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HUD Ltr CDBG on-site reviewU.S. Department of Housing and Urban Development Nebraska State Office Executive Tower Centre 10909 Mil[ Valley Road Omaha, Nebraska 68154-3955 April25,2002 Honorable Terrence M. Duggan Mayor of Dubuque City Hall 50 West 134 Street Dubuque, IA 52001-4864 Dear Mayor Duggan: This letter serves as a follow-up to the March 5th through the 7th on-site review of your Community Development Block Grant (CDBG) program, conducted by Mr. Tim Severin and Mr. Barry Linstrom from the Nebraska State Office of the Department of Housing and Urban Development (HUD). As a result of the review, there are five findings and four concerns relating to regulatory requirements of the CDBG program. Each finding and concern is followed by a recommended corrective action. Please provide a written response to our office within 30 days of the date of this letter. We appreciate the cooperation and courtesies extended by the city staff during the review. If further information is necessary regarding tlfis letter, please contact Mr. Barry Linstrom, Public Trust Specialist, at 402/492-3161. Sincerely, Gregory A. Bevirt Director Community Planning and Development Division Cc: Mr. Bill Baum Mr. David Harris MONITORING REPORT Program Reviewed: Date Review Conducted: Program Staff Consulted: Community Development Block Grant March 5, 6 and 7, 2002 Mr. David Harris, Mr. Bill Baum, Ms. Aggie Kramer, Ms. Jolene Patterson, Ms. Pam Myhre The review centered around activities that had been reported on the Consolidated Annual Performance and Evaluation Reports (CAPERS) for fiscal years ending June 30, 2000 and 2001. These activities included Housing Code Enforcement (activity # 195 and #247), Problem Properties Management (#193 and #244), Washington Tool Library (#212 and 263), Child Care Resource and Referral (#210 and #261) and Economic Development Services and Staff (#203 and #255) for the respective years noted above. We also reviewed files for Little Cloud Girl Scout Paid Leadership (#228) for fiscal year ending June 30, 2000; and and Dubuque Dispute Resolution Center (#268) for fiscal year ending June 30, 2001. Overall, the files were well organized and contained adequate documentation to review the activities in question. City Staff was very cooperative and obtained further information for our review from City Hall or the sub-grantee when necessary. The following details the findings and concerns that resulted from the review: Finding No. 1 Housing Code Enforcement expenses, which are classified as meeting the Low- and Moderate Income National Objective, are being charged to the CDBG program for inspections being conducted in other than low- and moderate-income areas. Standard The regulations at 24 CFR 570.208(a)(1) state area benefit activities will be considered to benefit low- and moderate-inoome (L/MI) persons when the benefits are available to all the residents in a particular area, where at least 51 percent of the residents are L/MI persons. Corrective Action Provide assurance that city code inspectors will charge time to the CDBG grant only for inspections conducted in L/MI income areas of the city. Finding No. 2 Little Cloud Girl Scouts were reimbursed for leadership expenses, which the city was not able to document as serving troop members in L/MI areas. Standard Same as for Finding No. 1. Narrative An attempt was made to start Girl Scout troops in L/MI areas of the city. Schools were identified that were in or bordered on L/MI areas. In order to get these troops started, it was deemed necessary to pay troop leaders initially until volunteers came forward to take over the troops. The city, as a public service activity, provided CDBG funds to Little Cloud Girl Scouts for three schools. The three schools were Audubon, Prescott/Fulton and Marshall. Because the attendance boundaries of these schools varied from the L/MI area boundaries, it could not be verified that at least 51% of the children attending were L/MI. We choose to allow information the schools maintained on "no- or reduced-cost lunches" to serve as verification of the percent of L/MI children attending each school. Utilizing this verification method, it was determined that the Prescott/Fulton combined enrollment was over 80% L/MI, Audubon was 69%, but Marshall was only 37%. Corrective Action During our on-site review, city staff discussed the preliminary results of our review with personnel from the Little Cloud Girl Scout Council. They agreed to reimburse the city for the CDBG funds paid for Scout Leaders at Marshall School. The repayment of these funds will serve to resolve this finding. Please provide evidence that repayment has occurred. Finding No. 3 The city is implementing a program, classified as interim assistance, which provides snow removal, weed clearance and minor repairs to vacant/abandoned buildings with CDBG funds. The activity does not meet the definition of an interim assistance activity. Standard The regulations at 24 CFR 570.201(f) limit activities carried out as interim assistance to two subcategories. The first subcategory covers limited improvements to a deteriorating area as a prelude to permanent improvements. The activities that may be carried out with CDBG funds under this subcategory are limited to: o The repair of streets, sidewalks, public buildings, parks and playgrounds, and publicly- owned utilities. The execution of special (i.e., beyond that normally provided) garbage, trash, and debris removal, including neighborhood cleanup campaigns. The second subcategory covers activities to alleviate an emergency condition. To qualify under the second subcategory, the grantee's chief executive officer must determine that emergency conditions threatening the public health and safety exist in the area and require immediate resolution. The activities that may be carded out with CDBG funds under this subcategory are limited to: o activities eligible under the first subcategory, except for the repair of parks