U.S. Department of Housing and Urban Development

Office of Inspector General

451 Seventh Street, SW

Washington, DC 20410-4500

Phone: (202) 708-0390 Fax: (202) 708-1354

 

December 9, 2010

 

MEMORANDUM FOR: John P. McCarty, Assistant Inspector General for Investigation, GI

//signed//

FROM: Jennifer L. Sorenson, Director, Inspections and Evaluations Division, Office of 

Investigation, GIH 

SUBJECT: Utilization of American Recovery and Reinvestment Act of 2009 (ARRA) Funds

By the Housing Authority of the City of Fort Myers, Florida, IED-11-003M 

INTRODUCTION

The Office of Inspector General, Inspections and Evaluations Division (IED), conducts 

independent, objective examinations of U.S. Department of Housing and Urban Development 

(HUD) activities, programs, operations, and organizational issues.

An article published in the Fort Myers Florida Weekly, dated June 2, 2010, raised concerns about

the Housing Authority of the City of Fort Myers’ (HACFM) use of ARRA funds to construct a 

new administration building. Consequently, we performed an inspection to address the 

following questions from OIG senior management: 

I. Could HACFM use ARRA funds to construct a new administration building?

II. Did HACFM use ARRA funds to purchase furniture and equipment for the new 

administration building? If yes, was this an eligible activity? 

We determined that HACFM could utilize ARRA funds and its fiscal year public housing capital 

funds for the construction of a new administration building. Additionally, we noted that the

HACFM did not use ARRA funds to purchase furniture and equipment for the new 

administration building. These purchases were made from other eligible funding sources.
IED-11-003M

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BACKGROUND

American Recovery and Reinvestment Act of 2009 (ARRA) Appropriations

ARRA includes a $4 billion appropriation for the Public Housing Capital Fund, to be used for 

capital and management activities for public housing agencies (PHAs), as authorized under 

Section 9 of the United States Housing Act of 1937, as amended. ARRA requires that $3 billion 

of these funds be distributed as formula funds, and the remaining $1 billion be distributed 

through a competitive process. 

 

• Public Housing Capital Fund – Formula Grants: ARRA requires that $3 billion of these 

funds be distributed by the same formula used for amounts made available in fiscal year 

2008, except that the Secretary of HUD has the discretion not to allocate funding to 

public housing agencies currently designated as troubled or to public housing agencies 

that elect not to accept such funding. ARRA requires that PHAs use these funds on 

eligible capital fund activities and give priority to capital projects that can award 

contracts based on bids within 120 days from the date the funds are made available to the 

PHAs. Under this program, PHAs will give priority consideration to the rehabilitation of 

vacant rental units, and prioritize projects that are already underway or included in their

Five-Year Capital Fund Action Plans required by 42 U.S.C. 1437c-1(a). 

 

• Public Housing Capital Fund – Competitive Grants: The purpose of this program is to 

provide an additional $995 million to PHAs for capital and management activities as 

authorized under Section 9 of the 1937 Housing Act in accordance with four funding 

categories: (1) improvements addressing the needs of the elderly and/or persons with 

disabilities; (2) public housing transformation; (3) gap financing for projects that are 

stalled due to financing issues; and (4) creation of energy efficient, green communities.

During September 2009, the Office of Public and Indian Housing (PIH) awarded $995 

million to PHAs in the form of 396 capital fund recovery competitive grants. 

The Housing Authority of the City of Fort Myers (HACFM) 

HACFM owns and manages 502 conventional public housing units located at four different sites. 

It also manages 200 Section 8 project-based units, 180 market rate units, and 120 elderly mixed 

finance units. The current occupancy rates are as follows: public housing units - 99 percent, 

Section 8 Project Based development - 99 percent, market rate development - 64 percent, and 

elderly mixed finance - 100 percent. HACFM has approximately 60 full-time employees with an 

annual budget of $24.6 million. 

According to the HUD Miami Office of Public Housing (OPH), HACFM is a “standard 

performer” under HUD’s PHAS (Public Housing Assessment System) scoring system. They 

stated that HACFM “has become an aggressive, entrepreneurial, creative, and results driven 

organization”, and its accomplishments “over the course of the past several years has been 

striking.” The Miami OPH conducted two reviews of HACFM’s utilization of ARRA funds. The 

first one was a remote review, completed on December 22, 2009, which identified only one 

deficiency relating to the Buy American provisions of ARRA. HACFM corrected this deficiency 
IED-11-003M

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by executing a contract amendment to further clarify compliance with the Buy American 

provisions. The second review was an on-site review, completed on January 27, 2010. The 

review concluded that HACFM was administering the ARRA grant in accordance with all

applicable regulatory and programmatic requirements, and no corrective actions or issues were 

noted. 

HACFM was awarded two ARRA stimulus capital fund grants consisting of a formula grant of

$2,219,810 and a competitive grant of $3,635,000, totaling $5,854,810. HACFM used the ARRA 

Capital Fund formula grant for the construction of a new administration building that was 

identified in its Annual Statement, and its Five-Year Capital Fund Action Plan required by 42

U.S.C. 1437c-1(a). The ARRA Capital Fund competitive grant was used for infrastructure 

improvements at HACFM’s approved HOPE VI site, which is also the site of the new 

administration building. 

