Agenda 06/23/2015 Item #10B6/23/2015 103.
EXECUTIVE SUMMARY
Recommendation to direct the County Attorney to investigate and, if appropriate, file a
lawsuit against H.O.M.E. as well as its executives and directors for the amount of
$427,472.42 plus lawsuit costs for mismanagement of CDBG funds issued to Collier County.
OBJECTIVE: For the Board of County Commissioners to make the taxpayer whole for the
amount of funds ordered by the U. S. Department of Housing and Urban Development to be
reimbursed by the County due to mismanagement by H.O.M.E.
CONSIDERATIONS: On September 23, 2008, the County entered into a written agreement with
Housing Opportunities for Everyone, Inc. (H.O.M.E.) in the amount of $427,472.42 for the
acquisition, rehabilitation and resale of up to 12 foreclosure properties to benefit low and very low
income families.
During the U.S. Department of Housing and Urban Development's audit of the funds, it reported
that some of H.O.M.E.'s Chief Financial Officer(s), Chief Operating Officers (COOS) and several
directors of H.O.M.E. received financial benefits proving a conflict of interest. Additionally, the
organization (H.O.M.E.) already owned some residences of its own and the number is unclear.
The audit reports that two properties were also given two different appraisal values in violation of
the program.
The U.S. Department of Housing and Urban Development has demanded that Collier County
reimburse its CDBG program account in the amount of $427,472.42 plus any program income
earned from non - federal funds in a letter issued on June 8, 2015. See Attachment A.
Due to discrepancies both financial and ethical by H.O.M.E.'s executives and staff, the County
Attorney should be directed to investigate this entire matter and, if appropriate, file suit against
H.O.M.E., its Executive Director and, COOs and CFOs involved with the program at this time in
order to make the taxpayer and County whole without fiscal impact.
FISCAL IMPACT: Cost of the lawsuit to be determined by the County Attorney's Office.
Without lawsuit, the County may owe HUD $427,472.42 plus program income.
GROWTH MANAGEMENT IMPACT: There is no Growth Management impact associated
with this Executive Summary.
LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney, is
approved as to fonn and legality, and requires a majority vote for Board action. -JAK
RECOMMENDATION: Recommendation to direct the County Attorney to investigate and, if
appropriate, file a lawsuit against H.O.M.E. as well as its executives and directors for the amount
of $427,472.42 plus lawsuit costs and program income earned from any non - federal funds for
mismanagement of CDBG funds issued to Collier County.
PREPARED BY: Commissioner Tom Henning
Attachments: A) June 8, 2015 HUD Order for Reimbursement
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COLLIER COUNTY
Board of County Commissioners
Item Number: 10.10.B.
6123/2015 103.
Item Summary: Recommendation to direct the County Attorney to file lawsuit against
H.O.M.E. as well as its executives and directors for the amount of $427,472.42 plus lawsuit
costs for mismanagement of CDBG funds issued to Collier County. (Commissioner Henning)
Meeting Date: 6/23/2015
Prepared By
Name: SmithCamden
Title: Executive Coordinator to Commissioner,
6/15/2015 11:31:41 AM
Approved By
Name: DurhamTim
Title: Executive Manager of Corp Business Ops,
Date: 6/15/2015 11:49:20 AM
Name: KlatzkowJeff
Title: County Attorney,
Date: 6/15/2015 1:1 l :49 PM
Name: OchsLeo
Title: County Manager, County Managers Office
Date: 6/15/2015 1:35:02 PM
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. T
'ptxeura
j U.S. Department of Housing and Urban Development
o Commeunity Planning and Development
R
i 1 g on IV, Miami Field Office
Brickell Plaza Federal Building
909 SE First Avenue, Room 500
Miami, FL 33131 -3042
June 8, 2015
Ms. Kimberley Grant, MBA, Director
Collier County
Housing and Human Services Department
3339 East Tamiami Trail
Suite 211
Naples, FL 34112 -5361
Dear Ms. Grant:
SUBJECT: Collier County - H.O.M.E. — Housing Opportunities for Everyone
Request for Reimbursement of CDBG funds — IDIS Activity #283
6/23/2015 103.
This is in response to documentation submitted, along with on -site meetings, emails, and
conference calls in reference to IDIS # 283. The County entered into a written agreement with
Housing Opportunities for Everyone, Inc. (H.O.M.E.), on September 23, 2008, in the amount of
$427,472.42 for the Acquisition /Rehabilitation/Resale of up to 12- foreclosure properties to benefit
low and very low income families in Collier County.
A review of HUD's Integrated Disbursement and information System (IDIS) revealed the
activity was funded in the amount of $427,472.42; a total of 11 units were completed and sold to
low and moderate income households. All funds for this activity have been drawn and the activity
was marked by the county as complete. However, the accomplishment narrative is unclear. Also, it
appears that H.O.M.E. Inc. had homes it already owned; it is not clear as to how many.
