type: other

jurisdiction: US

text: b' Issue Date\n September 29, 2011\n \xef\x80\xa0\n Audit Report Number\n 2011-CH-1014\n\n\n\n\nTO: Jorgelle Lawson, Director of Community Planning and Development, 5ED\n\nFROM:\n Kelly Anderson, Regional Inspector General for Audit, 5AGA\n\nSUBJECT: The City of Cleveland, OH, Lacked Adequate Controls Over Its HOME\n Investment Partnerships Program-Funded Housing Trust Fund Program\n Home-Buyer Activities\n\n HIGHLIGHTS\n\n What We Audited and Why\n\n We audited the City of Cleveland\xe2\x80\x99s HOME Investment Partnerships Program.\n The audit was part of the activities in our fiscal year 2011 annual audit plan. We\n selected the City based upon our analysis of risk factors related to Program\n grantees in Region V\xe2\x80\x99s1 jurisdiction, recent media coverage regarding the City\xe2\x80\x99s\n Program, and a request from the U.S. Department of Housing and Urban\n Development\xe2\x80\x99s (HUD) Columbus Office of Community Planning and\n Development. Our objectives were to determine whether the City complied with\n HUD\xe2\x80\x99s requirements in its use of Program funds to provide interest-free second\n mortgage loans to home buyers through its Housing Trust Fund program and its\n use of recapture provisions for Housing Trust Fund program home-buyer\n activities. This is the second of three audit reports on the City\xe2\x80\x99s Program.\n\n What We Found\n\n The City did not comply with HUD\xe2\x80\x99s requirements in its use of Program funds to\n provide interest-free second mortgage loans to home buyers through its Housing\n Trust Fund program and its use of recapture provisions for activities. It (1)\n1\n Region V includes the States of Indiana, Illinois, Ohio, Michigan, Minnesota, and Wisconsin.\n\x0c provided assistance for an ineligible activity, (2) lacked sufficient documentation\n to support that activities were eligible, (3) did not implement appropriate\n recapture provisions for all of the activities reviewed, and (4) did not ensure that\n its Program was reimbursed for Program funds used to assist a home buyer in\n purchasing a home that was later sold through a sheriff\xe2\x80\x99s sale and ownership of\n the home had been transferred.\n\n As a result, it inappropriately provided $20,000 in Program funds to assist a\n household that was not income eligible and was unable to support its use of\n $795,000 in Program funds. Further, its Program was not reimbursed for $20,000\n in Program funds used for a home that was sold through a sheriff\xe2\x80\x99s sale and\n ownership of the home had been transferred. In addition, the City is at risk of\n being required to reimburse its Program additional non-Federal funds if the\n ownership of additional homes acquired under its Housing Trust Fund program is\n transferred through foreclosures.\n\n We informed the Director of HUD\xe2\x80\x99s Columbus Office of Community Planning\n and Development and the director of the City\xe2\x80\x99s Department of Community\n Development of a minor deficiency through a memorandum dated September 29,\n 2011.\n\nWhat We Recommend\n\n We recommend that the Director of HUD\xe2\x80\x99s Columbus Office of Community\n Planning and Development require the City to (1) reimburse its Program from\n non-Federal funds for the $20,000 in Program funds inappropriately used to assist\n an activity, (2) provide supporting documentation or reimburse its Program\n $775,000 from non-Federal funds, (3) reimburse its Program $20,000 from non-\n Federal funds for the home that had been sold through a sheriff\xe2\x80\x99s sale and\n ownership of the home had been transferred, and (4) implement adequate\n procedures and controls to address the findings cited in this audit report.\n\n For each recommendation in the body of the report without a management\n decision, please respond and provide status reports in accordance with HUD\n Handbook 2000.06, REV-3. Please furnish us copies of any correspondence or\n directives issued because of the audit.\n\nAuditee\xe2\x80\x99s Response\n\n We provided our discussion draft audit report and supporting schedules to the\n director of the City\xe2\x80\x99s Department of Community Development and HUD\xe2\x80\x99s staff and\n our discussion draft audit report to the City\xe2\x80\x99s mayor during the audit. The City\n declined our offer to conduct an exit conference.\n\n\n\n\n 2\n\x0cWe asked the City\xe2\x80\x99s director to provide comments on our discussion draft audit\nreport by September 2, 2011. The director provided written comments, dated\nSeptember 2, 2011. The director did not agree with the findings. The complete text\nof the written comments, except for the eight appendixes of documentation that were\nnot necessary for understanding the director\xe2\x80\x99s comments, along with our evaluation\nof that response, can be found in appendix B of this report. We provided the\nDirector of HUD\xe2\x80\x99s Columbus Office of Community Planning and Development\nwith a complete copy of the City\xe2\x80\x99s written comments plus the eight appendixes of\ndocumentation.\n\n\n\n\n 3\n\x0c TABLE OF CONTENTS\n\nBackground and Objectives 5\n\nResults of Audit\n Finding 1: The City Lacked Adequate Controls Over Its Activities To Ensure\n That Households and Homes Were Eligible for Assistance 6\n\n Finding 2: The City Lacked Adequate Controls Over Its Housing Trust Fund\n Program To Ensure That Appropriate Recapture Provisions Were\n Used for Activities 10\n\nScope and Methodology 14\n\nInternal Controls 15\n\nAppendixes\n A. Schedule of Questioned Costs 17\n B. Auditee Comments and OIG\xe2\x80\x99s Evaluation 18\n C. HUD\xe2\x80\x99s Requirements 40\n D. Schedule of Activities With Insufficient Documentation 43\n\n\n\n\n 4\n\x0c BACKGROUND AND OBJECTIVES\n\nThe Program. Authorized under Title II of the Cranston-Gonzalez National Affordable Housing\nAct, as amended, the HOME Investment Partnerships Program is funded for the purpose of\nincreasing the supply of affordable standard rental housing; improving substandard housing for\nexisting homeowners; assisting new home buyers through acquisition, construction, and\nrehabilitation of housing; and providing tenant-based rental assistance.\n\nThe City. Organized under the laws of the State of Ohio, the City of Cleveland is governed by a\nmayor and a 19-member council, elected to 4-year terms. The City\xe2\x80\x99s Department of Community\nDevelopment is responsible for planning, administering, and evaluating the City\xe2\x80\x99s U.S.\nDepartment of Housing and Urban Development (HUD) programs. The Department of\nCommunity Development\xe2\x80\x99s Housing Development Office administers the City\xe2\x80\x99s Program-\nfunded Housing Trust Fund program, which helps low-income home buyers purchase homes by\noffering interest-free second mortgage loans. The overall mission of the Department is to\nimprove the quality of life in the City by strengthening neighborhoods through successful\nhousing and commercial rehabilitation efforts, new housing construction, home ownership, and\ncommunity-focused human services. The City\xe2\x80\x99s Program records are located at 601 Lakeside\nAvenue, Cleveland, OH.\n\nThe following table shows the amount of Program funds HUD awarded the City for fiscal years\n2006 through 2010. HUD had not awarded the City Program funds for fiscal year 2011 as of\nAugust 2, 2011.\n\n Fiscal Program\n year funds\n 2006 $6,323,744\n 2007 6,268,729\n 2008 6,081,589\n 2009 6,763,777\n 2010 6,743,584\n Totals $32,181,423\n\nOur objectives were to determine whether the City complied with HUD\xe2\x80\x99s requirements in its use\nof Program funds to provide interest-free second mortgage loans to home buyers through its\nHousing Trust Fund program and its use of recapture provisions for Housing Trust Fund program\nhome-buyer activities.\n\n\n\n\n 5\n\x0c RESULTS OF AUDIT\n\nFinding 1: The City Lacked Adequate Controls Over Its Activities To\n Ensure That Households and Homes Were Eligible for Assistance\nThe City did not comply with HUD\xe2\x80\x99s requirements in its use of Program funds to provide\ninterest-free second mortgage loans to home buyers through its Housing Trust Fund program. It\nprovided assistance for an ineligible household and lacked sufficient documentation to support\nthat households and homes were eligible. These weaknesses occurred because the City lacked\nadequate procedures and controls regarding its Housing Trust Fund program home-buyer\nactivities to ensure that it appropriately followed HUD\xe2\x80\x99s requirements. As a result, it\ninappropriately provided $20,000 in Program funds to assist a household that was not income\neligible and was unable to support its use of $795,000 in Program funds.\n\n\n\n The City Provided $20,000 in\n Program Funds for an\n Ineligible Household\n\n We reviewed all 44 households associated with the four Program-funded activities\n the City reported as complete in HUD\xe2\x80\x99s Integrated Disbursement and Information\n System from January 1, 2009, through November 30, 2010. The City used\n $835,000 in Program funds for the 44 households.\n\n HUD\xe2\x80\x99s regulations at 24 CFR (Code of Federal Regulations) 92.2 define a low-\n income household as a household with an annual income that does not exceed 80\n percent of the median income for the area as determined by HUD. HUD\xe2\x80\x99s\n regulations at 24 CFR 92.217 state that a participating jurisdiction must invest\n Program funds made available during a fiscal year so that with respect to home\n ownership assistance, 100 percent of these funds are invested in dwelling units that\n are occupied by households that qualify as low-income households.\n\n Contrary to HUD\xe2\x80\x99s regulations, the City drew down $20,000 in Program funds on\n February 20, 2007, to assist a household that was not income eligible. The Program\n funds were used to provide an interest-free second mortgage loan to a home buyer\n for activity number (including the Office of Inspector General (OIG)-designated\n household number) 8917 (11). The City could not provide sufficient income\n documentation for activity number 8917 (11). However, it stated that the household\n was not income eligible.