An Internal Audit Report on the OCI Self Help Center Program

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• Langue: English

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An Internal Audit Report on the
Office of Colonia Initiatives’ Self-Help Center Program
Executive Summary

The Department contracts with counties to administer the Self-Help Center Program.
Draws submitted by counties and reimbursed by the Department are not adequately
supported or in compliance with federal cost principles. The Office of Colonia
Initiatives (OCI) recently updated its policies
The Self-Help Center Programs and no longer requires counties to submit
and the Border Field Offices supporting documentation of expenditures

with their draw requests. At least one issue The Department’s Office of Colonia
was identified in each of the 12 draws tested Initiatives (OCI) is responsible for
administering the Self-Help Center that should have prevented the Department
Program. In 1995, the 74th Legislature
from reimbursing the expenditures. required the Department to establish self-
help centers in Cameron/Willacy, El Paso,
Hidalgo, Starr, and Webb counties. Self-The U.S. Department of Housing and Urban
help centers in Maverick and Val Verde
Development (HUD) has confirmed that the counties were added later. The Self-Help
Davis-Bacon Act applies to self-help center Center Program is designed to assist
individuals and families of low income contracts. The Davis-Bacon Act requires the
and very low income to finance, payment of not less than the prevailing wage refinance, construct, improve, or maintain
to workers performing construction work a safe, suitable home.
financed in whole or part with assistance
OCI operates three border field offices,
received under the Housing and Community located in El Paso, Laredo and Edinburg.
Development Act of 1974. The self-help The border field officers at these offices
are responsible for overseeing center contracts are not currently in
administration and providing technical compliance with the Davis-Bacon Act. Five assistance to the counties and the self-help
of the ten contracts reviewed (50%) do not centers.
contain the required prevailing wage language
For additional background information,
in the special conditions section of the see Appendix B.
contract. However, for the five contracts that
did contain the required language,
documentation of the prevailing wage rate could not be located in the contract files.
In addition, the Department’s self-help center contracts do not require the county to
ensure that the nonprofit administrators of the self-help centers comply with the
Davis-Bacon Act.

The Department is required to designate a certifying officer to approve the
environmental clearances submitted by counties prior to the start of construction or
rehabilitation of a property, and before costs are incurred. The Department has not
designated a certifying officer. As a result, at least one of nine contracts we reviewed
had an environmental clearance that was approved by an individual who was not
authorized to approve the clearance. In addition, the Department does not retain the
environmental clearance documentation submitted by the counties once the clearance
is approved.

The Department is also required to review and approve the counties’ environmental
clearances prior to reimbursing expenditures incurred for the construction or
rehabilitation of a home. The Department reimbursed counties for costs incurred
The Texas Department of Housing and Community Affairs – Internal Audit Division
Report # 08-1026 Page 1 December 2008
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An Internal Audit Report on the
Office of Colonia Initiatives’ Self-Help Center Program
prior to the completion of the environmental clearance. In addition, draws were
reimbursed for homes where an environmental clearance was never completed.

Other Key Points
The Department requires that certain pre-draw requirements are met prior to
reimbursing the first draw. A contract tracking sheet is used to ensure the pre-
draw requirements are met. However, the pre-draw section of the contract
tracking sheet is not consistently completed by staff. Without documenting that
the pre-draw requirements were met, the Department could reimburse a county
that has not met the requirements.

The Department uses administrative thresholds in order to limit the expenditure of
administrative funds in proportion to other funds for the self-help center contracts.
Three of the nine contracts we reviewed (33.3%) exceeded the first or second
threshold requirement. Several of the other contracts reviewed had an extremely
high rate of administrative expenditures compared to other contract expenditures.
The administration thresholds set by the Department were developed by the
Office of Rural Community Affairs (ORCA) to fit their large infrastructure
projects. Using the administrative thresholds set by ORCA means that 90% of the
budgeted administrative funds can be reimbursed to the county after the start of
construction on only one home.

The contracts between the Department and the counties for the Self-Help Center
Program identify the special conditions that are required before the Department
will release funds. The Department is not in compliance with the special
conditions related to public service policies, rehabilitation guidelines, model
subdivision rules, documentation of contractors’ registration with the Texas
Residential Construction Commission, and flood insurance approval. All of the
21 draws we reviewed reimbursed counties for their expenditures even when the
counties did not meet the required special conditions.

Two of three prior audit issues were not implemented.

Summary of Recommendations
The Department should develop minimum documentation requirements for
counties to use when submitting draw requests, and develop a draw checklist to
ensure that all draws are supported by the required documentation.

The Department should ensure that the requirement for compliance with the
Davis-Bacon Act is included in all future contracts, maintain documentation in
the contract files to support compliance with the Davis-Bacon Act, and require
counties to submit the required close-out forms prior to contract close-out.

The Department should designate a certifying officer for the Self-Help Program’s
environmental clearances to ensure that only approved staff signs off on
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An Internal Audit Report on the
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environmental clearances, and retain copies of all environmental clearances after
approval.

The Department should ensure that all environmental clearances are received and
documented prior to the start of construction and before expenses are incurred and
verify that all required corrective actions were taken prior to the payment of
draws.

The Department should ensure that the contract tracking sheet is completed for
each contract, and that all pre-draw requirements are met prior to reimbursing the
first draw.

The Department should develop its own administration thresholds that reflect a
reasonable expenditure of funds for the Self-Help Center Program.

The Department should ensure that all required special conditions are included in
the contracts and enforce them prior to reimbursing counties for their expenses.


Summary of Management Responses
Management generally concurs with the findings and appreciates the thorough review of
the program. Programmatic changes to address several of the findings are already
underway. To the extent steps have not already been taken to mitigate the noted risks,
they will be integrated into the programs’ procedures.
The Texas Department of Housing and Community Affairs – Internal Audit Division
Report # 08-1026 Page 3 December 2008
An Internal Audit Report on the
Office of Colonia Initiatives’ Self-Help Center Program
Table of Contents

Chapter 1
The Processing and Approval of Draws Should be Based on Appropriate
Documentation..................................................................................................5
Chapter 2
The Department Should Comply with the Requirements of the Davis-
Bacon Act.........................................................................................................10
Chapter 3
Environmental Clearances Should Be Completed and Approved by
Authorized Staff................................................................................................12
Chapter 4
The Department Should Comply with All Contract Requirements...........16
Chapter 5
The Department Should Ensure that Counties Comply with All Reporting
Requirements....................................................................................................21
Appendix A
Objectives, Scope and Methodology..........................................................23
Appendix B
Background..........................................................................................