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From: "Kinton, Craig" <craig.kinton@dallascityhall.

com>
Subject: FW: Follow-up to Sept. 26 conference call
Date: October 25, 2016 at 4:50:26 PM CDT
To: "Williams, Chan" <chan.williams@dallascityhall.com>
Cc: "Gates, Jennifer" <jennifer.gates@dallascityhall.com>, "Griggs, Scott" <scott.griggs@dallascityhall.com>, "Gonzalez, AC"
<AC.Gonzalez@dallascityhall.com>, "Sims, Alan" <alan.sims@dallascityhall.com>, "Reich, Mary Elizabeth"
<elizabeth.reich@dallascityhall.com>, "Mitchell, Bernadette" <bernadette.mitchell@dallascityhall.com>, "Ireland, Jack"
<jack.ireland@dallascityhall.com>

Chan,
Your responses to HUD regarding their questions stemming from the Office of the
City Auditors report issued last March on the Housing Departments operations and
the conference call held on September 26 th with Ms. Henley are disturbing,
especially this:
The City Auditors Office has not provided specific details on their file review; only generalization of the
concerns. Given the number of files and projects reviewed; in the absence of additional information, we
have no way to direct follow up or whether our follow up will address the concerns noted in the audit
report. While we did agree with the auditors recommendation to develop formal policies and procedures,
we did not concur with statements regarding the documentation. The auditors report concluded that
projects were completed and did not report any questioned costs.

Multiple discussions were held with management throughout the audit. There were
many opportunities to discuss and resolve any concerns about the results or
conclusions of this audit. An exit conference was held with Bernadette Mitchell and
Allen Sims which I attended. To my knowledge, at no time during the course of this
audit, during the exit conference or after the report release did management
question the conclusion stated in the report that the documentation of monitoring
practices was either absent, limited, inconsistent or incomplete. Additionally,
when this audit was briefed to the Housing Committee, management had an
opportunity to voice any concerns about the audit. I recently reviewed the
recording of this meeting and there was no mention in the testimony by either Ms.
Mitchell or Mr. Sims regarding concerns about the conclusions of the audit.
Furthermore, no one from management has requested any additional details about
the files reviewed subsequent to the audit completion. To suggest that this office
has not provided specific details on their file review, only generalization of the
concerns is disingenuous at best.
Finally, please understand that the scope of the audit was projects identified by
management as completed in FY 2012 through FY 2014 and that establishing
questioned costs was not an objective of the audit. The auditors stopped their
sample tests after reviewing ten project files and confirming with management
(Cynthia Rogers-Ellickson) that the files reviewed were representative of the
remaining files.
If you need additional information from this Office, we are ready to assist.
Regards,
Craig D. Kinton

City Auditor
214-670-3222
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From: Henley, Shirley J [mailto:Shirley.J.Henley@hud.gov]


Sent: Tuesday, October 25, 2016 7:12 AM
To: Kinton, Craig <craig.kinton@dallascityhall.com>
Subject: FW: Follow-up to Sept. 26 conference call
Good Morning Craig,
Please see the additional response, below.
From: Williams, Chan [mailto:chan.williams@dallascityhall.com]
Sent: Monday, October 24, 2016 7:12 PM
To: Henley, Shirley J <Shirley.J.Henley@hud.gov>
Cc: Mitchell, Bernadette <bernadette.mitchell@dallascityhall.com>; RogersEllickson, Cynthia Y <cynthia.rogersellic@dallascityhall.com>
Subject: RE: Follow-up to Sept. 26 conference call
Shirley,
In reading back through our responses, it may be helpful for us to clarify a bit more on the response to the
second question While some of the projects were construction projects, many were not. These
projects involved land acquisitions which included appraisals; gap financing which included analysis of
sales prices and subsidy appropriateness; and interim financing for construction which required
repayment upon sale. Recognizing that only 10 projects were reviewed, consistent documentation was
not required for all projects as they were different in scope. As previously mentioned, projects were
completed and no questions were raised related to costs.