\n\n\n\n\n 6\n\x0cThe City Lacked Sufficient\nDocumentation To Support Its\nUse of $795,000 in Program\nFunds\n\n The City lacked sufficient documentation for 42 of the 44 households and or\n homes reviewed to support that it used $795,000 in Program funds for eligible\n households and homes.\n\n HUD\xe2\x80\x99s regulations at 24 CFR 92.508(a) state that a participating jurisdiction must\n establish and maintain sufficient records to demonstrate that each household that\n receives Program funds is income eligible in accordance with 24 CFR 92.203 and\n meets the property standards of 24 CFR 92.251. HUD\xe2\x80\x99s \xe2\x80\x9cBuilding HOME: A\n Program Primer\xe2\x80\x9d states that all housing quality standards and code requirements\n must be met at the time of occupancy.\n\n Contrary to HUD\xe2\x80\x99s requirements, the City lacked sufficient documentation to\n support that 42 of the 44 households were income eligible and 9 of the 44 homes\n acquired with Program funds met HUD\xe2\x80\x99s property standards requirements at the\n time of occupancy. The closing dates for the nine homes occurred from June 16,\n 2006, through March 5, 2009. The City had certificates of occupancy for all nine\n homes stating that the homes met the City\xe2\x80\x99s building and zoning codes. However,\n eight of the nine certificates of occupancy were dated from 286 to 787 days (at\n least 6 months) before the properties were purchased by the home buyers.\n Further, although the remaining certificate of occupancy was dated 271 days after\n the property was purchased by the home buyer, it was based on a final inspection\n that occurred 295 days (more than 6 months) before the property was purchased\n by the home buyer. We did not inspect the homes since they were purchased\n more than 21 months before the start of our audit and we would not be able to\n reasonably determine whether the homes met HUD\xe2\x80\x99s property standards\n requirements at the time of occupancy. Further, on August 30, 2011, and as a\n result of our audit, the City inspected three of the nine homes and provided\n affidavits for the three homes stating that the properties met all applicable State\n and local standards and code requirements. The table in appendix D of this report\n shows the activity number (including the OIG-designated household number) for\n the 42 households and homes for which the City did not have (1) sufficient\n income documentation to demonstrate that households were income eligible and\n or (2) final inspection reports or certifications supporting that homes met HUD\xe2\x80\x99s\n property standards requirements at the time of occupancy.\n\n Further, the City did not ensure that it properly projected households\xe2\x80\x99 annual\n income for at least 23 of the 44 households reviewed. For example, the City used\n gross year-to-date income in its calculation of projected annual income rather than\n using current circumstances to project future income for 10 of the 23 households.\n The City also lacked documentation to support its calculation of households\xe2\x80\x99\n\n\n\n 7\n\x0c annual income or that it calculated households\xe2\x80\x99 annual income for six additional\n households.\n\nThe City Lacked Adequate\nProcedures and Controls\n\n The weaknesses regarding the City\xe2\x80\x99s providing Program funds to assist a\n household that was overincome and lack of sufficient documentation to support\n that households and homes were appropriate occurred because the City lacked\n adequate procedures and controls regarding its activities to ensure that it\n appropriately followed HUD\xe2\x80\x99s requirements.\n\n The City\xe2\x80\x99s internal procedures for its activities only required two pay statements\n and an Internal Revenue Service Form W-2 wage and tax statement to be\n maintained for all income-producing members of a household. The manager of\n the Department of Community Development\xe2\x80\x99s Housing Development Office said\n that the City was not aware that HUD\xe2\x80\x99s requirements specified that participating\n jurisdictions were required to maintain 3 consecutive months\xe2\x80\x99 worth of income\n documentation on which to base a household\xe2\x80\x99s projected income calculation.\n However, the director of the Department believed that the City generally\n complied with the 3-month requirement since the majority of the household files\n contained at least 3 months\xe2\x80\x99 worth of income documentation through a\n combination of year-to-date pay statement information, W-2 statements, tax\n returns, Social Security information, employment verifications, and other items\n that were used to verify and substantiate households\xe2\x80\x99 income.\n\n Further, the manager of the Housing Development Office said that she did not\n know why the certificates of occupancy for seven of the homes were dated more\n than 6 months before the properties were purchased and she believed that one of\n the certificates of occupancy was dated more than 6 months before the property\n was purchased because the home buyer had credit issues to resolve and was\n permitted to move in and lease the home until the issue was resolved. The\n director of the Department said that the certificate of occupancy for the remaining\n home was likely dated after the home buyer purchased the property because there\n was some work remaining to be done on the property. In some instances, a home\n buyer is permitted to move into a house with a temporary certificate of\n occupancy. This situation is typical if the home is completed during the winter\n but some exterior items cannot be completed due to inclement weather.\n\nConclusion\n\n The City lacked adequate procedures and controls regarding its activities to\n ensure that it appropriately followed HUD\xe2\x80\x99s requirements. It inappropriately\n provided $20,000 in Program funds to assist a household that was not income\n\n\n\n 8\n\x0c eligible and was unable to support its use of $795,000 in Program funds for 42\n households and or homes without sufficient documentation supporting eligibility.\n\nRecommendations\n\n We recommend that the Director of HUD\xe2\x80\x99s Columbus Office of Community\n Planning and Development require the City to\n\n 1A. Reimburse its Program from non-Federal funds for the $20,000 in\n Program funds inappropriately used to assist activity number (including\n the OIG-designated household number) 8917 (11).\n\n 1B. Provide supporting documentation or reimburse its Program from non-\n Federal funds, as appropriate, for the $775,000 in Program funds used for\n the 41 households and homes for which the City did not have (1) sufficient\n income documentation to demonstrate that households were income\n eligible and or (2) final inspection reports or certifications supporting that\n homes met HUD\xe2\x80\x99s property standards requirements at the time of\n occupancy. We did not include $20,000 in Program funds used for\n activity number 9706 (02) for which the City did not have sufficient\n income documentation to demonstrate that the household was income\n eligible since we included it in recommendation 2A of this report.\n\n 1C. Implement adequate procedures and controls to ensure that Program funds\n are only used for eligible households and that it maintains documentation\n to sufficiently support the eligibility of households and homes in\n accordance with HUD\xe2\x80\x99s requirements.\n\n\n\n\n 9\n\x0cFinding 2: The City Lacked Adequate Controls Over Its Housing Trust\n Fund Program To Ensure That Appropriate Recapture Provisions Were\n Used for Activities\nThe City did not comply with HUD\xe2\x80\x99s requirements in its use of recapture provisions for Housing\nTrust Fund program home-buyer activities. It did not (1) implement appropriate recapture\nprovisions for all 44 of the households reviewed and (2) ensure that its Program was reimbursed\nfor Program funds used to assist a home buyer in purchasing a home that was later sold through a\nsheriff\xe2\x80\x99s sale and ownership of the home had been transferred. These weaknesses occurred\nbecause the City lacked adequate procedures and controls regarding its activities to ensure that it\nappropriately followed HUD\xe2\x80\x99s requirements. As a result, its Program was not reimbursed for\n$20,000 in Program funds used for a home that was sold through a sheriff\xe2\x80\x99s sale and ownership\nof the home had been transferred. Further, the City is at risk of being required to reimburse its\nProgram additional non-Federal funds if the ownership of additional homes acquired under its\nHousing Trust Fund program is transferred through foreclosures.\n\n\n\n The City Did Not Implement\n Appropriate Recapture\n Provisions for Its Activities and\n Did Not Reimburse Its Program\n $20,000 From Non-Federal\n Funds\n\n We reviewed all 44 households associated with the four Program-funded activities\n the City reported as complete in HUD\xe2\x80\x99s Integrated Disbursement and Information\n System from January 1, 2009, through November 30, 2010. The City used\n $835,000 in Program funds for the 44 households.\n\n HUD\xe2\x80\x99s regulations at 24 CFR 92.254(a)(4) state that Program-assisted housing\n must meet HUD\xe2\x80\x99s affordability requirements. Section 92.254(a)(5)(ii) states that\n in establishing its recapture provisions, the participating jurisdiction is subject to\n the limitation that when the recapture provision is triggered by a voluntary or\n involuntary sale of the housing unit and there are no net proceeds or the net\n proceeds are insufficient to repay the Program investment due, the participating\n jurisdiction may only recapture the net proceeds, if any. HUD\xe2\x80\x99s HOMEfires,\n volume 5, number 2, states that for Program-assisted home-buyer projects with\n recapture provisions, the amount of Program funds required to be repaid in the\n event of foreclosure is the amount that would be subject to recapture under the\n terms of the written agreement with the home buyer. If the recapture provisions\n require the entire amount of the Program investment from the home buyer or an\n amount reduced prorata based on the time the home buyer has owned and\n occupied the home measured against the affordability period, the amount required\n by the recapture provisions is the amount that must be recaptured by the\n\n\n\n 10\n\x0c participating jurisdiction for the Program. If the participating jurisdiction is\n unable to recapture the funds from the household, it must reimburse its Program\n in the amount due pursuant to the recapture provisions in the written agreement\n with the home buyer.