2013 CLA, LLP Consultant's Report - H.O.M.E. Program Income PresentationBCC Meeting
CliftonLarsonAllen LLP
Consultant Report
H.O.M.E. Program Income
January 14, 2014
Dwight E. Brock
TIMELINE
2
In a meeting with H.O.M.E. and County HHVS representatives, the
Clerk’s Office requested invoices, bank statements, and financial
statements supporting program income and expenditures from
both H.O.M.E. and HHVS.
03/15/11
Internal Audit again requested of HHVS invoices, bank statements,
and financial statements.
03/22/11
Email from Internal Audit to HHVS requesting HUD closing
statements for the purchase and sale of each house utilizing grant
funds.
03/29/11
From 3/15/11 to 3/31/11, Internal Audit did not receive any requested documentation.
TIMELINE (continued)
3
Internal Audit received HUD closing statements for the purchase
and sale of 11 of 13 properties receiving public monies from HHVS.
03/31/11
Email from Internal Audit to HHVS requesting additional invoices
supporting expenditure documentation to validate program
income and property information previously discussed at March
15th meeting.
05/09/11
Internal Audit met with HHVS to discuss Management Alert dated
6/17/11. After the meeting, HHVS delivered QuickBooks summary
documents provided by H.O.M.E.
06/30/11
TIMELINE (continued)
4
Internal Audit received reconciliation of program income from an
OMB Grant Coordinator. Grant Coordinator used QuickBooks
summary ledgers provided by H.O.M.E. to complete the
reconciliation, instead of detailed supporting documentation such
as invoices and bank statements.
07/11/11
Internal Audit sent letter dated 07/18/11 to H.O.M.E. requesting
documentation to support program income and expenditures.
County Staff informed of the letter via email.
07/20/11
Email from H.O.M.E. to County Staff suggesting to disregard the
letter sent by Internal Audit on 7/20/11.
07/21/11
TIMELINE (continued)
5
Follow-up letter from Internal Audit to H.O.M.E. once again
requesting documentation related to the expenditure of grant
funds.
08/18/11
Letter from H.O.M.E. to Internal Audit via email stating copies of
canceled checks supporting expenditures for 11 of the 13
properties will be provided by H.O.M.E. H.O.M.E.’s position is that
all other relevant documentation has already been provided.
08/22/11
Internal Audit met with John Barlow, Vice President, and Mike
Pettit, Secretary, of H.O.M.E. to discuss availability of records. Mr.
Pettit suggested the requested documentation be given to Internal
Audit to conclude the review.
08/25/11
6
TIMELINE (continued)
Copies of some, but not even close to all, cancelled checks and
related invoices hand delivered to Internal Audit by John Barlow.
Internal Audit was advised by John Barlow, again, that he had
provided all of the records Audit needed to complete the review.
09/22/11
Emails from Internal Audit to H.O.M.E. requesting backup for
missing information; some records provided via email the same
day. John Barlow’s e-mail from 11/08 stated he would have to
check storage for additional records, such as cancelled checks,
responses to RFPs, and IRS 990s. Obtaining these records from
John Barlow is like pulling teeth.
11/08/11
7
TIMELINE (continued)
Records (bid documents, related proposals, and additional
cancelled checks) that H.O.M.E. was willing to share hand delivered
by John Barlow to Internal Audit.
12/06/11
Between 12/06/11 and 5/09/12, Internal Audit did not receive any
financial records requested and therefore issued Audit Report
2011-4 citing the inability to calculate program income due to the
lack of financial records.
05/09/12
H.O.M.E. provided bank statements covering grant period for
“CDBG” account. These statements showed the existence of two
additional bank accounts, for which we had no records. H.O.M.E.
subsequently provided bank statements for these two accounts on
10/17/13 - 1 ½ years after discovery.
05/18/12
8
TIMELINE (continued)
Collier County BCC approved motion directing “all officers of
H.O.M.E. provide the County Manager the documentation by
Friday, April 26, 2013 and the County Manager to in turn provide
them to the County Clerk for auditing …”. Documentation such as
bank statements, HUD statements, and invoices needed to
determine program income.
04/23/13
County manager provided to the Clerk additional documentation
via e-mail indicating the documentation was submitted by
H.O.M.E.
04/26/13
Clerk of Courts engaged CliftonLarsonAllen LLP to perform an
independent analysis of the H.O.M.E. program with specific
emphasis to determine the amount of program income.
05/30/13
9
TIMELINE (continued)
CliftonLarsonAllen LLP met with former H.O.M.E. Directors, Internal
Audit staff, and HHVS staff to discuss preliminary results of
analysis. H.O.M.E. offered to provide additional documentation,
including debt instruments used to purchase properties and bank
statements. BCBE agreed to provide their subcontractor invoices
for work completed on each home to support their payments. To
date, these invoices have never been received, as noted in the
CliftonLarsonAllen, LLP report.
