oversight

Puerto Rico PHA, Procurement Management, San Juan, Puerto Rico

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-03-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                                     Issue Date
                                                                            March 6, 2000

                                                                     Audit Case Number
                                                                            00-AT-201-1003




TO:            Hildamar Ortiz, Director, Office of Public Housing, 4NPH


FROM:          Nancy H. Cooper
               District Inspector General for Audit-Southeast/Caribbean, 4AGA


SUBJECT:       Puerto Rico Public Housing Administration
               Procurement Management
               San Juan, Puerto Rico

We have completed an audit of the Puerto Rico Public Housing Administration’s (PHA) management of
its central office procurement system. We conducted the audit in response to the Department of
Housing and Urban Development (HUD) officials and our on-going concerns regarding the Puerto Rico
Public Housing Administration’s financial management systems. Our audit objectives were to determine
whether the PHA administered its activities in compliance with HUD requirements.

We focused our audit to evaluate the PHA’s procurement system. This report presents four findings
that detail the PHA’s need to improve its procurement operations.

Within 60 days, please give us a status report for each recommendation in the report on: (1) the
corrective action taken; (2) the proposed corrective action and a planned implementation date; or (3)
why action is not considered necessary. Also, please furnish us copies of any correspondence or
directives issued as a result of the audit.

Should you or your staff have any questions please contact me or Sonya D. Lucas, Assistant District
Inspector General for Audit, at (404) 331-3369. We are providing a copy of this report to the Puerto
Rico Department of Housing and the PHA.




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Management Memorandum




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00-AT-201-1003                  Page ii
Executive Summary
We completed an audit of the Puerto Rico Public Housing Administration. The audit was conducted in
response to the Department of Housing and Urban Development officials’ and our on-going concerns
regarding the Puerto Rico Public Housing Administration’s financial management systems, especially its
procurement system. Our audit objectives were to determine whether the PHA: (1) had procurement
policies and procedures that complied with HUD requirements; (2) followed the policies and
procedures; (3) adequately determined the need for goods and services; and (4) had adequate
management controls to ensure receipt of quality goods and services and to preclude duplicate
payments.

The PHA has a long history of management problems. It was rated as a “troubled” public housing
authority until December 1996. However, in November 1997 the PHA was placed on the “mod
troubled” list because of problems managing its modernization program. HUD program officials and
Independent Public Accountants (IPA) continue to report serious management control weaknesses
regarding procurement and related financial management systems. None of the findings regarding
procurement have been resolved. In 1999, several former PHA employees were indicted for fraudulent
activities involving disbursements. Strong management controls may have prevented these crimes.
Other investigations involving the PHA are ongoing.

Local HUD officials have tried to take action to get PHA compliance without success. On June 11,
1998, the Director of HUD’s Caribbean Office of Public Housing sent a letter to John Blakeman, III.
The letter made reference to the numerous times that HUD had notified the PHA about their failure to
comply with Title 24 Code of Federal Regulations (CFR), part 85.36. The Director stated in the
request that the PHA must provide HUD the following: 1) a status of strategies you are
implementing through your improvement plan towards the resolution of the procurement
findings, and 2) evidence of the steps PHA has taken to ensure that procurement files are
complete, including but not limited to the history of the procurement as required by 24 CFR
85.36. Unless we receive the above required evidence by July 28, 1998, the HUD Caribbean
Office of Public Housing cannot approve the use of project funds to pay for services provided
under contracts not properly procured. In addition, please be advised that because of the
persistent failure of the PHA to address these issues in any meaningful way, failure to make
substantial progress toward correction of items of non-compliance will force this Department to
take whatever actions are necessary to obtain compliance with the Annual Contributions
Contract.

In the PHA’s reply dated September 3, 1998, the PHA administrator claimed that he had taken steps
to correct the deficiencies in the procurement area. Among the steps taken, he mentioned strict
enforcement of procurement requirements by the procurement office, sufficient records to show the
procurement history, and analysis for each procurement. Our audit disclosed that these areas were still
deficient.




