LTC 580-2017 City Repayment of HUD Funds to Comply with Office oM
AM
BEACH
OFFICE OF THE CITY MANAGER
NO. LTC #
580-2017
LETTER TO COMMISSION
TO: Mayor Dan Gelber and Members of he City Co ission
FROM: Jimmy L. Morales, City Manager
DATE: December 5, 2017
SUBJECT: City Repayment of HUD Funds to mply with Office of Inspector General Audit
The purpose of this Letter to Commission is to advise the Mayor and Commission regarding the
Administration's efforts to address compliance issues raised by the U.S. Department of Housing
and Urban Development (HUD) and it's Office of Inspector General (OIG) regarding the City's
administration of Federal funds under the City's previous administration.
As previously reported via LTC #279-2016, the Administration has worked collaboratively with
HUD since June 2013 to review the operations of the City's Housing and Community
Development Division. These efforts were sparked by concerns that arose when the City
terminated Anna Parekh, the then Director of the Office of Real Estate, Housing and Community
Development, in May 2013. The bulk of the City's concerns centered around the its transactions
with Miami Beach Community Development Corporation (MBCDC), the City's then sole
Community Housing Development Organization (CHDO). Upon the change in departmental
management, our Administration worked collaboratively with HUD and the related agencies to
identify the programs' shortcomings dating back to 2008. Once identified, we swiftly took the
necessary steps to ensure that such failures are not repeated and ensured that our efforts were
transparent and in consultation with HUD.
OIG assigned an audit team to review City records onsite from September 2015 through
January 2016. The extensive review was facilitated by City staff and included project files,
personnel records and financial transactions. As a result of this extensive review, OIG
discovered considerable shortcomings in the City's HOME and CDBG programs as previously
administered. It should be emphasized that the program failures identified in the reports
occurred during the prior Administration.
The compliance failures occurred in the City's administration of its HOME Investment
Partnership (HOME) and Community Development Block Grant (CDBG) funds as awarded by
the City to MBCDC. According to the OIG audit report, the City did not ensure that it charged
supported and eligible expenditures to the programs and lacked due diligence when supporting
and approving expenditures with HOME and CDBG funds. As a result, HUD is requiring that the
City repay $742,270 in unsupported and ineligible costs from the HOME program and $336,150
in CDBG funds; and recapture and reallocate $300,278 that had been allocated to the Barclay
Plaza Apartments, a property previously owned by MBCDC but subsequently acquired by the
City. The City recaptured and reallocated the Barclay Plaza funds to its London House
Apartments project via Resolution 2015-29080.
When notified of the need to repay these funds, the Administration immediately submitted a
request to HUD's Miami Field Office in July 2016 to repay these funds from its future three (3)
HUD allocations so as to minimize the impact on the General Fund. On November 27, 2017, the
City received correspondence from HUD advising that the request for a Voluntary Grant
Reduction (VGR), to enable the repayment via future HUD allocations, would require that the
City submit the following to enable HUD's consideration of the request:
• The City's chief elected official must request the grant reduction in writing to the
Miami HUD field office.
• The City must document in the request its inability to repay the CDBG and
HOME funds from non -Federal sources.
• The request must state that the City waives its right to a hearing pursuant to 24
CFR 570.913, other remedies for non-compliance, or the PJ waives its
opportunity for a hearing under 24 CFR 92.552(a), as appropriate.
The Administration feels that HUD would subsequently decline this request because of the
City's existing financial position and, importantly, that such a consideration could result in
additional financial and legal exposure. As such, the Administration is recommending that we
proceed with the repayment to HUD of the $1,078,420 with non -Federal funds as required by
HUD as a result of the OIG audit. The Office of Housing and Community Services will work with
the Office of Budget and Performance Improvement to prepare a request to bring to
Commission.
If you have any questions, please feel free to contact me.
JLM/KGB/MLR