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HomeMy WebLinkAboutR-00-0625J-00-733 7/20/00 RESOLUTION NO. 0 0 — A RESOLUTION OF THE MIAMI CITY COMMISSION AUTHORIZING A SETTLEMENT CONSISTENT WITH THE FINDINGS OF THE AUDIT REPORT PREPARED BY OFFICE OF THE INSPECTOR GENERAL ON THE Y OF MIAMI COMMUNITY PLANNING AND DEVEL ENT PROGRAMS FOR THE YEARS 1995 AND 1996 SUE MARCH 26, 1998, BY REPAYING . INEL EXPENDITURES IN THE AMOUNT OF $4 69 THE CITY OF MIAMI COMMUNITY DEV LO GRANT (CDBG) AND HOME INVESTM PARTN HI (HOME) PROGRAM ACCOUNTS AS IFIED B W; SAID SETTLEMENT TO INCLUD T RANSFE OF $558,349 FROM.THE GENERAL 1,05 47 OF 1976 GENERAL OBLIGATION H NG DS TO THE CDBG ACCOUNT $2.6 IO 1976 GENERAL OBLIGATION DS TO THE HOME ACCOUNT, FUR ER OC 00,000 OF 1976 GENERAL OBLI ON SING BOND FUNDS TO PROVIDE REQUIRED OC N PAYMENTS IN ACCORDANCE F L GULATIONS FOR TENANTS OF AJ64011INFIRTHWE N ESTATES PROJECT. e Inspector General issued an Audit Repot on- the _of Miami Community Planning and ch 26, 1998; and tie �5. Department of Housing and Urban (HUD) notified the City in writing of its proposed jte findings of said Audit Report; and Rescinded by R-00-697 0 WHEREAS, HUD has determined that ineligible expenditures of $4,212,696 must be returned by the City of Miami to the Community Development Block Grant (CDBG) or Home Investment Partn (HOME) program, as appropriate; and WHEREAS, the ineligible costs include 7,5 of inappropriate administrative costs charged to Sup men Disaster Grant; and WHEREAS, the ineligible costs of unsupported CDBG costs relating to the t Alloca n P an; and WHEREAS, the ineligible cost ncl $68 270 of CDBG funds for the uncollected loan DC Two on Inc.; and WHEREAS, the ineligi e is $368,077 of CDBG funds for past due interest la t ees forgiven for the Ideal Rehab and Liberty Ci Improveme orporation loans; and WHEREAS, the neligiblet costs include $2,600,000 of inappropriat and hwestern Estates Housing Project; W EAS�in a tion to the ineligible expenditures re ng 'AA& t rthwestern Estates Project, the City is req by F eral regulations to continue the payment of ocat xpenses relating to former tenants of the tern Estates Project for another two years and it is estimated that an additional $500,000 will be needed to meet this igation; and Rescinded by R-00-697 Page 2 of 4 0 0 WHEREAS, $4.4 million from the City's Public Facilities Fund, 1976 G.O.B. Project ("Housing Project Fund") has been identified to meet the aforementioned obligations for h projects; and, funds in the amount of $558,349 from e ral Fund will be used to meet the aforementioned obli ions r n housing projects; NOW, THEREFORE, BE IT RESOLVED BY OF MIAMI, FLORIDA: It Section 1. The rec' al; Preamble to this Resolutio incorporated as if f y set for Section 2. settleme the Audit Re rep by E on the Cit f Mmmunity for tear 995 a 1996 is; d contained in the -e dopted by reference and this Section. onsistent with the findings of )ffice of the Inspector General inning and Development Programs �d March 26, 1998. by repaving in ible xpeTNINWes in the amount of $4, 212, 696 to CDBG and HOM am a unts as specified below is authorized. Se o Funds in the amount of $558,349 from the and and $1,054,347 of 1976 General Obligation Housing Bond Funds are authorized to be transferred to the City of Miami 6BG account. 0� 6 Rescinded by R-00-697 Page 3 of 4 Section 4. Funds in the amount of $2.6 million of 1976 General Obligation Housing Bond Funds are authorized to be transferred to the City of Miami HOME account. Section 5. Funds in the amount of $500'000 1976 General Obligation Housing Bond Funds are allocate o ide required relocation payments in accordance ith ede regulations for tenants of the Northwestern Estat ect. - Section 6. This Resolution sh me e ctive immediately upon adoption and signature the May PASSED AND ADOPTED this JOE CAROLLO, MAYOR ec. 2-36, since the Mayor did not indicate epmrovdl of 7ps, he designated pl P vided, said legisiatit� of ten (10 day rom the d to of Comm' tion Mayorpercisin� a , tom_ CORRECTNESS 1 If the Mayor does not sign this Resolution, it shall become effective at the end of ten (10) calendar days from the date it was passed and adopted. If the Mayor vetoes this Resolution, it shall become effective immediately upon override of the veto by the City Commission. Rescinded by R-00-697 -- Page 4 of 4 0 . 