                                                        Page iii                         00-AT-201-1003
Executive Summary



Additionally, 24 CFR 85.43 (a) (2)-Enforcement provides remedies for noncompliance. If a grantee
materially fails to comply with any term of an award…the awarding agency may disallow (that
is, deny both use of funds and matching credit for) all or part of the cost of the activity or action
not in compliance.

Our review disclosed continued serious problems with the PHA’s ability to manage its procurement and
related financial management systems. Of about $39 million in procurements and other disbursements
reviewed, we identified about $21.8 million of ineligible costs and $4.1 million in cost efficiencies (see
Appendix A).

      ♦ The PHA did not comply with Federal and agency procurement requirements and did not
        maintain control over its central office procurement activities. Although HUD program
        officials and auditors had repeatedly cited the agency for noncompliance and lack of control
        over purchases, actions taken to correct the systemic weaknesses were not effective. This
        occurred because PHA management disregarded requirements and associated management
        controls for planning, soliciting, and awarding purchase orders and contracts. As a result, the
        PHA obtained goods and services without full and open competition, incurred excessive
        costs, and allowed program waste, abuse, and potential fraud to occur. We identified
        ineligible costs totaling about $8.8 million.

      ♦ The PHA paid about $4.9 million more than necessary for professional services provided by
        two contractors. This occurred because it contracted for the services without competition
        and without performing comprehensive price and/or cost analyses. The PHA improperly
        justified these sole-source procurements under an emergency declaration by the Puerto Rico
        Department of Housing Secretary. The PHA may incur additional ineligible costs of about
        $2.1 million, if corrective actions are not taken.

      ♦ PHA management controls were not effective in deterring waste, abuse, and fraud. The PHA
        paid: (1) invoices without proper authorization or signed agreements; (2) invoices that were
        not original; (3) invoices without proof of delivery; (4) invoices that exceeded contract limits;
        (5) unallowable advanced payments (per PHA regulations); and (6) invoices without any
        support. In addition, the PHA routinely charged costs to inappropriate fund source (see
        Appendices B and D). Both HUD and IPAs had previously reported similar deficiencies to
        the PHA. These deficiencies continued to occur because the PHA management did not
        enforce Federal and PHA requirements and ensure effective management controls were in
        place. We identified other ineligible costs totaling about $8.1 million. The PHA may incur
        additional ineligible costs of about $2 million unless corrective actions are taken.

      ♦ The PHA did not maintain adequate property management and related procurement
        documents. Its inventory records were not accurate or did not contain required data such as
        property location. PHA purchase order and contract registers and procurement regulations

00-AT-201-1003                         Page iv
                                                                                      Introduction


          also need improvement. This occurred because the PHA did not ensure that past actions
          taken to improve controls were effective. As a result, there was no assurance that personal
          property was properly accounted for and used or if effective controls were in place to
          safeguard assets. The PHA’s June 30, 1997, Balance Sheet showed that personal property
          was valued at about $8.6 million. However, the inventory report, as of June 30, 1997,
          provided to OIG in February 1999, showed an adjustment increasing the inventory value from
          $8.6 to $15.3 million, an increase of about 80 percent.

We recommend that you: (1) consider declaring the PHA in substantial default, if improvements are not
made; (2) consider placing the PHA on a reimbursement basis for funding; (3) review and approve the
PHA’s annual procurement plan; (4) ensure the validity of future emergency declarations; and (5)
perform cost reviews to determine whether the PHA properly allocated costs to HUD programs. Also
require the PHA to detail its procedures for maintaining a property ledger, conducting an annual physical
inventory, and reconciling and investigating differences. Recover about $21.8 million in ineligible costs
charged HUD programs and take appropriate action to save another $4.1 million in efficiencies.