10/07/13
Internal Audit received e-mail from H.O.M.E. with a copy of a
$500k LOC promissory note in the name of H.O.M.E. and
guaranteed by the John Barlow Trust.
10/08/13
10
TIMELINE (continued)
Internal Audit emailed letter to former H.O.M.E. Directors and
HHVS staff summarizing documentation agreed to be provided
during 10/07/13 meeting, including the BCBE subcontractor
invoices .
10/09/13
Internal Audit received from H.O.M.E. copies of bank statements
related to accounts with Bank of America and Bank of Florida, as
referenced on 5/18/12.
10/17/13
HHVS provided copies of H.O.M.E. applications for $150k SHIP
grant and $427k CDBG grant, as requested at the initial 3/15/11
meeting and again during 10/07/13 meeting.
10/17/13
11
TIMELINE (continued)
HHVS provided Internal Audit a copy of the Initial Award Letter
addressed to H.O.M.E.
10/22/13
Internal Audit received from H.O.M.E. a spreadsheet detailing the
use of CDBG funds by H.O.M.E.
10/24/13
Internal Audit received from HHVS a copy of a letter dated 3/09/09
sent from Marcy Krumbine to H.O.M.E. addressing program
income. The letter incorrectly stated “Per the sub-recipient
agreement … a portion of the CDBG funds were going to remain in
the property in order to keep it affordable and the remainder was
going to come back to H.O.M.E., Inc. as program income.”
10/24/13
12
TIMELINE (continued)
Internal Audit received from H.O.M.E. a letter and spreadsheet
dated 3/15/09 sent to HHVS documenting a plan for the use of
program income and HHVS acknowledging receipt of the plan.
H.O.M.E.’s original application included home buyer’s assistance,
which was not approved by the Board. The amount awarded to
H.O.M.E. and approved by the Board was for $427,473, which did
not include home buyer’s assistance.
10/25/13
CliftonLarsonAllen LLP identified:
•Program income not returned to the County
•Insufficient Support of Construction Costs
•Potential Conflicts of Interest among H.O.M.E.
Directors
13
CliftonLarsonAllen Report
Program Generated Income (PGI)
•CliftonLarsonAllen calculated $75,675 in
PGI from H.O.M.E. activities
•PGI amount is net of $427,473 used for
home-buyer assistance
•H.O.M.E. returned $644.37 to County
14
Agreement - PGI
15
OMB Circular A-110
16
Agreement – Exhibit “A”
17
H.O.M.E. Grant Application
18
Project Description
1.Purchase or Build Home
2.Refurbish Home (w/ SHIP Funds)
3.Subsidize Home Price to Lower
Mortgage Payments
4.Keep Home Affordable Over Time
5.Cover Related Administrative Expenses
6.Close the Sale to Qualified Buyer
19
Budget
Application vs. Agreement
H.O.M.E. Application
Agreement
20
Incorrectly, the letter stated “Per
the sub-recipient agreement … a
portion of the CDBG grant funds
were going to remain in the
property in order to keep it
affordable and the remainder was
going to come back to H.O.M.E.,
Inc. as program income.”
Unauthorized Change by Staff
Letter does not follow OMB
Circular A-110 and Project
Scope defined in Agreement.
Staff is making decisions
contrary to Board approval.
Initial request for documentation
on 3/15/11. Letter received on
10/24/13, 2½ years after request.
CliftonLarsonAllen LLP identified:
•Program income not returned to the County
•Insufficient Support of Construction
Costs
•Potential Conflicts of Interest among H.O.M.E. Directors
21
CliftonLarsonAllen Report
24 CFR Sec. 84
Procurement Standards
22
Agreement - Procurement
23
Insufficient Support
of Construction Costs
•All invoices from Boran Craig Barber Engel
Construction Co., Inc. (BCBE) dated
10/25/2009. As of 12/04/13, no additional
supporting documentation has been provided.
•Without supporting documentation, it is
uncertain if costs paid by Contractor were
included in later invoices to H.O.M.E.
(potentially double counting rehabilitation
costs).
24
H.O.M.E. RFP – General Contractor
25
BCBE Proposal
26
Absolute subterfuge of a
document. Bid does not
include construction
costs, only contractors
fee (5% of the total cost
of work). BCBE charged
$2,500 contractor’s fee
for each property, even
though total cost of work
was less than $50,000
per property.