A review of documentation submitted by the County show several areas of non-
compliance and concerns.
Specifically, the documentation submitted revealed that the county did not ensure adequate
oversight and monitoring of its subrecipient, H.O.M.E. Inc. as required by federal regulations.
Some of the issues included Appraisals, Program Income, Environmental and Conflict of Interest.
The County should have the documentation of compliance showing that the homes were acquired,
contracts as applicable, eligible costs for rehabilitation etc., and the disposition costs of the
properties.
HUD's mission is to create strong, sustainable, inclusive communities and quality, affordable homes for alL
w'w'w-- hov espanol.hud.gov
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6/23/2015 10.B.
Appraisals
Our review of appraisals disclosed that mortgages exceeded the appraised value. In addition, it was
noted that one property listed two appraisals with different appraised values. The regulations at 2
CFR Part § 225, Appendix A specifies reasonable costs: a cost is reasonable if, in its nature and
amount, it does not exceed that which would be incurred by a prudent person under the
circumstances prevailing at the time the decision was made to incur the cost. The question of
reasonableness is particularly important when governmental units or components are
predominately federally - funded. In determining reasonableness of a given cost, consideration
shall be given to:
a. Whether the cost is of a type generally recognized as ordinary and necessary for the
operation of the governmental unit or the performance of the Federal award.
b. The restraints or requirements imposed by such factors as: Sound business practices;
arm's - length bargaining; Federal, State and other laws and regulations; and, terms and
conditions of the Federal award.
c. Market prices for comparable goods or services.
d. Whether the individuals concerned acted with prudence in the circumstances
considering their responsibilities to the governmental unit, its employees, the public
at large, and the Federal Government.
e. Significant deviations from the established practices of the governmental unit which
may unjustifiably increase the Federal award's cost.
Program Income
The regulations at 24 CFR Part § 570.504 (a) require that "The receipt and expenditure of program
income as defined in § 570.500(a) shall be recorded as part of the financial transactions of the grant
program." The County is responsible for either collecting the program income from its
subrecipients or allowing the subrecipients to use any program income generated for eligible
activities that meet a national objective. The language in the subrecipient agreement (i.e.: scope of
work) is important to determine what the subrecipient was required to carry out. The subrecipient
agreement should state what the subrecipient was required to do with the program income it
received from the sale of properties acquired/rehabilitated with CDBG funds. It cannot be a vague
statement; it must clearly detail what the subrecipient is allowed to do with the program income. In
addition, program income should have been receipted in IDIS as it was earned in that it is used to
determine in part how much the County may spend on public services and planning and
administration.
Environmental
The regulation at 24 CFR Part §58 and Part §570.604 require that grantees who receive CDBG
funds must complete an environmental review of all project activities prior to obligating CDBG
funds. Though the County's property inspection checklist disclosed that an environmental review
was completed on 2/23/2009, (it is not clear if this is for one property or all of them) this office was
not able to conf= that it was actually complete.
2
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6/23/2015 10. B.
The documentation submitted did not contain an environmental file. This implies that that the
County has no documentation to indicate that an environmental review had been completed.
Consequently, the county would be required to reimburse the $472,472.42 from the line of credit
from which it was drawn.
Conflict of Interest
Our review revealed that several members of H.O.M.E. Inc., which included Directors, Chief
Financial Officers (CFOs), and Chief Operating Officers (COOs), received financial benefits. The
regulations at 24 CFR §570.611 (b) and (c) states that "... no persons described in paragraph (c) of
this section who exercise or have exercised any functions or responsibilities with respect to
activities assisted under this part, or who are in a position to participate in a decision - making
process or gain inside information with regard to such activities, may obtain a financial interest or
benefit from a CDBG - assisted activity, or have a financial interest in any contract, subcontract, or
agreement with respect to a CDBG- assisted activity, or with respect to the proceeds of the CDBG-
assisted activity, either for themselves or those with whom they have business or immediate family
ties...The conflict of interest provisions of paragraph (b) of this section apply to any person who is
an employee, agent, consultant, officer, or elected official or appointed official of the recipient, or of
any designated public agencies, or of subrecipients that are receiving funds under this part.
In summary, the County must reimburse its CDBG program account in the amount of $427,472.42
plus any program income earned from non - federal funds. You may contact our office regarding the
proper procedure for reimbursement of funds. In addition, the County must implement policies and
procedures in accordance with the requirements of managing and implementing its CDBG program,
including but not limited to ensuring adequate monitoring of sub - recipients. Once completed, the
policies and procedures must be distributed to staff and incorporated into the County's day -to -day
activities.
Should you have any question regarding this correspondence, please contact Nora E. Casal, Senior
CPD Representative, at 305 -520 -5009 or via email at: nora.e.casal@hud.aov.
Sin rely,
Ann D. Chavis, Director
Community Planning & Development
cc: Lisa Bustamante, Program Manager, USHUD
James D. Molenaar, Internal Audit Manager, Collier County
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