0 CITY OF MIAMI, FLORIDA 19 A INTER -OFFICE MEMORANDUM To : The Honorable Mayor and Members of DATE: �l�E! 2(? FILE: the City Commission SUBJECT: Settlement Relating Audit Report of March 26, 1998 Issued by the Office of the Inspector General FROM: REFERENCES: os A. Gime z City Commission Meeting 2ity CManager ENCLOSURES: of July 20, 2000 RECOMMENDATION: It is respectfully recommended that the City Commission adopt the attached resolution authorizing a settlement to the findings of the Audit Report on the City of Miami Community Planning and Development Programs for the years. 1995 and 1996 issued March 26, 1998 by the Office of the Inspector .General; said settlement to include the return of $1,612,696 to the Community Development Program (CDBG) account and $2,600,000 million to the HOME Investment Partnership (HOME) Program account, with $3,654,347 of the $4,212,696 repayment total to repaid from 1976 General Obligation Housing Bond Funds and $558,349 from the General Fund; further allocating $500,000 of 1976 General Obligation Housing Bond Funds to provide required relocation payments for the Northwestern Estates Project. BACKGROUND: The Administration is excited to report that the U.S. Department of Housing and Urban Development (HUD) has proposed a settlement to the Audit Report on the City of Miami Community Planning and Development Programs issued March 26, 1998 by the Office of the Inspector General (OIG). For the last two (2) years, the primary focus of the Department of Community Development has been to address the findings and complementary issues relating to the Audit Report. As issued, the Audit Report identifies approximately $21.3 million of questioned costs, which represented an obvious fiscal burden on a City that was in the midst of recovering from financial crisis. More importantly, the City faced the grim reality that the continuation of its HUD grant programs, intended to address the immediate needs in the City's poorest neighborhoods, was being threatened. The settlement proposal, if approved, will close the remaining unresolved ,financial findings in the Audit Report and is a testimony that the Administration has moved progressively forward in alleviating the management concerns identified in the Report. The repayment of $4,212,696 represents approximately 20% of the questioned costs identified in the Audit Report and is the result of proactive administrative actions to satisfy HUD's • management concerns or a justification of costs that had been previously questioned by the OIG. The HUD letter confirms the following disallowed costs that must be repaid by the City: Disallowed Cost Cate or Funding Source Original Amount of Disallowed Costs Final Amount'of Ineli ible Costs Finding 1- City Inappropriately Sent $5,688,606: 1A - Grant administrative expenses transferred between years CDBG $ 2,133,797 -0- 0 -transferred 1B - Exceeded 20% administrative cap CDBG $ 484,999. .0 - 0-1C IC - Unsupported Costs of Cost Allocation Plan CDBG $ 2,518,210 $510,817 1D - Administrative Costs Charged to Supplemental Disaster Grant CDBG $ 551,600 $ 47,532 TOTALS FOR FINDING 1 . 5,688,606 558 349 . Finding 2 - Defaulted Loan Portfolio of $10,954,347 2A - Uncollected Loan for DC Two Exponent, Inc. CDBG $ 686,270 $686,270 2B - Past Due Interest and Late Fees Forgiven for the Ideal Rehab, Inc. and Liberty City Improvement Corporation Loans CDBG $ 368,077 $ 368,077 2C - Defaulted Loan Portfolio CDBG $9,900,000 -0-1 TOTALS FOR FINDING 2 L01954,347 $1,054,347 Finding 3 - City allocated funds to a project that was not feasible (Northwestern Estates) HOME $ 4,750,000 $2,600,000 TOTALS FOR FINDING 3 4,750,000 2 600 000 TOTALS All FINDINGS $21,392-();l $4,212,696 �O-- 6400 The Federal Government provides the following three (3) options to reimburse the ineligible expenses: 1. Option 1 - Payment of non -Federal funds directly to HUD for credit to the City's CDBG line of credit account or HOME account, as appropriate. 