\n\n Contrary to HUD\xe2\x80\x99s requirements, the City did not ensure that it implemented\n appropriate recapture provisions for all 44 of the households reviewed. Although\n the mortgages and promissory notes between the City and the home buyers\n included affordability requirements, neither the mortgages nor the promissory\n notes contained language that limited the amount of Program funds the City could\n recapture to the net proceeds from the sale of a home. The mortgages and\n promissory notes required repayment of the full amount of the loan upon sale,\n lease, refinance, or transfer. An additional amount equal to the interest that would\n have accrued on the second mortgage loan if it had been made at the same interest\n rate as the first mortgage loan was also due and payable in the event that the\n borrower sold, leased, refinanced, or transferred the property within the initial 5\n years of the execution of the mortgage and promissory note.\n\n As previously stated, the mortgages and promissory notes required repayment of\n the entire amount of the Program investment upon sale. As of July 8, 2011, the\n City had received foreclosure notices for six homes associated with three of the\n activities completed from January 1, 2009, through November 30, 2010.\n Therefore, we reviewed the six households to determine whether the homes had\n been sold and ownership of the homes had been transferred. One of the homes\n had been sold through a sheriff\xe2\x80\x99s sale, and ownership of the home had been\n transferred as of July 8, 2011. The City did not receive any net proceeds from the\n sale of the home, nor did it reimburse its Program for the $20,000 in Program\n funds used for the home. The following table includes the activity number\n (including the OIG-designated household number), the date of closing, the date\n Program funds were drawn down for the household in HUD\xe2\x80\x99s system, the date the\n home was sold through a sheriff\xe2\x80\x99s sale, and the date ownership was transferred for\n the home.\n\n Date of\n Activity Date of Date of Date of ownership\n number closing drawdown sheriff\xe2\x80\x99s sale transfer\n 9706 (02) June 25, 2007 Nov. 13, 2007 Dec. 7, 2009 Feb. 2, 2010\n\nThe City Lacked Adequate\nProcedures and Controls\n\n The weaknesses regarding the City\xe2\x80\x99s not (1) implementing appropriate recapture\n provisions for its activities and (2) ensuring that its Program was reimbursed for\n Program funds used to assist a home buyer in purchasing a home that was later\n sold through a sheriff\xe2\x80\x99s sale and ownership of the home had been transferred\n\n\n 11\n\x0c occurred because the City lacked adequate procedures and controls regarding its\n activities to ensure that it appropriately followed HUD\xe2\x80\x99s requirements.\n\n The manager of the Department of Community Development\xe2\x80\x99s Housing\n Development Office stated that until the former assistant director of the\n Department notified the Office in January 2011, the Office was not aware that it\n was required to include language in its mortgages and promissory notes that\n limited recapture to the net proceeds from the sale of the homes. Further, the\n director of the Department stated that although the City was not aware that it had\n created an additional financial burden on itself, it complied with HUD\xe2\x80\x99s\n requirements and State law regarding foreclosure sales and did not recapture more\n than the net proceeds from the sale of the homes. The City was developing a\n revised mortgage and promissory note for its activities to include language that\n would limit the amount of Program funds the City could recapture to the net\n proceeds from the sale of a home.\n\nConclusion\n\n The City lacked adequate procedures and controls regarding its activities to\n ensure that it appropriately followed HUD\xe2\x80\x99s requirements. It did not implement\n appropriate recapture provisions for all 44 of the households reviewed and ensure\n that its Program was reimbursed for the $20,000 in Program funds used for a\n home that was later sold through a sheriff\xe2\x80\x99s sale and ownership of the home had\n been transferred. Further, the City is at risk of being required to reimburse its\n Program additional non-Federal funds if the ownership of additional homes\n acquired under its Housing Trust Fund program is transferred through\n foreclosures.\n\nRecommendations\n\n We recommend that the Director of HUD\xe2\x80\x99s Columbus Office of Community\n Planning and Development require the City to\n\n 2A. Reimburse its Program $20,000 from non-Federal funds for the home that\n had been sold through a sheriff\xe2\x80\x99s sale and ownership of the home had been\n transferred.\n\n 2B. Implement adequate procedures and controls to ensure that if the\n ownership of additional homes acquired under its Housing Trust Fund\n program is transferred through foreclosures, the City recaptures the entire\n amount of the Program funds through the receipt of net proceeds from the\n sales of the homes or reimburses its Program from non-Federal funds for\n the Program funds provided to the home buyers as appropriate.\n\n\n\n\n 12\n\x0c2C. Implement adequate procedures and controls to ensure that it includes\n appropriate recapture provisions in its written agreements with home\n buyers.\n\n\n\n\n 13\n\x0c SCOPE AND METHODOLOGY\n\nTo accomplish our objectives, we reviewed\n\n \xef\x82\xb7 Applicable laws; HUD\xe2\x80\x99s regulations at 24 CFR Part 92; HUD\xe2\x80\x99s \xe2\x80\x9cBuilding\n HOME: A Program Primer\xe2\x80\x9d; HUD\xe2\x80\x99s HOMEfires, volume 5, numbers 2 and 5;\n HUD\xe2\x80\x99s Technical Guide for Determining Income and Allowances for the\n Program; and HUD\xe2\x80\x99s guidebook, \xe2\x80\x9cFitting the Pieces Together.\xe2\x80\x9d\n\n \xef\x82\xb7 The City\xe2\x80\x99s accounting records; audited financial statements for the years ending\n December 31, 2007, 2008, and 2009; data from HUD\xe2\x80\x99s Integrated Disbursement\n and Information System; Program activity files; policies and procedures;\n organizational chart; consolidated plan for 2005 through 2010; action plans for\n program years 2008 to 2009, 2009 to 2010, and 2010 to 2011; and consolidated\n annual performance and evaluation reports for program years 2008 and 2009.\n\n \xef\x82\xb7 HUD\xe2\x80\x99s files for the City.\n\nIn addition, we interviewed the City\xe2\x80\x99s employees and HUD\xe2\x80\x99s staff.\n\nFindings 1 and 2\n\nWe selected all 44 of the City\xe2\x80\x99s households associated with the four Program-funded Housing\nTrust Fund program home-buyer activities the City reported as complete in HUD\xe2\x80\x99s system from\nJanuary 1, 2009, through November 30, 2010. The City used $835,000 in Program funds for the\n44 households.\n\nIn addition, we relied in part on data in HUD\xe2\x80\x99s system. Although we did not perform detailed\nassessments of the reliability of the data, we performed minimal levels of testing and found the\ndata to be adequately reliable for our purposes.\n\nWe performed our onsite audit work from January through June 2011 at the City\xe2\x80\x99s offices located at\n601 Lakeside Avenue, Cleveland, OH. The audit covered the period January 2009 through\nNovember 2010 and was expanded as determined necessary.\n\nWe performed our audit in accordance with generally accepted government auditing standards.\nThose standards require that we plan and perform the audit to obtain sufficient, appropriate evidence\nto provide a reasonable basis for our findings and conclusions based on our audit objectives. We\nbelieve that the evidence obtained provides a reasonable basis for our findings and conclusions\nbased on our audit objectives.\n\n\n\n\n 14\n\x0c INTERNAL CONTROLS\n\nInternal control is a process adopted by those charged with governance and management,\ndesigned to provide reasonable assurance about achievement of the organization\xe2\x80\x99s mission,\ngoals, and objectives with regard to\n\n \xef\x82\xb7 Effectiveness and efficiency of operations,\n \xef\x82\xb7 Reliability of financial reporting, and\n \xef\x82\xb7 Compliance with applicable laws and regulations.\n\nInternal controls comprise the plans, policies, methods, and procedures used to meet the\norganization\xe2\x80\x99s mission, goals, and objectives. Internal controls include the processes and\nprocedures for planning, organizing, directing, and controlling program operations as well as the\nsystems for measuring, reporting, and monitoring program performance.\n\n\n\n Relevant Internal Controls\n\n We determined that the following internal controls were relevant to our audit\n objectives:\n\n \xef\x82\xb7 Effectiveness and efficiency of operations \xe2\x80\x93 Policies and procedures that\n management has implemented to reasonably ensure that a program meets\n its objectives.\n\n \xef\x82\xb7 Reliability of financial reporting \xe2\x80\x93 Policies and procedures that\n management has implemented to reasonably ensure that valid and reliable\n data are obtained, maintained, and fairly disclosed in reports.\n\n \xef\x82\xb7 Compliance with applicable laws and regulations \xe2\x80\x93 Policies and\n procedures that management has implemented to reasonably ensure that\n resource use is consistent with laws and regulations.\n\n We assessed the relevant controls identified above.\n\n A deficiency in internal control exists when the design or operation of a control does\n not allow management or employees, in the normal course of performing their\n assigned functions, the reasonable opportunity to prevent, detect, or correct (1)\n impairments to effectiveness and efficiency of operations, (2) misstatements in\n financial or performance information, or (3) violations of laws or regulations on a\n timely basis.