SCOPE AND METHODOLOGY

To address the questions asked we reviewed applicable HUD regulations, criteria and other 

guidance. We interviewed HUD staff from the Miami OPH, and reviewed the information and 

documents obtained from HACFM to support its sources of funds for the construction of the new 

administration building and for the purchase of furniture and equipment. 

We conducted the inspection in accordance with the Quality Standards for Inspections issued by 

the President’s Council on Integrity and Efficiency.

RESULTS 

I. Could HACFM use ARRA funds to construct a new administration building?

Yes. The construction of a new administration building is an eligible use of ARRA and fiscal 

year capital funds per HUD regulations and guidance.1 At our request, HACFM provided the 

sources of funds used for the construction of the new administration building, which is outlined 

below.

ARRA capital fund (formula grant) $2,019,810 2

Fiscal year 2008 capital fund $625,000 

Fiscal year 2009 capital fund $476,139 

HOPE VI demolition only $36,000 

Total amount budgeted for construction $3,156,949 

Total final construction cost $3,023,367 

Budget amount versus final cost (excess) $133,582 3

1 Notice PIH-2009-12(HA); PIH Low-Rent Technical Accounting Handbook 7510.1; Section 9 of the United States 

Housing Act of 1937; 24 CFR Part 990; and American Recovery and Reinvestment Act of 2009. 

2

 This amount is exclusive of HACFM’s administration fee of $200,000. 

3

 According to HACFM, the FY 2009 budget line item for the administration building will be reduced and the 

excess will be budgeted to other PHA projects. 

 
IED-11-003M

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Except for the eligible demolition costs funded from HOPE VI, the construction costs for the 

new administration building came from capital funds and were charged to the budget line item, 

Account 1470-Non Dwelling Structure. This was reported to HUD on HACFM’s annual 

statements for ARRA, and fiscal years 2008 and 2009 capital funds. We interviewed the Miami 

OPH director, senior engineer, and HOPE VI grant manager for HACFM who all stated that the 

construction costs were an eligible use of ARRA and fiscal year capital funds.

We verified that HACFM was not considered a troubled PHA by HUD, and the plan to construct 

a new administration building was included in HACFM’s Five-Year Capital Fund Action Plan

submitted to HUD. Furthermore, as stated in HUD’s additional guidance to Notice PIH 2009-12

(HA), Information and Procedures for Processing American Recovery and Reinvestment Act 

Capital Fund Formula Grants, ARRA funds are restricted for public housing rental and 

homeownership units and non-dwelling structures. The administration building is considered a 

non-dwelling structure according to the PHA’s Chart of Accounts

4 provided in HUD’s

accounting guidelines. The Miami OPH staff stated that headquarters staff were well aware of 

HACFM’s activities, plans, and use of ARRA funds, and did not take any exceptions.

II. Did HACFM use the ARRA funds to purchase furniture and equipment for the new 

administration building? If yes, was this an eligible activity? 

No. HACFM did not use any ARRA funds to purchase furniture and equipment for the new 

administration building. All payments to the vendors for the purchase of furniture and equipment 

were processed through HACFM’s PHA operating account. The total disbursements, in the 

amount of $317,595.88, from the PHA operating account were reimbursed through the following 

sources of funds: 

Remaining asset - repositioning fee (AMP 06) $210,743 66%

Housing Choice Voucher $51,710 16%

Fiscal year 2009 capital fund $55,143 18%

Total cost of furniture and equipment $317,596 100%

• Remaining Asset - Repositioning Fee (ARF): This represents the transition funding

remaining in an asset management project (AMP), where the old administration building 

was located. According to the Miami OPH staff, there is nothing contained in the current 

HUD regulations and guidance that prevents a housing authority from utilizing the 

remaining ARF for other eligible low rent activities.

• Housing Choice Voucher: The amount charged to the Section 8 program was based on 

the actual cost of the furniture and equipment items assigned to the Section 8 offices and 

rooms in the new administration building.

• Fiscal Year 2009 Capital Fund: This amount represents the cost of building a high 

density filing system which is a structural component of the new administration building. 

This amount was included as part of the construction cost of the new administration 

4

 PIH Low-Rent Technical Accounting Guide 7510.1, Chart of Accounts. 

 
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building and was paid by LOCCS (Line of Credit Control System) as non-dwelling 

structure. 

Based on research of HUD regulations and guidance,

5 and review of vendor invoices, journal 

vouchers, and other documents provided by HACFM, we took no exceptions to the source of 

funds used for the purchase of furniture and equipment. 

5 Notice PIH-2009-20 (HA); Frequently Asked Questions (FAQ), Financial Reporting Under the New Operating 

Fund Rule, June 27, 2008; Calculation and Submission of 2007 Operating Subsidy, Frequently Asked Questions 

(No. 2), September 8, 2006; and 24 CFR 990-190.