We provided copies of the draft report to the PHA and HUD’s Caribbean Office officials on
September 24, 1999. We discussed the draft report with the HUD officials on October 27, 1999.
Upon the PHA’s request, we held a working session to discuss the draft report on November 4, 1999;
and held an exit conference on December 7, 1999. At the exit conference, we agreed to consider the
PHA’s comments and issue a revised draft report. We provided copies of the revised draft report to
the PHA and HUD’s Caribbean Office officials on January 12, 2000. The PHA provided written
comments on January 31, 2000. Generally, the PHA did not agree with the findings. We considered
the comments in finalizing the report. The PHA’s comments are summarized within each finding and
included in their entirety in Appendix G.




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Executive Summary




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00-AT-201-1003                Page vi
Table of Contents

Management Memorandum                                                  i


Executive Summary                                                    iii


Introduction                                                           1

Findings

1    PHA Management Disregarded Procurement Requirements               5

2    The PHA Paid Excessive Costs For Professional Services
     On Two Sole-Source Contracts                                          17

3    The PHA Did Not Adequately Administer Procurement
     Disbursements and Payments Involving Management Agents           25

4    Property Management and Related Procurement Controls
     Need Improvement                                                  31



Management Controls                                                35

Follow Up On Prior Audits                                           37

Appendices
     A Schedule of Ineligible Costs and Cost Efficiencies         39
     B Summary of Purchase Order Deficiencies                    41
     C Summary of Purchase Order Cost Exceptions                  45

                                      Page vii                00-AT-201-1003
Table of Contents


        D Summary of Contract Deficiencies                                     47
        E Summary of Contract Cost Exceptions                                  49
        F Purchase Order Cost Exceptions                                       51
        G PHA Comments                                                         57
        H Distribution                                                         89


Abbreviations
CAER             Corporacion de Adiestramiento y Empleo en los Residenciales
CFR              Code of Federal Regulations
CGP              Comprehensive Grant Program
DEP              Drug Elimination Program
FY               Fiscal Year
HUD              Department of Housing and Urban Development
IPA              Independent Public Accountant
OIG              Office of Inspector General
PHA              Puerto Rico Public Housing Administration




00-AT-201-1003                        Page viii
Introduction
Background

Public housing and urban renewal programs first started in Puerto Rico in 1938. By 1957 the Puerto
Rico Urban Renewal and Housing Corporation, the PHA’s predecessor, was created by the
Commonwealth Law No. 88 for the purpose of reorganizing those programs. In 1972, the government
of Puerto Rico established the Department of Housing (Law 97 of June 10, 1972). Under this law, the
Puerto Rico Urban Renewal and Housing Corporation was attached to the Department of Housing, and
the powers and faculties of the Board of Directors were transferred to the Secretary of Housing.

The PHA was created in 1989 and placed under the direction of the Puerto Rico Department of
Housing for the purpose of creating an efficient and flexible administration of public housing (Law 66
dated August 17, 1989). In 1991, the Puerto Rican Government dissolved the Puerto Rico Urban
Renewal and Housing Corporation and transferred the powers and faculties of its Public Housing
Program to the Puerto Rico Public Housing Administration. The Puerto Rico Public Housing
Administration is directed by the PHA Administrator which is appointed by the Puerto Rico Secretary
of Housing. The current PHA Administrator was appointed during December 1997. The PHA is the
second largest public housing agency in the nation. As of July 1, 1999, it had 327 housing projects with
56,585 units scattered throughout Puerto Rico.

History

The PHA has a long history of management problems. In 1981, its predecessor agency was designated
by HUD as “financially troubled.” In 1985, the agency was determined by HUD to be “operationally
troubled” because of serious financial, administrative, and project maintenance deficiencies. These
deficiencies were not corrected. As a result, in 1991, HUD imposed severe sanctions on the agency by
freezing about $308 million of unobligated funds. In 1992, the Governor of Puerto Rico transferred the
PHA’s modernization and development programs to the Puerto Rico Public Building Authority to act as
an agent for the PHA. Also, all project management functions were contracted to private management
agents. PHA staff were dramatically reduced from over 4,500 to under 100 employees. Its role was
reduced to an “asset manager” responsible for accounting for and reporting on the use of Federal funds
and overseeing management agent activities.

