

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Project Description

• 1. Purchase or Build Home
• 2. Refurbish Home (w/ SHIP Funds)
• 3. Subsidize Home Price to Lower

Mortgage Payments

• 4. Keep Home Affordable Over Time
• 5. Cover Related Administrative Expenses
• 6. Close the Sale to Qualified Buyer

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Budget Application vs. Agreement

H.O.M.E. Application Agreement

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Incorrectly, the letter stated “Per the sub-recipient agreement … a portion of the CDBG grant funds were going to remain in the property in order to keep it affordable and the remainder was going to come back to H.O.M.E.,

• Inc. as program income.”

Unauthorized Change by Staff

Letter does not follow OMB Circular A-110 and Project Scope defined in Agreement. Staff is making decisions contrary to Board approval.

Initial request for documentation

• n 3/15/11. Letter received on

10/24/13, 2½ years after request.

CliftonLarsonAllen LLP identified:

• Program income not returned to the County
• Insufficient Support of Construction

Costs

• Potential Conflicts of Interest among H.O.M.E. Directors

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CliftonLarsonAllen Report

24 CFR Sec. 84 Procurement Standards

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Agreement - Procurement

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Insufficient Support

• f Construction Costs
• All invoices from Boran Craig Barber Engel

Construction Co., Inc. (BCBE) dated 10/25/2009. As of 12/04/13, no additional supporting documentation has been provided.

• Without supporting documentation, it is

uncertain if costs paid by Contractor were included in later invoices to H.O.M.E. (potentially double counting rehabilitation costs).

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H.O.M.E. RFP – General Contractor

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BCBE Proposal

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Absolute subterfuge of a

• document. Bid does not

include construction costs, only contractors fee (5% of the total cost

• f work). BCBE charged

$2,500 contractor’s fee for each property, even though total cost of work was less than $50,000 per property.

Insufficient Support of Costs

27 Housing Opportunities Made For Everyone, Inc. ATTACHMENT A Boran Craig Barber Engel Invoice payments w/o detail BCBE request for detail (per H.O.M.E. spreadsheets from QuickBooks) October 8, 2013 Apparent Apparent Quick Books H.O.M.E BCBE BCBE House # Address Date Check # Project # Invoice # Amount 1 4174 18th Place SW 12/02/08 5152 n/a not provided $ 837.00 1 4174 18th Place SW 12/02/08 5154 n/a not provided $ 42,227.62 1 4174 18th Place SW 12/02/08 515 n/a not provided $ 409.00 2 2082 41st Terrace SW 12/04/09 1124 28206 2820601 $ (266.00) 3 4833 21st Place 10/29/09 1112 29177 2917701 $ 32,620.00 4 1883 48th Street SW 08/21/09 1087 28214 2821401 $ 37,778.00 4 same 12/01/09 n/a 28214 2821401 $ (836.00) 5 2307 54TH Terrace SW 02/16/10 1135 29180 2918001 $ 40,798.00 6 5100 19th Ct. SW 03/22/10 5167 29185 2918501 $ 10,000.00 6 same 03/23/10 1142 29185 2918501 $ 18,239.00 7 2349 51st Street SW 10/28/09 1113 29190 2919001 $ 41,485.00 8 4473 20th Place SW 10/26/09 1114 29195 2919501 $ 38,724.00 9 2790 8th Avenue SE 08/21/09 1088 29200 2920001 $ 40,902.83 9 same 12/01/09 n/a 29200 2920001 $ (1,383.00) 10 2841 2nd Ave SE 08/21/09 1089 29205 2920501 $ 36,808.32 10 same 12/01/09 n/a 29205 2920501 $ (590.32) 11 4130 Cindy Ave 10/29/09 1115 29210 2921001 $ 31,262.00 12 4705 Orchard Ln 12/04/09 1125 29215 2921502 $ 16,078.00 13 530 10th Street NE 10/29/09 1116 29220 2922001 $ 25,707.00 Total = $ 410,800.45

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Contractor’s Statement

No way to determine if goods received, work was completed, what the work was, whether any of this work was bid, or whether BCBE did all of the work.

CliftonLarsonAllen LLP identified:

• Program income not returned to the County
• Insufficient Support of Construction Costs
• Potential Conflicts of Interest among

H.O.M.E. Directors

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CliftonLarsonAllen Report

Conflict of Interest

24 CFR Sec. 570.611

• Identifies potential conflicts of interest in the procurement of

supplies, equipment, construction, and services by recipients when engaged in activities where CDBG funds are expended.

• Paragraph (b) – Any person in a position to make decisions or gain

inside information may not have a financial interest in or benefit from contracts or subcontracts involving CDBG-assisted activities either for themselves or those with whom they have business or immediate family ties, during their tenure or for one year thereafter.

• Paragraph (c) – Applies to any person who is an employee, agent,

consultant, officer, or appointed official of the recipient or sub- recipient receiving grant funds.

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Agreement

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Conflict of Interest

CEO, CFO, & COO of H.O.M.E. each had business relationships that could be construed as a potential conflict of interest.

• CEO
• Director & President of BCBE, construction company which provided construction related

rehabilitation services.

• Resigned in December 2008, after BCBE emerged as the lowest qualified bidder. Rejoined

B.O.D. in 2010, after project activities were completed.

• CFO
• Spouse is President of Insurance Co. which was underwriter for property & builder’s risk

insurance for majority of properties purchased by H.O.M.E.

• Senior V.P. with Bank of America, responsibilities cover commercial customers. Bank of

America provided financing for one homebuyer.

• COO
• B.O.D. member of Bank of Florida - Southwest. Bank provided financing to 12 of 13

homebuyers.

• Bank of Florida - Southwest shut down in May 2010 by the Florida Office of Financial

Regulation.

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Conflict of Interest - CEO

H.O.M.E. response to CEO Conflict of Interest comment in CliftonLarsonAllen LLP report. H.O.M.E. RFP dated 11/07/08 BCBE Proposal dated 11/25/08

• Mel Engel CEO on these dates

Summary

• 1. PGI of $75,675 in CLA report
• 2. Insufficiently supported costs of $410,800
• Payments

to Boran, Craig, Barber, Engel Construction Company, Inc. (conflicted contractor) were not properly approved or sufficiently documented.

• 3. $427,473 in CDBG funds due to all identified

problems

• 4. $200,000 in SHIP funds due to all identified

problems

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Summary

Grant Awards

• CDBG = $427,473
• SHIP = $200,000

Total = 627,473 Total Construction Costs Paid to BCBE = $461,249 Percentage of Grant Funds = 73.5%

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Thank you

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