From: Williams, Chan


Sent: Thursday, October 20, 2016 6:46 PM
To: 'Henley, Shirley J' <Shirley.J.Henley@hud.gov>
Cc: Mitchell, Bernadette <bernadette.mitchell@dallascityhall.com>; RogersEllickson, Cynthia Y <cynthia.rogersellic@dallascityhall.com>
Subject: RE: Follow-up to Sept. 26 conference call
Shirley,
Please see responses to follow up questions below.

From: Henley, Shirley J [mailto:Shirley.J.Henley@hud.gov]


Sent: Tuesday, October 11, 2016 10:15 AM
To: Williams, Chan <chan.williams@dallascityhall.com>
Cc: Mitchell, Bernadette <bernadette.mitchell@dallascityhall.com>; Rogers-

Ellickson, Cynthia <cynthia.rogersellic@dallascityhall.com>; Henley, Shirley J


<Shirley.J.Henley@hud.gov>
Subject: RE: Follow-up to Sept. 26 conference call
Good Morning
Thank you for the Oct. 6 response.
After reviewing the responses:
The fourth bullet, regarding 30 percent of logs did not include inspector visits to
construction sites, response does not address, what monitoring procedures were in
place by HOU to ensure inspectors completed site visits to construction sites.
Please provide monitoring information completed by HOU for the above.
City Response: Inspections were conducted on all projects identified in the 2016 audit report. At that
time, the development manager met with inspectors on a biweekly basis and received reports on the
status of each unit under construction. Prior to submitting payment requests to the Finance Division for
processing, Coordinators conducted compliance reviews and signed off on the payment. The
compliance review included additional follow up with inspectors to ensure that site visits were conducted.
Payments were processed by the Finance Division when all signatures were confirmed. Attached is the
inspections Policies and Procedures Manual that details how and when inspections are conducted.
Updates have been made to ensure consistency of how files are maintained and archived.

At present, has HOU located, completed, or corrected the limitations and


inconsistencies in the documentation for the $29.9 million from FY 2012 through FY
2014 identified in the March 18, 2106 City Auditors report?
Please provide a written response to this question.
City Response: The City Auditors Office has not provided specific details on their file review; only
generalization of the concerns. Given the number of files and projects reviewed; in the absence of
additional information, we have no way to direct follow up or whether our follow up will address the
concerns noted in the audit report. While we did agree with the auditors recommendation to develop
formal policies and procedures, we did not concur with statements regarding the documentation. The
auditors report concluded that projects were completed and did not report any questioned costs.

From: Williams, Chan [mailto:chan.williams@dallascityhall.com]


Sent: Thursday, October 06, 2016 10:34 PM
To: Henley, Shirley J <Shirley.J.Henley@hud.gov>
Cc: Mitchell, Bernadette <bernadette.mitchell@dallascityhall.com>; RogersEllickson, Cynthia <cynthia.rogersellic@dallascityhall.com>
Subject: RE: Follow-up to Sept. 26 conference call
Shirley please see responses to your questions below.
The $29.9 million to complete 54 projects was provided from funding sources
that included Community Development Block Grant (CDBG), HOME Investment
Partnerships Program (HOME) and the Neighborhood Stabilization Program (NSP).
During the call, Ms. Mitchell stated there possibly was another HUD funding source
through Multifamily. Please verify if HUD, Multifamily funds were included in any of
the 54 projects.

City Response: The funding sources used for the 54 contracts representing 36 projects included CDBG,
HOME, NSP and General Obligation Bonds. No HUD, Multifamily funds were included.