\n\n\n\n\n 15\n\x0cSignificant Deficiency\n\n Based on our review, we believe that the following item is a significant\n deficiency:\n\n \xef\x82\xb7 The City lacked adequate procedures and controls to ensure that (1) it used\n Program funds for Housing Trust Fund program home-buyer activities in\n accordance with HUD\xe2\x80\x99s requirements, (2) it implemented appropriate\n recapture provisions for activities, and (3) its Program was reimbursed for\n Program funds used to assist a home buyer in purchasing a home that was\n later sold through a sheriff\xe2\x80\x99s sale and ownership of the home had been\n transferred (see findings 1 and 2).\n\n\n\n\n 16\n\x0c APPENDIXES\n\nAppendix A\n\n SCHEDULE OF QUESTIONED COSTS\n\n Recommendation\n number Ineligible 1/ Unsupported 2/\n 1A $20,000\n 1B $775,000\n 2A $20,000\n Totals $40,000 $775,000\n\n\n1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity\n that the auditor believes are not allowable by law; contract; or Federal, State, or local\n polices or regulations.\n\n2/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program\n or activity when we cannot determine eligibility at the time of the audit. Unsupported\n costs require a decision by HUD program officials. This decision, in addition to\n obtaining supporting documentation, might involve a legal interpretation or clarification\n of departmental policies and procedures.\n\n\n\n\n 17\n\x0cAppendix B\n\n AUDITEE COMMENTS AND OIG\xe2\x80\x99s EVALUATION\n\nRef to OIG Evaluation Auditee Comments\n\n\n\n\n 18\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComment 1\n\n\nComments 2, 3,\n and 4\n\n\n\n\nComments 4\n and 5\n\n\n\n\n 19\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComments 6\n and 7\n\n\nComment 8\nComments 8\n and 9\n\n\n\n\nComments 3\n and 4\n\n\n\n\nComment 10\n\n\nComment 10\nComment 11\n\n\n\n\n 20\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComment 11\n\nComments 8\n and 11\n\n\n\n\nComment 4\n\n\n\n\nComment 12\n\n\n\n\n 21\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComment 8\n\n\n\n\nComments 8\n and 9\n\n\n\n\nComments 5, 8,\n and 9\nComments 8\n and 9\n\n\n\n\n 22\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComments 8\n and 9\n\n\n\n\nComment 13\n\n\n\n\nComment 14\n\n\n\n\n 23\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComments 3\n and 4\n\n\n\n\nComment 11\n\n\n\n\nComment 8\n\n\n\n\n 24\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComment 8\n\n\n\n\nComment 7\n\n\n\n\nComment 15\n\n\n\n\n 25\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComment 15\n\n\n\n\nComments 16\n and 17\n\n\n\n\nComment 17\n\n\n\n\nComment 17\n\n\n\n\nComment 18\nComments 17\n and 18\nComments 16,\n 17, and 18\n\n\n\n\n 26\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComments 16\n and 17\n\n\n\n\nComment 15\n\n\n\n\nComments 16\n and 17\n\n\n\n\n 27\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComment 15,\n 16, and 17\n\n\n\n\nComment 1, 8,\n and 11\n\n\n\n\nComment 19\n\n\nComment 19\n\n\n\n\nComment 19\n\n\n\n\n 28\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComment 19\n\n\n\n\n 29\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComment 19\n\n\n\n\nComment 20\n\n\n\n\n 30\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComment 20\n\n\n\n\nComment 20\n\n\n\n\nComment 21\n\n\nComment 20\n\n\n\n\nComments 20\n and 22\n\n\n\n\n 31\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComments 20\n and 22\n\n\n\n\nComment 20\nComment 21\n\n\n\n\n 32\n\x0cRef to OIG Evaluation Auditee Comments\n\n\n\n\nComments 20\n and 22\n\n\n\nComment 21\n\n\n\n\nComment 23\n\n\n\n\nComments 20\n and 21\n\n\n\n\n 33\n\x0c OIG\xe2\x80\x99s Evaluation of Auditee Comments\n\nComment 1 The City lacked adequate procedures and controls regarding its Housing Trust\n Fund program home-buyer activities to ensure that it appropriately followed\n HUD\xe2\x80\x99s requirements. It provided assistance for an ineligible household and\n lacked sufficient documentation to support that households were income eligible.\n Further, it did not ensure that it properly projected households\xe2\x80\x99 annual income.\n For example, the City used gross year-to-date income in its calculation of\n projected annual income rather than using current circumstances to project future\n income for households. It also lacked documentation to support its calculation of\n households\xe2\x80\x99 annual income or that it calculated households\xe2\x80\x99 annual income.\n\nComment 2 We did not cite any households as being overincome in our discussion draft audit\n report.\n\nComment 3 We added the following to the report:\n\n \xef\x82\xb7 Contrary to HUD\xe2\x80\x99s regulations, the City drew down $20,000 in Program funds\n on February 20, 2007, to assist a household that was not income eligible. The\n Program funds were used to provide an interest-free second mortgage loan to a\n home buyer for activity number (including the OIG-designated household\n number) 8917 (11). The City could not provide sufficient income documentation\n for activity number 8917 (11). However, it stated that the household was not\n income eligible.\n\n We also moved recommendations 1A and 1B to recommendations 1B and 1C,\n respectively, and added a new recommendation 1A to state the following:\n\n \xef\x82\xb7 Reimburse its Program from non-Federal funds for the $20,000 in Program\n funds inappropriately used to assist activity number (including the OIG-\n designated household number) 8917 (11).\n\nComment 4 We revised the report to state the following:\n\n \xef\x82\xb7 The City lacked sufficient documentation for 42 of the 44 households and or\n homes reviewed to support that it used $795,000 in Program funds for eligible\n households and homes.\n\n \xef\x82\xb7 Contrary to HUD\xe2\x80\x99s requirements, the City lacked sufficient documentation to\n support that 42 of the 44 households were income eligible.\n\n \xef\x82\xb7 The table in appendix D of this report shows the activity number (including\n the OIG-designated household number) for the 42 households and homes for\n which the City did not have (1) sufficient income documentation to\n demonstrate that households were income eligible and or (2) final inspection\n\n\n\n 34\n\x0c reports or certifications supporting that homes met HUD\xe2\x80\x99s property standards\n requirements at the time of occupancy.\n\n We also amended recommendation 1B to reflect these revisions.\n\n Further, we revised the table in appendix D of this report by removing entries\n showing that the City had insufficient income documentation for activity numbers\n (including the OIG-designated household number) 8917 (09) and 8917 (11).\n\nComment 5 The City provided documentation to support that it calculated the households\xe2\x80\x99\n annual income for activity numbers (including the OIG-designated household\n number) 8917 (08) and 8917 (09).\n\n Therefore, we revised the report to state the following:\n\n \xef\x82\xb7 The City also lacked documentation to support its calculation of households\xe2\x80\x99\n annual income or that it calculated households\xe2\x80\x99 annual income for six\n additional households.\n\nComment 6 The City did not provide documentation to support that HUD found the City\xe2\x80\x99s\n method of calculating income eligibility for its Housing Trust Fund program to be\n sufficient. The City\xe2\x80\x99s method of calculating income eligibility for its Housing\n Trust Fund program was not reviewed as part of HUD\xe2\x80\x99s Columbus Office of\n Community Planning and Development\xe2\x80\x99s 2006, 2007, or 2008 monitoring\n reviews of the City. Further, just because HUD\xe2\x80\x99s Office\xe2\x80\x99s 2006, 2007, and 2008\n monitoring reviews of the City did not result in any findings or concerns\n regarding the City\xe2\x80\x99s calculations used to determine income eligibility, does not\n mean that HUD approved the City\xe2\x80\x99s calculations used to determine income\n eligibility.\n\nComment 7 Further, HUD\xe2\x80\x99s Columbus Office of Community Planning and Development\xe2\x80\x99s\n February 2010 monitoring review identified that the City lacked sufficient\n documentation to support that households were income eligible and its\n calculations of households\xe2\x80\x99 annual income for activities. In addition, HUD\xe2\x80\x99s\n Office requested that we conduct an audit of the City\xe2\x80\x99s Program due to the issues\n uncovered during its monitoring review.\n\nComment 8 Chapter two of HUD\xe2\x80\x99s Technical Guide for Determining Income and Allowances\n for the Program, dated January 2005, states that a participating jurisdiction must\n project a household\xe2\x80\x99s future income by using the household\xe2\x80\x99s current income\n circumstances. The year-to-date pay statement, Internal Revenue Service Form\n W-2 wage and tax statement, and tax return information may not reflect the\n household\xe2\x80\x99s current income circumstances.\n\nComment 9 Contrary to HUD\xe2\x80\x99s requirements, the City lacked sufficient documentation to\n support that the 31 households were income eligible.\n\n\n\n 35\n\x0cComment 10 The City provided assistance for an ineligible activity and lacked sufficient\n documentation to support that activities were eligible. As a result, it\n inappropriately provided $20,000 in Program funds to assist a household that was\n not income eligible and was unable to support its use of $795,000 in Program\n funds.