2. Option 2 - Installment payment by a reduction in future allocations to the City with three (3) years allowed to fully pay the obligation. 3. Option 3 - An internal transfer of non-federal funds by the City to its Community Development or HOME account, as appropriate. The Administration recommends that the City Commission approve Option 3 to repay the ineligible expenses, which can be achieved through an internal transfer of funds within the appropriate CDBG or HOME account rather than making a direct payment to HUD, as outlined in Option 1. While Option 2 provides an opportunity to spread payments over a three (3) year period through a reduction in the entitlement grant, it also eliminates the City's ability to reprogram the disallowed expenditures to otherwise eligible activities. This has a triple negative impact because, not only does it eliminate the City's ability to reprogram the ineligible costs for eligible activities, but it also reduces the .amount of future funds available for allocation to the City's depressed neighborhoods as a result of the decreased funding level and prohibits the City from competing for other HUD grants since the findings will not be closed until the final payment is received by the Federal Government. Execution of Option 1 or 3 will close the Audit Report and enable the City to once again compete for HUD grants, will not affect future entitlement grants and will enable the City to reinvest the repaid funds to meet community needs. The Administration recommends that 1976 General Obligation Housing Bond Funds be used to repay the $3,654,347 of ineligible costs relating to housing expenditures. The Administration has identified approximately $4.3 million from this source that must be used for affordable housing activities. It is further recommended that the remaining non-federal share balance of $558,349 come from the General Fund. The total repayment of $4,212,696 will be transferred to the City's HOME ($2.6 million) and CDBG ($1,612,696) accounts. In addition to the ineligible expenditures relating to the Northwestern Estates Project, the City is required by Federal regulations to continue the payment of relocation expenses relating to former tenants of the Northwestern Estates Project for another two (2) years. It is estimated that an additional $500,000 will be needed to meet this obligation and it is further recommended that the City Commission approve the allocation of this amount from 1976 General Obligation Housing Bond Funds to meet this obligation. The HUD letter also addresses issues relating to the management of the City's loan program. As previously cited, the ineligible expenditures sustained by HUD included the repayment of $1,054,347 relating to loans to DC Two Exponent, Inc. ($686,270), Ideal Rehab, Inc. and Liberty City Improvement Corporation Loans ($368,077). The Audit Report also raised significant concerns regarding other loans that were not included among the ineligible expenditures identified. The Administration has implemented procedures to address HUD's management concerns and it is critical that the City maintains an aggressive posture in protecting the public interest and integrity of the loan program by maintaining the processes that have been established. The City is required to provide a Quarterly Report to HUD that provides a breakdown of loans in default status and the steps taken to collect each loan. The HUD letter specifically states that, "The field office will monitor the City's progress on this until final closure." It is recommended that the City Commission adopt the proposed resolution that resolves and closes the findings of the OIG Audit report. GUC(9VMF fes''