Project selection, prior to FY 2015, was performed solely by the former HOU
Director who did not document the reasoning for choosing particular Projects.
What is the current, documented HOU process for Project selection? Please identify
even if in DRAFT.
What is the current, documented HOU process for developer selection? Please
identify even if in DRAFT.
What documentation was evaluated and maintained by HOU staffs, prior to FY 2015,
for developers financial and compliance history and what changes in this
documentation, if any, are in place in response to the March 18, 2016 report?
City Response: The current selection process for projects and developers is detailed on pages 3-5 of the
attached Development Divisions Administration Manual. (ATT 1) . Prior to 2015, the evaluation of
financial capacity and compliance history was performed by the staff. Attached is the City of Dallas
Development Division Policies and Procedures manual that details the process for selecting projects. This
is the same Policies and Procedures manual that is under review by our Internal Controls staff.

For the evaluation of developers reimbursement, in regard to reasonable


expenses and charges consistent with the Project budget, HOU utilizes the AIA
percent completion form signed by three staff members. Please verify.
What additional documentation, such as invoices, inspectors and/or coordinator
reports, photographs, etc. are included with the signed AIA form?
City Response: Budgets are negotiated at the time of the underwrite of the project prior to the contract
execution. Staff processes payments based on the originally negotiated budget. Payments are signed by
the Coordinator, Inspector and Manager. The payment is forwarded to a separate Finance Division that
posts the payment to the Citys accounting system and then to IDIS. Invoices are attached for soft
costs. Inspectors visit the sites, complete the project log sheets, take pictures, and obtain green tags
when applicable to place in the files before they sign off on the payment request. Coordinators receive the
payment request, review approved contract budget for compliance, and discusses percentage of
completion with the inspector before they sign off on the payment. Payments are submitted to the
Finance Division for processing when all signatures are confirmed.

The March 18, 2016 report identified 30 percent of logs did not include inspector
visits to construction sites. What criteria was in place for HOU inspector site visits
to construction sites, what type of documentation, i.e., checklists, reporting forms,
etc.?
What monitoring procedures were in place by HOU to ensure inspectors completed
site visits to construction sites?
What is the current HOU criteria for inspector visits to construction sites and how
are the visits documented? Where is the documentation maintained and what HOU
staff reviews the documentation?
City Response: Inspectors were required to make site visits at least once a week and document project
progress on weekly reports. The inspectors met with the Coordinators and Manager once a week to
discuss the inspections. Separate inspection files for each project were maintained. Currently, the
inspectors follow the same procedure, with the addition of more detailed documentation, files and
scheduled meetings. The documentation is held by the inspector, discussed with the Coordinators and
reviewed by the Inspections Manager. Monthly, the inspector also provides a status report of each
projects progress to the Development Manager.

What criteria was in place, prior to FY 2015, for HOU coordinator meetings with
developers? What type of documentation, i.e., report, checklist, etc., was utilized by
coordinators when meetings occurred with developers?
What is the current criteria for coordinator meetings with developers and how are
the meetings documented? Where is the documentation maintained and what HOU
staff reviews the documentation?
City Response: Prior to FY 2015, the process for the Coordinators was that they met with the developers
and other pertinent staff to explain the contract terms and regulations, discuss the process for
inspections, payments, Davis Bacon, Environmental Review and all other requirements prior to execution
of the contract. After contract execution, the developers and Coordinators discussed project items once a
week. We have now added additional documentation of a checklist that the developer and Coordinator
sign to document the discussions. As the project progresses, the Coordinator logs the site visits and
meetings. The documentation is maintained in the project files.

What was the HOU written criteria and process for Project underwriting for the
54 Projects identified in the March 18, 2016 report? What is the HOU written criteria
and process for Project underwriting at present? Please identify even if in DRAFT.
City Response: The 54 contracts representing 36 projects were underwritten utilizing federal
standards. The submission of projects was on a first come first serve basis, or part of a Neighborhood
Investment Program Area Plan, or a CHDO project. (See ATT 2 for steps.) In 2015, the City began
issuing Notices of Funding Availability (NOFA) which details how development projects are solicited,
eligible, and evaluated. It is posted annually to announce the Citys availability of funding for projects. In
addition to the use of HOME underwriting standards, evaluation checklists include a new Fair Housing
analysis and additional City of Dallas concerns. Attached for your review is a copy of the Policies and
Procedures that outlines the current underwriting and selection process. (ATT 1) As with all City
commitments, the Dallas City Council has and continues to approve all contracts and funding awards.