and playgrounds; o clearance of streets, including snow removal and similar activities; and o improvements to private properties. Corrective Action The city must provide certification that it will not use CDBG funds to implement this activity as interim assistance in the future. Finding No. 4 The city is funding the Washington Neighborhood Tool Library as a public service serving individuals located in an area which has been designated as blighted. City records indicate that the activity is providing service to areas outside of the blighted area defined by the city. Standard The regulations at 24 CFR 570.208(13)(1) restrict the assisted activity to addressing conditions which contributed to the deterioration of the area. Corrective Action The city must provide certification that it will limit the activity to the blighted area that has been designated under state or local law. As an alternative, the city could redefine the project's service area, limiting the area to census tracts that are primarily low- and moderate-income (LMI) households. Fifty-one percent or more of the households in the service area would be required to be LMI households. This would require the activity to be classified as benefiting a LMI area, however, it would still require the activity to be restricted to a specific area. If the city would like to follow this alternative, please provide a listing of the new service area, evidence documenting the area is primarily LMI households, and a certification that the city will limit the activity to the defined service area. Concern The Washington Tool Library receives donations from individuals using tools from their inventory. Based upon discussions with city staff, the donations are not currently being considered program income. The donations should be considered program income as the project is funded entirely with CDBG funds. Recommendation The city should notify the subgrantee of the status of the donations. As program income, the donations should be used to offset expenses of the program prior to the subgrantee requesting additional CDBG funding. Finding No. 5 The city is funding a project to provide child care resources and referrals as a public service. City records indicate that the activity is drawing funds in advance of need. The agreement between the city and the subgrantee allows the subgrantee to make quarterly draws of equal amounts. Standard The regulations at 24 CFR 85.21(b) requires methods and procedures to minimize the time elapsing between the transfer of funds and disbursement by the subgrantee. The regulations at 24 CFR 85.41(c)(3) requires the grantee to take action to reduce excess balances in the hands of subgrantees in excess of three days' need. Corrective Action Provide written assurance that the city will monitor the draws of recipients to prohibit the drawing of CDBG funds in advance of need. We would recommend that the city revise its agreement with subrecipients to use a reimbursement basis for payments. Concern The subrecipient files for the tool library and child care resources did not contain any evidence that the activities had been monitored for program compliance. The city staff indicated that the city's policies required monitoring of subrecipients at least once a year. Recommendation The city should monitor their subrecipients according to outstanding policy. The subrecipient files should contain documentation of the monitoring visit. A letter announcing the monitoring visit, review notes/checklists, and a follow-up letter discussing the outcome of the visit, at a minimum, should be included in the file. Concern In looking at files during our review, it was determined that the funding for the Dubuque Dispute Resolution Center should be classified as a public service activity instead of an administrative cost. We advised stuff of our concern that this activity was misclassified, and they stated that in the future, funding for the Dubuque Dispute Resolution Center would be funded as a public service activity. Recommendation In the future, the Dubuque Dispute Resolution Center should be classified as a public service activity. Concern In reviewing the charges to the category Economic Development Services and Staff, we noted that over $90,000 per year was charged to this category for the two years reviewed, with no discernable economic development activities being funded. The staff explained that numerous staff hours could be incurred in attempting to assist a business with CDBG funds, only to have the business choose to seek a loan elsewhere, or not to pursue the changes for which the loan was intended. Recommendation Any staff time spent working on potential CDBG loans, whether successful or not, should be documented and a detailed file maintained. Other Comments During our site visit, we had concerns that property acquired in the Ice Harbor area of the city, part of which was paid for with CDBG funds, was a change in use of the property per 24 CFR 570.505, and that a pro-rata share of the fair market value of the land would have to be reimbursed to the line-of-credit. In order to make an informed decision regarding regulatory compliance, we asked the city to provide further background information on the purchase and subsequent use of the land. Upon receipt of this information, and in consultation with headquarters' personnel, we have determined that since there was an Urban Renewal Plan in effect for this area, and since the activity was classified as Slum and Blight Removal on an area basis, the city has complied with regulatory requirements. Standard The regulations at 24 CFR 570.208 (d) state "Where the acquisition is for the purpose of clearance which will eliminate specific conditions of blight or physical decay, the clearance activity shall be considered the actual use of the property." We have determined that as long as the city is able to document that any future activity continues to address the slum and blighting conditions, no further qualifying action is required on its part.