\n\nComment 11 Chapter two of HUD\xe2\x80\x99s Technical Guide for Determining Income and Allowances\n for the Program, dated January 2005 also states that a participating jurisdiction\n must project a household\xe2\x80\x99s future income by using the household\xe2\x80\x99s current\n income circumstances. Exhibit 2.1 states that a participating jurisdiction must\n include hourly wage figures, overtime figures, bonuses, anticipated raises, cost-\n of-living adjustments, or other anticipated changes in income in an applicant\n household\xe2\x80\x99s projected income calculation. For households with jobs providing\n steady employment, it can be assumed that there will only be slight variations in\n the amount of income earned. Therefore, 3 consecutive months\xe2\x80\x99 worth of income\n documentation is an appropriate amount upon which to base a household\xe2\x80\x99s\n projected income calculation for the following 12-month period. For those\n households with jobs providing employment that is less stable or does not\n conform to a 12-month schedule (such as seasonal laborers), income\n documentation that covers the entire previous 12-month period should be\n examined. In addition to hourly earnings, participating jurisdictions must account\n for all earned income. This income will include annual cost-of-living\n adjustments, bonuses, raises, and overtime pay in addition to base salary. In the\n case of overtime, it is important to determine whether overtime is sporadic or\n predictable. If a participating jurisdiction determines that a household will\n continue to earn overtime pay on a regular basis, it should calculate the average\n amount of overtime pay earned by the household over the past 3 months. This\n average should then be added to the total amount of projected earned income for\n the following 12-month period. Appropriate income documentation includes pay\n statements, third-party verification, bank statements, or certified copies of tax\n returns.\n\nComment 12 The activity number (including the OIG-designated household number) for the\n household that had a benefits-based income determination was 8917 (09) rather\n than 8917 (08).\n\nComment 13 Contrary to HUD\xe2\x80\x99s requirements, the City lacked sufficient documentation to\n support that the households for the 11 activities were income eligible.\n\nComment 14 The City previously provided documentation to support that it properly projected\n the household\xe2\x80\x99s annual income for activity number (including the OIG-designated\n household number) 8917 (21).\n\n Therefore, we revised the report to state the following:\n\n\n\n\n 36\n\x0c \xef\x82\xb7 Further, the City did not ensure that it properly projected households\xe2\x80\x99 annual\n income for at least 23 of the 44 households reviewed. For example, the City\n used gross year-to-date income in its calculation of projected annual income\n rather than using current circumstances to project future income for 10 of the\n 23 households.\n\nComment 15 We revised the report to state the following:\n\n \xef\x82\xb7 Contrary to HUD\xe2\x80\x99s requirements, the City lacked sufficient documentation to\n support that 9 of the 44 homes acquired with Program funds met HUD\xe2\x80\x99s\n property standards requirements at the time of occupancy. The closing dates\n for the nine homes occurred from June 16, 2006, through March 5, 2009. The\n City had certificates of occupancy for all nine homes stating that the homes\n met the City\xe2\x80\x99s building and zoning codes. However, eight of the nine\n certificates of occupancy were dated from 286 to 787 days (at least 6 months)\n before the properties were purchased by the home buyers.\n\n We added the following to the report:\n\n \xef\x82\xb7 Further, on August 30, 2011, and as a result of our audit, the City inspected\n three of the nine homes and provided affidavits for the three homes stating\n that the properties met all applicable State and local standards and code\n requirements.\n\n We also removed the following from the report:\n\n \xef\x82\xb7 The manager of the Housing Development Office stated that she believed that\n the City lacked certificates of occupancy for the four homes because the\n property developers did not pay the fee to obtain the certificates of occupancy.\n\n In addition, we revised the table in appendix D of this report by removing entries\n showing that the City had insufficient final inspection reports or certifications\n supporting that homes met HUD\xe2\x80\x99s property standards requirements at the time of\n occupancy for activity numbers (including the OIG-designated household\n number) 7758 (02), 7758 (03), 8917 (06), 8917 (16), 8917 (17), and 8917 (23).\n\n The settlement statement date for activity number (including the OIG-designated\n household number) 8917 (06) is May 24, 2006, rather than May 24, 2007.\n\nComment 16 Contrary to HUD\xe2\x80\x99s requirements, the City lacked sufficient documentation to\n support that 9 of the 44 homes acquired with Program funds met HUD\xe2\x80\x99s property\n standards requirements at the time of occupancy.\n\nComment 17 Certificates of occupancy based on inspections that occurred more than 6 months\n before properties were purchased by home buyers do not support that homes met\n HUD\xe2\x80\x99s property standards requirements at the time of occupancy.\n\n\n 37\n\x0cComment 18 HUD\xe2\x80\x99s regulations at 24 CFR 92.251(a)(2) state that housing acquired with\n Program funds must meet all applicable State and local housing quality standards\n and code requirements. Chapter five, part I, of HUD\xe2\x80\x99s \xe2\x80\x9cBuilding HOME: A\n Program Primer,\xe2\x80\x9d dated March 2008, states that all housing quality standards and\n code requirements must be met at the time of occupancy.\n\nComment 19 The City\xe2\x80\x99s commitment to new procedures and controls, if fully implemented,\n should improve the City\xe2\x80\x99s management of its Program.\n\nComment 20 HUD\xe2\x80\x99s HOMEfires, volume 5, number 2, which has been in effect since June\n 2003, states that for Program-assisted home-buyer projects with recapture\n provisions, the amount of Program funds required to be repaid in the event of\n foreclosure is the amount that would be subject to recapture under the terms of the\n written agreement with the home buyer. If the recapture provisions require the\n entire amount of the Program investment from the home buyer, the amount\n required by the recapture provisions is the amount that must be recaptured by the\n participating jurisdiction for the Program. If the participating jurisdiction is\n unable to recapture the funds from the household, it must reimburse its Program\n in the amount due pursuant to the recapture provisions in the written agreement\n with the home buyer.\n\nComment 21 On July 19, 2011, the director of the City\xe2\x80\x99s Department of Community\n Development stated that the City was developing a revised mortgage and\n promissory note for its activities to include language that would limit the amount\n of Program funds the City could recapture to the net proceeds from the sale of a\n home. The City did not provide documentation to support that it developed a\n revised mortgage and promissory note for its activities to include language that\n would limit the amount of Program funds the City could recapture to the net\n proceeds from the sale of a home through foreclosure.\n\nComment 22 The City did not comply with HUD\xe2\x80\x99s requirements in its use of recapture\n provisions for activities. Neither the mortgages nor promissory notes between the\n City and the home buyers contained language that limited the amount of Program\n funds the City could recapture to the net proceeds from the sale of a home. The\n mortgages and promissory notes required repayment of the full amount of the loan\n upon sale, lease, refinance, or transfer. The City did not implement appropriate\n recapture provisions for all 44 of the households reviewed and did not ensure that\n its Program was reimbursed for Program funds used to assist a home buyer in\n purchasing a home that was later sold through a sheriff\xe2\x80\x99s sale and ownership of\n the home had been transferred. As a result, its Program was not reimbursed for\n $20,000 in Program funds used for the home that was sold through a sheriff\xe2\x80\x99s sale\n and ownership of the home had been transferred. Further, the City is at risk of\n being required to reimburse its Program additional non-Federal funds if the\n ownership of additional homes acquired under its Housing Trust Fund program is\n transferred through foreclosures.\n\n\n\n\n 38\n\x0cComment 23 The City lacked adequate procedures and controls to ensure that (1) it used\n Program funds for activities in accordance with HUD\xe2\x80\x99s requirements, (2) it\n implemented appropriate recapture provisions for activities, and (3) its Program\n was reimbursed for Program funds used to assist a home buyer in purchasing a\n home that was later sold through a sheriff\xe2\x80\x99s sale and ownership of the home had\n been transferred.\n\n\n\n\n 39\n\x0cAppendix C\n\n HUD\xe2\x80\x99S REQUIREMENTS\n\nFinding 1\nHUD\xe2\x80\x99s regulations at 24 CFR 92.2 define a low-income household as a household with an\nannual income that does not exceed 80 percent of the median income for the area as determined\nby HUD.\n\nHUD\xe2\x80\x99s regulations at 24 CFR 92.203(a) state that a participating jurisdiction must determine\nwhether each household is income eligible by determining the household\xe2\x80\x99s annual income.\nSection 92.203(a)(2) states that a participating jurisdiction must determine households\xe2\x80\x99 annual\nincome by examining source documentation evidencing households\xe2\x80\x99 annual income. Section\n92.203(d)(1) states that a participating jurisdiction must calculate a household\xe2\x80\x99s annual income\nby projecting the prevailing rate of the household\xe2\x80\x99s income at the time the participating\njurisdiction determines the household to be income eligible. Annual income must include\nincome from all household members.\n\nHUD\xe2\x80\x99s regulations at 24 CFR 92.217 state that a participating jurisdiction must invest Program\nfunds made available during a fiscal year so that with respect to home ownership assistance, 100\npercent of these funds are invested in dwelling units that are occupied by households that qualify\nas low-income households.\n\nHUD\xe2\x80\x99s regulations at 24 CFR 92.251(a)(2) state that housing acquired with Program funds must\nmeet all applicable State and local housing quality standards and code requirements. If there are\nno such housing quality standards or code requirements, the housing must meet HUD\xe2\x80\x99s housing\nquality standards.