From: Henley, Shirley J [mailto:Shirley.J.Henley@hud.gov]


Sent: Wednesday, September 28, 2016 12:17 PM
To: Williams, Chan <chan.williams@dallascityhall.com>
Subject: RE: Follow-up to Sept. 26 conference call
Good Morning Chan
Does Oct. 6 work ?
From: Williams, Chan [mailto:chan.williams@dallascityhall.com]
Sent: Wednesday, September 28, 2016 10:57 AM
To: Henley, Shirley J <Shirley.J.Henley@hud.gov>
Subject: RE: Follow-up to Sept. 26 conference call
I know that HOU is working on this response, Bernadette and I have talked a couple of times this week.
However, it will be a great challenge (if possible at all) to complete our concurrence process on this
response in time to meet the requested due date. While my request would be Friday, Oct 7th, I would
appreciate any additional days you could allow.

From: Henley, Shirley J [mailto:Shirley.J.Henley@hud.gov]


Sent: Wednesday, September 28, 2016 10:29 AM
To: Williams, Chan <chan.williams@dallascityhall.com>

Cc: Henley, Shirley J <Shirley.J.Henley@hud.gov>


Subject: Follow-up to Sept. 26 conference call
Good Morning Chan
In follow-up to the Sept. 26 conference call regarding the March 18, 2016, Audit of
the Department of Housing/Community Services Contract Monitoring report, with
the City of Dallas HOU and City Auditor staffs, Ms. Bernadette Mitchell agreed to
provide a written response to:
The $29.9 million to complete 54 projects was provided from funding sources
that included Community Development Block Grant (CDBG), HOME Investment
Partnerships Program (HOME) and the Neighborhood Stabilization Program (NSP).
During the call, Ms. Mitchell stated there possibly was another HUD funding source
through Multifamily. Please verify if HUD, Multifamily funds were included in any of
the 54 projects.
Project selection, prior to FY 2015, was performed solely by the former HOU
Director who did not document the reasoning for choosing particular Projects.
What is the current, documented HOU process for Project selection? Please identify
even if in DRAFT.
What is the current, documented HOU process for developer selection? Please
identify even if in DRAFT.
What documentation was evaluated and maintained by HOU staffs, prior to FY 2015,
for developers financial and compliance history and what changes in this
documentation, if any, are in place in response to the March 18, 2016 report?
For the evaluation of developers reimbursement, in regard to reasonable
expenses and charges consistent with the Project budget, HOU utilizes the AIA
percent completion form signed by three staff members. Please verify.
What additional documentation, such as invoices, inspectors and/or coordinator
reports, photographs, etc. are included with the signed AIA form?
The March 18, 2016 report identified 30 percent of logs did not include inspector
visits to construction sites. What criteria was in place for HOU inspector site visits
to construction sites, what type of documentation, i.e., checklists, reporting forms,
etc.?
What monitoring procedures were in place by HOU to ensure inspectors completed
site visits to construction sites?
What is the current HOU criteria for inspector visits to construction sites and how
are the visits documented? Where is the documentation maintained and what HOU
staff reviews the documentation?
What criteria was in place, prior to FY 2015, for HOU coordinator meetings with
developers? What type of documentation, i.e., report, checklist, etc., was utilized by
coordinators when meetings occurred with developers?
What is the current criteria for coordinator meetings with developers and how are
the meetings documented? Where is the documentation maintained and what HOU
staff reviews the documentation?

What was the HOU written criteria and process for Project underwriting for the
54 Projects identified in the March 18, 2016 report? What is the HOU written criteria
and process for Project underwriting at present? Please identify even if in DRAFT.
I would appreciate a written response to the above by October 3, 2016.