We recommend that the Director of the Office of Block Grant Assistance require the Texas GLO to provide evidence of subrecipient monitoring of Harris County’s capacity to manage its Hurricane Harvey grant funds to address duplicative, inefficient, and cost-prohibitive processes or positions. The evidence should include any corrective actions that have been imposed and Harris County’s response.

We recommend that the Director of the Office of Block Grant Assistance require the Texas GLO to ensure that Harris County obtains adequate training for its program staff and that the staff continuously demonstrates their understanding of and competence to operate Harris County’s programs within applicable requirements. This would include ensuring that Harris County takes appropriate steps to remedy situations where staff are not operating the program within applicable requirements.

We recommend that the Director of the Office of Block Grant Assistance require the Texas GLO to review Harris County’s Housing Reimbursement Program policies, including assistance prioritization, to ensure compliance with the Texas GLO’s action plan and amendments. This would include the Texas GLO analyzing the County’s project pipeline to determine whether changes are warranted to ensure that those most in need are prioritized to receive limited Federal assistance. The Texas GLO should provide HUD with an analysis of the County’s project pipeline within 90 days of its review to share the results and demonstrate compliance with its action plan.

Provide documentation to support that program activities within NHSLA’s interfund were for eligible NSP2 activities or repay the program $3,425,679 from non-Federal funds.

Return the outstanding balance of $529,745 owed to NSP2. In addition, cease the practice of depositing NSP2 funds in non-NSP2 accounts and making them available to be used or borrowed for non-NSP2 activities.

Provide documentation to support that $658,261 in loan proceeds was used for an eligible NSP2 activity or property or repay the program from non-Federal funds.

Provide documentation to support that $500,000 in NSP funds transferred to the revolving loan fund was used for an eligible NSP2 activity or property or repay the program from non-Federal funds.

Develop and implement sufficient financial procedures and controls to ensure that program income is appropriately recorded and properly transferred to its NSP2 account.

Ensure it has sufficient staffing and capacity to administer the NSP2 program, including obtaining training for its staff to understand HUD requirements and how to use the DRGR system.

Amend the NSP2 action plan to include its revolving loan fund.

Adjust program income calculation methodology to ensure it is in accordance with HUD requirements.

Submit overdue NSP2 quarterly reports to DRGR and update prior reports that did not accurately report program income activity.

Provide adequate documentation to support its administrative and project delivery cost expenditures or repay the program $1,388,545 from non-Federal funds.

Provide supporting documentation to show whether the outstanding liability of $324,478 is correctly classified as an NSP2 liability. If not, HUD should ensure that NHSLA corrects its NSP2 cost reimbursement summary for the 12 months ending June 30, 2018, to reclassify the expenses to a non-NSP2 program. Such funds would be considered funds to be put to better use.

Develop and implement a HUD-approved cost allocation plan to properly account for indirect program costs.

Establish written payroll policies and procedures in accordance with program requirements for the tracking, recording, and maintenance of direct costs to ensure that time distribution records are in place to support the allocation of charges.

Obtain training to ensure that it understands NSP2 regulations and requirements related to payroll allocation for its administrative and project delivery costs and program income calculation methodology to ensure it properly computes the amount it is allowed to charge for administrative costs.

Support the reasonableness of the South Gate contract or repay NSP2 $856,692 from non-Federal funds.

Develop and implement additional procedures and controls to ensure that HUD procurement requirements are followed.

Reevaluate and adequately document justification for the establishment of the percentages and other key assumptions used to determine the accrual amount for each program in CPD’s accrued grant liabilities estimate.