\n\nHUD\xe2\x80\x99s regulations at 24 CFR 92.508(a) state that a participating jurisdiction must establish and\nmaintain sufficient records to enable HUD to determine whether it has met the requirements of\n24 CFR Part 92. The participating jurisdiction must maintain records demonstrating the\nfollowing:\n\n \xef\x81\xb6 Each household is income eligible in accordance with 24 CFR 92.203.\n \xef\x81\xb6 Each activity meets the property standards of 24 CFR 92.251.\n\nChapter two, part I, of HUD\xe2\x80\x99s \xe2\x80\x9cBuilding HOME: A Program Primer,\xe2\x80\x9d dated March 2008, states\nthat income eligibility is based on anticipated income. Therefore, the previous year\xe2\x80\x99s tax return\ndoes not establish anticipated income and is not adequate source documentation. Chapter five,\npart I, states that all housing quality standards and code requirements must be met at the time of\noccupancy.\n\nChapter two of HUD\xe2\x80\x99s Technical Guide for Determining Income and Allowances for the\nProgram, dated January 2005, states that a participating jurisdiction may develop its own income\n\n\n 40\n\x0cverification procedures provided that it collects source documentation and that this\ndocumentation is sufficient to enable HUD to monitor Program compliance. A participating\njurisdiction must project a household\xe2\x80\x99s future income by using the household\xe2\x80\x99s current income\ncircumstances. Exhibit 2.1 states that a participating jurisdiction must include hourly wage\nfigures, overtime figures, bonuses, anticipated raises, cost-of-living adjustments, or other\nanticipated changes in income in an applicant household\xe2\x80\x99s projected income calculation. For\nhouseholds with jobs providing steady employment, it can be assumed that there will only be\nslight variations in the amount of income earned. Therefore, 3 consecutive months\xe2\x80\x99 worth of\nincome documentation is an appropriate amount upon which to base a household\xe2\x80\x99s projected\nincome calculation for the following 12-month period. For those households with jobs providing\nemployment that is less stable or does not conform to a 12-month schedule (such as seasonal\nlaborers), income documentation that covers the entire previous 12-month period should be\nexamined. In addition to hourly earnings, participating jurisdictions must account for all earned\nincome. This income will include annual cost of living adjustments, bonuses, raises, and\novertime pay in addition to base salary. In the case of overtime, it is important to determine\nwhether overtime is sporadic or predictable. If a participating jurisdiction determines that a\nhousehold will continue to earn overtime pay on a regular basis, it should calculate the average\namount of overtime pay earned by the household over the past 3 months. This average should\nthen be added to the total amount of projected earned income for the following 12-month period.\nAppropriate income documentation includes pay statements, third-party verification, bank\nstatements, or certified copies of tax returns.\n\nFinding 2\nSection 215(b) of Title II of the Cranston-Gonzalez National Affordable Housing Act, as\namended, states that housing that is for home ownership shall qualify as affordable housing\nunder Title II of the Act only if the housing is subject to resale restrictions that are established by\nthe participating jurisdiction and determined by HUD\xe2\x80\x99s Secretary to be appropriate to (1) allow\nfor the later purchase of the property only by a low-income household at a price which will\nprovide the owner a fair return on investment and ensure that the housing will remain affordable\nto a reasonable range of low-income home buyers or (2) recapture the Program investment to\nassist other persons in accordance with the requirements of Title II of the Act, except when there\nare no net proceeds or when the net proceeds are insufficient to repay the full amount of the\nassistance.\n\nHUD\xe2\x80\x99s regulations at 24 CFR 92.254(a)(4) state that Program-assisted housing must meet the\naffordability requirements for not less than the applicable period beginning after activity\ncompletion. Home-ownership activities that receive less than $15,000 in Program assistance\nmust remain affordable for at least 5 years. Section 92.254(a)(5) states that to ensure\naffordability, a participating jurisdiction must impose either resale or recapture provisions that\ncomply with the standards of section 92.254(a)(5) and include the provisions in its consolidated\nplan. Section 92.254(a)(5)(ii) states that a participating jurisdiction\xe2\x80\x99s recapture provisions must\nensure that the participating jurisdiction recoups all or a portion of the Program assistance to the\nhome buyers if the housing does not continue to be the principal residence of the household for\nthe duration of the period of affordability. In establishing its recapture provisions, the\nparticipating jurisdiction is subject to the limitation that when the recapture provision is triggered\n\n\n 41\n\x0cby a voluntary or involuntary sale of the housing unit and there are no net proceeds or the net\nproceeds are insufficient to repay the Program investment due, the participating jurisdiction may\nonly recapture the net proceeds, if any. The recaptured funds must be used to carry out Program-\neligible activities in accordance with the requirements of 24 CFR Part 92.\n\nHUD\xe2\x80\x99s regulations at 24 CFR 92.502(c)(3) state that a participating jurisdiction must disburse\nProgram funds, including Program income and recaptured Program funds, in its HOME\ninvestment trust fund local account before requesting Program funds from its treasury account.\nSection 92.503(c) states that Program funds recaptured in accordance with 24 CFR\n92.254(a)(5)(ii) must be deposited into the participating jurisdiction\xe2\x80\x99s local account and used in\naccordance with the requirements of 24 CFR Part 92.\n\nHUD\xe2\x80\x99s regulations at 24 CFR 92.504(b) state that before disbursing any Program funds to any\nentity, a participating jurisdiction must enter into a written agreement with that entity. Section\n92.504(c)(5)(i) states that when a participating jurisdiction provides assistance to a home buyer,\nthe written agreement must conform to the requirements in 24 CFR 92.254(a) regarding resale or\nrecapture provisions.\n\nHUD\xe2\x80\x99s HOMEfires, volume 5, number 2, states that for Program-assisted home-buyer projects\nwith recapture provisions, the amount of Program funds required to be repaid in the event of\nforeclosure is the amount that would be subject to recapture under the terms of the written\nagreement with the home buyer. If the recapture provisions provide for shared net proceeds, the\namount subject to recapture is based on the amount of net proceeds, if any, from the foreclosure\nsale. If the recapture provisions require the entire amount of the Program investment from the\nhome buyer or an amount reduced prorata based on the time the home buyer has owned and\noccupied the home measured against the affordability period, the amount required by the\nrecapture provisions is the amount that must be recaptured by the participating jurisdiction for\nthe Program. If the participating jurisdiction is unable to recapture the funds from the household,\nthe participating jurisdiction must reimburse its Program in the amount due pursuant to the\nrecapture provisions in the written agreement with the home buyer.\n\nHUD\xe2\x80\x99s HOMEfires, volume 5, number 5, requires a participating jurisdiction to select either\nresale or recapture provisions for its Program-assisted home-buyer projects. The participating\njurisdiction may select resale or recapture provisions for all of its home-buyer projects or resale\nor recapture provisions on a case-by-case basis. However, the participating jurisdiction must\nselect whether resale or recapture will be imposed for each home-buyer project at the time the\nassistance is provided. A participating jurisdiction may adopt any one of four options in\ndesigning its recapture provisions. All of the options the participating jurisdiction will employ\nmust be identified in its consolidated plan and approved by HUD.\n\n\n\n\n 42\n\x0cAppendix D\n\n SCHEDULE OF ACTIVITIES WITH INSUFFICIENT\n DOCUMENTATION\n\n\n Activity Income Final inspections Assistance\n number documentation or certifications amount\n 7758 (01) X $20,000\n 7758 (02) X 20,000\n 7758 (03) X 20,000\n 7758 (04) X 20,000\n 7758 (05) X X 20,000\n 8917 (01) X 20,000\n 8917 (02) X 20,000\n 8917 (03) X 20,000\n 8917 (04) X X 20,000\n 8917 (05) X 10,000\n 8917 (06) X 10,000\n 8917 (07) X 10,000\n 8917 (08) X 20,000\n 8917 (10) X X 15,000\n 8917 (12) X X 20,000\n 8917 (13) X 20,000\n 8917 (14) X 20,000\n 8917 (15) X 20,000\n 8917 (16) X 20,000\n 8917 (17) X 20,000\n 8917 (18) X 20,000\n 8917 (19) X 10,000\n 8917 (20) X 20,000\n 8917 (21) X 20,000\n 8917 (22) X 20,000\n 8917 (23) X 20,000\n 8917 (24) X 20,000\n 9706 (01) X X 20,000\n 9706 (02) X 20,000\n 9723 (01) X 20,000\n 9723 (02) X 20,000\n 9723 (03) X X 20,000\n 9723 (04) X 20,000\n 9723 (05) X 20,000\n 9723 (06) X 20,000\n 9723 (07) X 20,000\n 9723 (08) X 20,000\n 9723 (09) X 20,000\n 9723 (10) X 20,000\n\n\n\n 43\n\x0cSCHEDULE OF ACTIVITIES WITH INSUFFICIENT\n DOCUMENTATION (CONT.)\n\n\n Activity Income Final inspections Assistance\n number documentation or certifications amount\n 9723 (11) X 20,000\n 9723 (12) X 20,000\n 9723 (13) X 20,000\n Totals 42 6 $795,000\n\n\n\n\n 44\n\x0c'


type: legislation

jurisdiction: EU

text:
 EUROPEISKA KOMMISSIONEN
 Bryssel den 12.11.2020
 COM(2020) 706 final
 2020/0316(NLE)
 Förslag till
 RÅDETS BESLUT
 om den ståndpunkt som på Europeiska unionens vägnar ska intas i gemensamma EES-kommittén avseende en ändring av bilaga IV (Energi) till EES-avtalet [32016R1719 - Riktlinje om förhandstilldelning av kapacitet]
 (Text av betydelse för EES)
 MOTIVERING
 1.BAKGRUND TILL FÖRSLAGET
 •Motiv och syfte med förslaget
 Utkastet till beslut av gemensamma EES-kommittén (som åtföljer förslaget till rådsbeslut) syftar till att ändra bilaga IV (Energi) till EES-avtalet för att införliva kommissionens förordning (EU) 2016/1719 av den 26 september 2016 om fastställande av riktlinjer för förhandstilldelning av kapacitet
 1
 med EES-avtalet.
