Northwest Indiana Discussion

Section III – Federal Award Findings and Questioned Costs
FINDING 2010-3 - DAVIS-BACON ACT

Federal Agency: U.S. Department of Housing and Urban Development
Federal Program: Community Development Block Grants/Entitlement Grants
ARRA Community Development Block Grant ARRA Entitlement Grants (CDBG-R)
CFDA Number: 14.218, 14.253 Award Number: B-09-MC-18-0006, B-10-MC-18-0006, B-09-MY-18-0006

Compliance with the Davis-Bacon Act requires payment of federal prevailing wage rates for
construction, repair or alteration work. The grantee must establish controls for monitoring wages paid by
contractors. They must obtain recent and applicable wage rates from the U.S. Department of Labor and
incorporate them into the construction contract.

According to a U.S. Department of Housing and Urban Development on-site review conducted on
March 24, 2011, three projects in which Davis Bacon laws were applicable, adequate payroll records
were not maintained nor were the proper labor standards provisions and correct wage decision included
in the bid specifications or the construction contract. The City also failed to conduct the appropriate wage
interviews for all three projects reviewed. The lack of monitoring of compliance with the Davis-Bacon Act could result in cancellation of contracts and/or the repayment of federal funds.

FINDING 2010-5 - PROCUREMENT
Federal Agency: U.S. Department of Energy
Federal Program: ARRA Energy Efficiency and Conservation Block Grant Program (EECBG)
CFDA Number: 81.128
Award Number: SC0001386

The City submitted their overall goals and objectives for the Energy Efficiency and Conservation
Block Grant Program (EECBG) to the U.S. Department of Energy which included the breakdown of
activities and the budgeted amounts for these activities. The planned activities included: EECBG
strategy development, administration/program delivery, marketing/outreach, light bulb giveaway, and the
remaining portion was housing, commercial, and large business audits and retrofits.

The City submitted a Request For Proposal (RFP) for consulting services for the administration of the EECBG program which were due to the City by January 22, 2010. The services included in the RFP
were: marketing, evaluation of selected buildings, oversight of contractor selection and the construction
work, maintenance of records, assistance with reporting requirements, and facilitation of public presentations.
The City received four proposals for consulting services for $364,000, $133,500, $72,600 and
$88,000. The proposal for $88,000 also included an amount for construction services for another
$640,000 for a total proposal of $728,000. (now what ever happened to taking the lowest bid?)

The City, without supporting documentation to document the reasoning, chose the vendor that proposed both the consulting and construction portion of the project even though the RFP did not provide general plans or specifications for the construction portion of the project. The awarded contract totaled $530,000 even though the total proposal amount submitted was $728,000 for both the consulting and construction portion.

The City did not prepare general plans and specifications for the public work, publish notice in
accordance with Indiana Code 5-3-1 calling for sealed proposals for the public work needed, or allow for
the submission of bids separately for the construction portion of the project; therefore bypassing the City's
procurement policy. The City's procurement policy is to follow Indiana Code.
Since the construction services were not let in accordance with Indiana Code, $323,865 of 2010
grant disbursements made to the construction company are considered questioned costs.

Failure to properly procure public works projects in accordance with state and federal guidelines
could result in the contract for public work being voided and the City losing future federal awards .
We recommended the City establish control procedures to ensure that all contracts awarded,
whether consulting services or construction, are awarded in accordance with state and federal guidelines.

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

The City prepared a Schedule of Federal Grant Receipts and Disbursements for 2010 that was
materially inaccurate. The City's grant schedule did not include the proper Catalog of Federal Domestic Assistance (CFDA) titles and numbers for the following grants:




Program Title Per City CFDA#
CDBG - Entitlement Grants Custer - Neighborhood Stabilization Program 14.859 14.218
ARRA Community Development Block Grant ARRA Entitlement Grants (CDBG-R) -- 14.253
Emergency Shelter Grants Program 14.218 14.231
HOME Investment Partnerships Program 14.403 14.239
ARRA Homelessness Prevention and Rapid Re-Housing Program 14.235 14.257
Fair Housing Assistance Program - State and Local 14.403 14.401
Federal Equity Sharing -- 16.xxx
ARRA Federal Transit - Formula Grants -- 20.507
State and Community Highway Safety 20.604 20.600
Alcohol Traffic Safety and Drunk Driving Prevention Incentive Grants 20.604 20.601
Capitalization Grants for Clean Water State Revolving Funds -- 66.458
ARRA Capitalization Grants for Drinking Water State Revolving Funds -- 66.468
ARRA Energy Efficiency and Conservation Block Grant Program (EECBG) -- 81.128
In addition, grants awarded through the American Recovery and Reinvestment Act of 2009
(ARRA) were not identified on the City's grant schedule. The following grants were determined to be


ARRA funded grants:
CFDA # Program Title Expended
14.253 ARRA Community Development Block Grant ARRA Entitlement Grants (CDBG-R) $ 549,779
14.257 ARRA Homelessness Prevention and Rapid Re-Housing Program 8 64,720
20.205 ARRA Highway Planning and Construction 58,484
20.507 ARRA Federal Transit - Formula Grants 2 09,378
66.468 ARRA Capitalization Grants for Drinking Water State Revolving Funds 1,072,682
81.128 ARRA Energy Efficiency and Conservation Block Grant Program (EECBG) 3 36,337

The City did not ensure that employees had the adequate training, nor did they take advantage of
available opportunities to seek the guidance necessary, to prepare an accurate Schedule of Expenditures
of Federal Awards. In addition, there was a lack of management oversight or approval of the schedule
before it was filed with the state. Adequate internal control over reporting of federal awards requires that
employees be aware of the applicable requirements and that they have the requisite knowledge and skills
to prepare accurate schedules.

In addition, adequate internal control requires sufficient supervision and
oversight by management and the governing bodies to ensure accurate reporting of federal awards.
Circular No. A-133, Audit of States, Local Governments, and Non-Profit Organizations, Subpart
C, has the following requirements for grantees:

"The auditee shall:
(a) Identify, in its accounts, all Federal awards received and expended and the Federal
programs under which they were received. Federal program and award identification
shall include, as applicable, the CFDA title and number, award number and year, name of
the Federal agency, and name of the pass-through entity.

(b) Maintain internal control over Federal programs that provides reasonable assurance
that the auditee is managing Federal awards in compliance with laws, regulations, and
the provisions of contracts or grant agreements that could have a material effect on each
of its Federal programs.

(c) Comply with laws, regulations, and the provisions of contracts or grant agreements
related to each of its Federal programs.

(d) Prepare appropriate financial statements, including the schedule of expenditures of
Federal awards in accordance with §___.310.
§___.310 Financial statements.

(b) Schedule of expenditures of Federal awards. The auditee shall also prepare a
schedule of expenditures of Federal awards for the period covered by the auditee's
financial statements. While not required, the auditee may choose to provide information
requested by Federal awarding agencies and pass-through entities to make the schedule
easier to use. For example, when a Federal program has multiple award years, the
auditee may list the amount of Federal awards expended for each award year
separately."

......
http://www.in.gov/sboa/WebReports/B39219.pdf%20pages%2046%20and%2048


Nearly $3,000,000 in expenditures which were unaccounted for. 8)