Insufficient Support of Costs
27
Housing Opportunities Made For Everyone, Inc. ATTACHMENT A
Boran Craig Barber Engel Invoice payments w/o detail BCBE request for detail
(per H.O.M.E. spreadsheets from QuickBooks) October 8, 2013
Apparent Apparent
Quick Books H.O.M.E BCBE BCBE
House # Address Date Check # Project # Invoice # Amount
1 4174 18th Place SW 12/02/08 5152 n/a not provided $ 837.00
1 4174 18th Place SW 12/02/08 5154 n/a not provided $ 42,227.62
1 4174 18th Place SW 12/02/08 515 n/a not provided $ 409.00
2 2082 41st Terrace SW 12/04/09 1124 28206 2820601 $ (266.00)
3 4833 21st Place 10/29/09 1112 29177 2917701 $ 32,620.00
4 1883 48th Street SW 08/21/09 1087 28214 2821401 $ 37,778.00
4 same 12/01/09 n/a 28214 2821401 $ (836.00)
5 2307 54TH Terrace SW 02/16/10 1135 29180 2918001 $ 40,798.00
6 5100 19th Ct. SW 03/22/10 5167 29185 2918501 $ 10,000.00
6 same 03/23/10 1142 29185 2918501 $ 18,239.00
7 2349 51st Street SW 10/28/09 1113 29190 2919001 $ 41,485.00
8 4473 20th Place SW 10/26/09 1114 29195 2919501 $ 38,724.00
9 2790 8th Avenue SE 08/21/09 1088 29200 2920001 $ 40,902.83
9 same 12/01/09 n/a 29200 2920001 $ (1,383.00)
10 2841 2nd Ave SE 08/21/09 1089 29205 2920501 $ 36,808.32
10 same 12/01/09 n/a 29205 2920501 $ (590.32)
11 4130 Cindy Ave 10/29/09 1115 29210 2921001 $ 31,262.00
12 4705 Orchard Ln 12/04/09 1125 29215 2921502 $ 16,078.00
13 530 10th Street NE 10/29/09 1116 29220 2922001 $ 25,707.00
Total = $ 410,800.45
28
Contractor’s Statement
No way to determine if
goods received, work
was completed, what
the work was, whether
any of this work was
bid, or whether BCBE
did all of the work.
CliftonLarsonAllen LLP identified:
•Program income not returned to the County
•Insufficient Support of Construction Costs
•Potential Conflicts of Interest among
H.O.M.E. Directors
29
CliftonLarsonAllen Report
Conflict of Interest
24 CFR Sec. 570.611
•Identifies potential conflicts of interest in the procurement of
supplies, equipment, construction, and services by recipients
when engaged in activities where CDBG funds are expended.
Paragraph (b) – Any person in a position to make decisions or gain
inside information may not have a financial interest in or benefit from
contracts or subcontracts involving CDBG-assisted activities either for
themselves or those with whom they have business or immediate
family ties, during their tenure or for one year thereafter .
Paragraph (c) – Applies to any person who is an employee, agent,
consultant, officer, or appointed official of the recipient or sub -
recipient receiving grant funds.
30
Agreement
31
Conflict of Interest
CEO, CFO, & COO of H.O.M.E. each had business relationships that
could be construed as a potential conflict of interest.
•CEO
Director & President of BCBE, construction company which provided construction related
rehabilitation services.
Resigned in December 2008, after BCBE emerged as the lowest qualified bidder. Rejoined
B.O.D. in 2010, after project activities were completed.
•CFO
Spouse is President of Insurance Co. which was underwriter for property & builder’s risk
insurance for majority of properties purchased by H.O.M.E.
Senior V.P. with Bank of America, responsibilities cover commercial customers. Bank of
America provided financing for one homebuyer.
•COO
B.O.D. member of Bank of Florida - Southwest. Bank provided financing to 12 of 13
homebuyers.
Bank of Florida - Southwest shut down in May 2010 by the Florida Office of Financial
Regulation.
32
33
Conflict of Interest - CEO
H.O.M.E. response to CEO Conflict of Interest comment
in CliftonLarsonAllen LLP report.
H.O.M.E. RFP dated 11/07/08
BCBE Proposal dated 11/25/08
•Mel Engel CEO on these dates
Summary
1.PGI of $75,675 in CLA report
2.Insufficiently supported costs of $410,800
Payments to Boran, Craig, Barber, Engel
Construction Company, Inc. (conflicted contractor)
were not properly approved or sufficiently
documented.
3.$427,473 in CDBG funds due to all identified
problems
4.$200,000 in SHIP funds due to all identified
problems
34
Summary
Grant Awards
•CDBG = $427,473
•SHIP = $200,000
Total = 627,473
Total Construction Costs Paid to BCBE = $461,249
Percentage of Grant Funds = 73.5%
35
Thank you
36