 De nätföreskrifter och riktlinjer för elnät som utarbetats med grund i det tredje energipaketet fastställer tekniska bestämmelser som ska underlätta handeln inom EU:s interna elmarknad. En fullt fungerande och sammanlänkad inre energimarknad är avgörande för en trygg energiförsörjning, ökar konkurrenskraften och ser till att konsumenterna kan köpa energi till överkomliga priser. Långtgående elsammanlänkningar har inrättats mellan Norge, som är ett Eftaland inom EES-området, och EU:s medlemsstater. Det är viktigt att de tekniska bestämmelserna för handel inom EU:s inre marknad för el utvidgas till att omfatta EES-länderna, för att säkerställa rättslig enhetlighet i handeln med elektricitet.
 I kommissionens förordning (EU) 2016/1719 fastställs närmare bestämmelser om tilldelning av kapacitet mellan elområden på förhandsmarknaderna. I förordningen fastställs gemensamma metoder för att fastställa långsiktig kapacitet mellan elområden och en gemensam plattform på europeisk nivå för att erbjuda överföringsrättigheter för el, möjligheten att återlämna rättigheterna samt att överlåta dem mellan marknadsaktörer. Den ska tillämpas på alla överföringssystem, med undantag för överföringssystem på öar som inte är anslutna till andra överföringssystem.
 Anpassningarna i det bifogade utkastet till beslut av gemensamma EES-kommittén går utöver vad som kan anses vara rent tekniska anpassningar i den mening som avses i rådets förordning nr 2894/94. Unionens ståndpunkt ska därför fastställas av rådet.
 •Förenlighet med befintliga bestämmelser inom området
 Genom det bifogade utkastet till beslut av gemensamma EES-kommittén utvidgas den befintliga EU-politiken till att omfatta Eftastaterna i EES (Norge, Island och Liechtenstein).
 •Förenlighet med unionens politik inom andra områden
 Utvidgningen av EU:s regelverk till att omfatta Eftastaterna i EES – genom att det införlivas med EES-avtalet – sker i enlighet med EES-avtalets mål och principer att upprätta ett dynamiskt och homogent europeiskt ekonomiskt samarbetsområde, som är grundat på gemensamma regler och lika konkurrensvillkor.
 2.RÄTTSLIG GRUND, SUBSIDIARITETSPRINCIPEN OCH PROPORTIONALITETSPRINCIPEN
 •Rättslig grund
 Den lagstiftning som bör införlivas med EES-avtalet grundar sig på artikel 194 i fördraget om Europeiska unionens funktionssätt.
 Enligt artikel 1.3 i rådets förordning (EG) nr 2894/94
 2
 om formerna för genomförandet av avtalet om Europeiska ekonomiska samarbetsområdet ska rådet när det gäller denna typ av beslut fastställa unionens ståndpunkt på förslag från kommissionen.
 •Subsidiaritetsprincipen (för icke-exklusiv befogenhet)
 Förslaget är förenligt med subsidiaritetsprincipen av följande skäl:
 Målet med detta förslag, nämligen att säkerställa enhetligheten på den inre marknaden, kan inte i tillräcklig utsträckning uppnås av medlemsstaterna och kan därför, på grund av förslagets verkningar, bättre uppnås på unionsnivå.
 •Proportionalitetsprincipen
 I enlighet med proportionalitetsprincipen går detta förslag inte utöver vad som är nödvändigt för att nå målet.
 •Val av instrument
 I enlighet med artikel 98 i EES-avtalet har ett beslut av gemensamma EES-kommittén valts som instrument. Gemensamma EES-kommittén ska säkerställa att EES-avtalet genomförs och fungerar på ett effektivt sätt. I detta syfte ska kommittén fatta beslut i de fall som anges i EES-avtalet.
 3.RESULTAT AV EFTERHANDSUTVÄRDERINGAR, SAMRÅD MED BERÖRDA PARTER OCH KONSEKVENSBEDÖMNINGAR
 •Efterhandsutvärderingar/kontroller av ändamålsenligheten med befintlig lagstiftning
 Ej tillämpligt.
 4.BUDGETKONSEKVENSER
 Inga budgetkonsekvenser förväntas som en följd av införlivandet av ovannämnda förordning med EES-avtalet.
 5.ÖVRIGA INSLAG
 •Ingående redogörelse för de specifika bestämmelserna i förslaget
 Anpassning a – ingen tillämpning på Island och Liechtenstein
 Eftersom Islands överföringssystem inte är anslutet till andra överföringssystem bör kommissionens förordning (EU) 2016/1719 inte tillämpas på Island.
 Kommissionens förordning (EU) 2016/1719 bör inte tillämpas på Liechtenstein, som på grund av landets ringa storlek och det begränsade antalet elkonsumenter inte har något eget överföringssystem för el.
 Anpassning b och skäl 6 - känsliga uppgifter om elsystemet
 Kommissionens förordning (EU) 2016/1719 innehåller bestämmelser om skyldighet att lämna uppgifter till det europeiska nätverket för överföringssystem för el (Entso för el) och byrån för samarbete mellan energitillsynsmyndigheter (Acer). Anpassning b gör det möjligt för varje systemansvarig för överföringssystem och tillsynsmyndighet att utbyta och skydda sådana uppgifter.
 Anpassning c och skäl 7 - hänvisning till norska systemansvariga för överföringssystem, norska nominerade elmarknadsoperatörer (Nemo) och norska nationella tillsynsmyndigheter att delta i utveckling och godkännande av krav, villkor och metoder
 Den ovannämnda anpassningen och skälet anpassar relevanta bestämmelser i artikel 4 i kommissionens förordning (EU) 2016/1719 med avseende på relevanta organs deltagande i utvecklingen och godkännande av krav, villkor och metoder som ska omfatta Norge.
 2020/0316 (NLE)
 Förslag till
 RÅDETS BESLUT
 om den ståndpunkt som på Europeiska unionens vägnar ska intas i gemensamma EES-kommittén avseende en ändring av bilaga IV (Energi) till EES-avtalet
 [32016R1719 - Riktlinje om förhandstilldelning av kapacitet]
 (Text av betydelse för EES)
 EUROPEISKA UNIONENS RÅD HAR ANTAGIT DETTA BESLUT
 med beaktande av fördraget om Europeiska unionens funktionssätt, särskilt artikel 194 jämförd med artikel 218.9,
 med beaktande av rådets förordning (EG) nr 2894/94 av den 28 november 1994 om formerna för genomförandet av avtalet om Europeiska ekonomiska samarbetsområdet
 3
 , särskilt artikel 1.3,
 med beaktande av Europeiska kommissionens förslag, och
 av följande skäl:
 (1)Avtalet om Europeiska ekonomiska samarbetsområdet
 4
 (nedan kallat EES-avtalet) trädde i kraft den 1 januari 1994.
 (2)Enligt artikel 98 i EES-avtalet får gemensamma EES-kommittén besluta att ändra bland annat bilaga IV till EES-avtalet.
 (3)Kommissionens förordning (EU) 2016/1719 av den 26 september 2016 om fastställande av riktlinjer för förhandstilldelning av kapacitet
 5
 bör införlivas med EES-avtalet.
 (4)Bilaga IV till EES-avtalet bör därför ändras i enlighet med detta.
 (5)Unionens ståndpunkt i gemensamma EES-kommittén bör därför grunda sig på det bifogade utkastet till beslut av gemensamma EES-kommittén.
 HÄRIGENOM FÖRESKRIVS FÖLJANDE.
 Artikel 1
 Den ståndpunkt som ska intas på unionens vägnar i gemensamma EES-kommittén beträffande den föreslagna ändringen av bilaga IV (Energi) till EES-avtalet ska baseras på de utkast till gemensamma EES-kommitténs beslut som åtföljer det här beslutet.
 Artikel 2
 Detta beslut träder i kraft samma dag som det antas.
 Utfärdat i Bryssel den
 På rådets vägnar
 Ordförande
 (1)
 EUT L 259, 27.9.2016, s. 42.
 (2)
 EGT L 305, 30.11.1994, s. 6.
 (3)
 EGT L 305, 30.11.1994, s. 6.
 (4)
 EGT L 1, 3.1.1994, s. 3.
 (5)
 EUT L 259, 27.9.2016, s. 42.
 ---documentbreak---
 EUROPEISKA KOMMISSIONEN
 Bryssel den 12.11.2020
 COM(2020) 706 final
 BILAGA
 till
 Förslag till rådets beslut
 om den ståndpunkt som på Europeiska unionens vägnar ska intas i gemensamma EES-kommittén avseende en ändring av bilaga IV (Energi) till EES-avtalet [32016R1719 - Riktlinje om förhandstilldelning av kapacitet]
 BILAGA
 GEMENSAMMA EES-KOMMITTÉNS BESLUT
 nr [...]
 av den [...]
 om ändring av bilaga IV (Energi) till EES-avtalet
 GEMENSAMMA EES-KOMMITTÉN HAR ANTAGIT DETTA BESLUT
 med beaktande av avtalet om Europeiska ekonomiska samarbetsområdet (nedan kallat EES-avtalet), särskilt artikel 98, och
 av följande skäl:
 (1)Kommissionens förordning (EU) 2016/1719 av den 26 september 2016 om fastställande av riktlinjer för förhandstilldelning av kapacitet
 1
 bör införlivas med EES-avtalet.
 (2)Kommissionens förordning (EU) 2016/1719 är inte tillämplig på överföringssystem på öar som inte är anslutna till andra överföringssystem genom sammanlänkningar.
 (3)Eftersom Islands överföringssystem inte är anslutet till andra överföringssystem bör kommissionens förordning (EU) 2016/1719 inte tillämpas på Island.
 (4)På grund av landets ringa storlek och det begränsade antalet elkonsumenter har Liechtenstein inget eget överföringssystem för el. Kommissionens förordning (EU) 2016/1719 bör därför inte gälla Liechtenstein.
 (5)Hänvisningar till systemansvariga för överföringssystem, nominerade elmarknadsoperatörer (Nemo), tillsynsmyndigheter och aktörer bör förstås som att de inkluderar även systemansvariga för överföringssystem, nominerade elmarknadsoperatörer (Nemo), tillsynsmyndigheter och aktörer som företräder Norge.
 (6)Vid utarbetandet av gemensamma krav, villkor och metoder enligt kommissionens förordning (EU) 2016/1719 är det viktigt att alla nödvändiga uppgifter lämnas utan dröjsmål. Ett nära samarbete mellan systemansvariga för överföringssystem och tillsynsmyndigheter bör säkerställa att känsliga uppgifter, såsom detaljerade uppgifter om understationer, överföringssystem under jord, kontrollsystem och ingående sårbarhetsanalyser som kan användas för sabotageändamål, får ett effektivt skydd vid utarbetandet av krav, villkor och metoder. För en effektiv tillämpning av förordningen bör samma nivå i samarbetet om informationsutbyte och skydd av känsliga uppgifter inrättas i samarbetet med Norge.
 (7)Effektiva gränsöverskridande lagstiftningsramar är beroende av synpunkter från alla stora aktörer vid utarbetning av regionala eller EES-omfattande krav, villkor och metoder som kan komma att bli bindande efter tillsynsmyndigheternas godkännande. De systemansvariga för överföringssystem och andra aktörer bör därför delta i arbetet med att utveckla förslag till krav, villkor och metoder enligt förordningens olika bestämmelser De norska systemansvariga för överföringssystemen och nominerade elmarknadsoperatörerna bör bland annat delta i aktörernas beslutsfattande på ett liknande sätt som systemansvariga för överföringssystem och nominerade elmarknadsoperatörer som företräder en av EU:s medlemsstater.
 (8)Om regionala eller unionsomspännande förslag från systemansvariga för överföringssystem kräver godkännande genom beslut av mer än en tillsynsmyndighet, bör tillsynsmyndigheterna samråda och driva ett nära samarbete för att nå en överenskommelse innan de fattar sitt beslut Den norska tillsynsmyndigheten bör delta i detta samarbete.
 (9)Eftersom denna förordning antagits med grund i Europaparlamentets och rådets förordning (EG) nr 714/2009 av den 13 juli 2009 om villkor för tillträde till nät för gränsöverskridande elhandel och om upphävande av förordning (EG) nr 1228/2003
 2
 , är de anpassningar som utarbetats och antagits genom gemensamma EES-kommitténs beslut nr 93/2017 av den 5 maj 2017
 3
 avseende tillämpningen av förordning 714/2009, i synnerhet bestämmelserna i artikel 1.1 och 1.5 vilka föreskriver anpassningar av rollen för byrån för samarbete mellan energitillsynsmyndigheter i EES-sammanhang, relevanta även för den föreliggande förordningens tillämpning i EES-området, särskilt avseende artikel 4.8 och 4.10.
 (10)Bilaga IV till EES-avtalet bör därför ändras i enlighet med detta.
 HÄRIGENOM FÖRESKRIVS FÖLJANDE.
 Artikel 1
 Följande ska införas efter punkt 49 (kommissionens förordning (EU) 2015/1222) i bilaga IV till EES-avtalet:
 ”50.
 32016 R 1719: kommissionens förordning (EU) 2016/1719 av den 26 september 2016 om fastställande av riktlinjer för förhandstilldelning av kapacitet (EUT L 259, 27.9.2016, s. 42).
 Bestämmelserna i förordningen ska, inom ramen för detta avtal, tillämpas med följande anpassningar:
 (a)Förordningen ska inte tillämpas på Island och Liechtenstein.
 (b)Följande ska läggas till i artikel 7:
 ’Avtal mellan systemansvariga för överföringssystem och/eller tillsynsmyndigheter kan säkerställa att konfidentiella eller känsliga uppgifter får ett effektivt skydd och kan bidra till att alla uppgifter som behövs för att utveckla gemensamma krav, villkor och metoder lämnas utan dröjsmål’.
 (c)Artikel 4 ska ändras på följande sätt:
 i) Hänvisningarna till ’unionens befolkning’ i artikel 4.2 b, till ’det berörda områdets befolkning’ och till ’befolkningen i de deltagande medlemsstaterna’ i artikel 4.3 b ska läsas som att de även omfattar Norges befolkning vid bedömningen av huruvida tröskeln för den berörda befolkningens andel är uppnådd för att nå kvalificerad majoritet.
 ii) Hänvisningarna till ’regioner[na som] består av mer än fem medlemsstater’ respektive ’regioner som består av högst fem medlemsstater’ i artikel 4.3 ska förstås som ’regioner[na som] består av mer än fyra EU-medlemsstater och Norge’ respektive som ’regioner som består av högst fyra EU-medlemsstater och Norge'.”.
 Artikel 2
 Texten till förordning (EU) 2016/1719 på isländska och norska, som ska offentliggöras i EES-supplementet till Europeiska unionens officiella tidning, ska vara giltig.
 Artikel 3
 Detta beslut träder i kraft den [...], eller dagen efter det att den sista anmälan enligt artikel 103.1 i EES-avtalet har gjorts till gemensamma EES-kommittén
 4*, om denna dag infaller senare.
 Artikel 4
 Detta beslut ska offentliggöras i EES-delen av och EES-supplementet till Europeiska unionens officiella tidning.
 Utfärdat i Bryssel den [...].
 På gemensamma EES-kommitténs vägnar
 Ordförande
 [...]
 Sekreterarna
 för gemensamma EES-kommittén
 [...]
 (1)
 EUT L 259, 27.9.2016, s. 42.
 (2)
 EUT L 211, 14.8.2009, s. 15.
 (3)
 EUT L 36, 7.2.2019, s. 44.
 (4)
 *
 Konstitutionella krav finns angivna.