HUD rated the PHA as troubled until December 1996. However, in November 1997 HUD
determined that only the PHA’s modernization program was troubled. In the letter to the Department of
Housing Secretary dated November 4, 1997, HUD cited the PHA’s continuing financial management
problems and need for corrective actions.

Previous IPA and Office of Inspector General (OIG) audits and HUD program reviews have also
disclosed serious procurement noncompliance and associated management control weaknesses. Fiscal
year (FY) 1992-1997 single audit reports repeatedly cited the PHA for not following Federal
procurement requirements. The reports also disclosed numerous instances of poor management

                                                         Page 1                          00-AT-201-1003
Introduction


controls involving disbursements. Millions of dollars of ineligible costs were recommended for recovery.
Because of the condition of the PHA’s accounting system and the control weaknesses, the IPA
disclaimed an opinion on the PHA’s 1993-1996 financial statements. The 1993-1996 statements were
all prepared in 1998, because the PHA had not obtained an annual audit since 1991. In order to bring
the PHA back into compliance with the Single Audit Act, the PHA’s current administration requested
the audits in 1998. Although an unqualified opinion was given on the agency’s 1997 statements, the
IPA determined that the PHA’s management controls were inadequate.

In June 1996, we reported (Report No. 96-AT-201-1821) that the PHA did not: (1) document the
history of each procurement including basis for contractor selection or rejection and contract price; (2)
perform required price and/or cost analyses prior to procurements; and (3) provide all required
standard contract provisions in its contracts. The findings remain unresolved.

In a monitoring report on PHA operations issued in August 1994, HUD also identified various
procurement related deficiencies including: (1) improperly procured and/or justified sole-source
contracts for professional and security services; and (2) no annual equipment inventory. The report
stated “…we could not determine that the PHA was obtaining goods and services at the lowest and
best prices.” HUD again reported similar procurement and management control deficiencies in 1997
and 1998 reports to the PHA. For example, in the Comprehensive Grant Program (CGP) Limited
Monitoring Review Report dated April 15, 1998, the Director of HUD’s Caribbean Office of Public
Housing detailed the continuing systemic weaknesses and lack of effective corrective actions. She
stated that “The continual lack of systems, the lack of urgency on the part of staff, and other factors
contribute to a general tendency of not addressing priorities with focus and determination. … Without
clear focus and action the PHA is exposed to losing substantial funds….”

In 1999, several former PHA employees were indicted for fraudulent activities involving disbursements.
Strong management controls may have prevented these crimes. Other investigations involving the PHA
are ongoing.

In October 1995, HUD’s central office contracted with a firm to provide the PHA technical assistance
in creating a central procurement unit and developing a procurement manual. The PHA later contracted
with an affiliate firm to provide similar services (see Finding 2). The procurement unit was established in
May 1997. The manual was drafted but had not been issued as of July 1999. Subsequent to our draft
report, in November 1999, the PHA submitted the final draft manual for HUD’s approval. HUD’s
comments and recommendations for changes to the manual were addressed in a letter dated December
3, 1999.

Procurement Spending

The PHA spent millions annually for goods and services procured by its central office and management
agents. In FY 1997 and 1998 program expenditures totaled $289.1 million. The PHA’s FY 1999
budget was about $260.6 million.


00-AT-201-1003                          Page 2
                                                                                           Introduction



                                                               1997             1998              Total
                           Grant                              (million)        (million)        (million)
     1994 Drug Elimination (DEP)                               $ 9.1            $ 0               $9.1
     1995 DEP                                                     1.3            13.9             15.2
     1996 DEP                                                        0               0                0
     1994 HOPE VI                                                 7.8             5.4             13.2
     1995 HOPE VI                                                   .2              .1               .3
     1996 Comprehensive Grant Program (CGP)                     23.2             29.0             52.2
     1997 CGP                                                        0              .6               .6
     1998 CGP                                                        0               0                0
     1999 CGP                                                        0               0                0
     1997 Operating Subsidy & Income (OS & I)                   93.3                 0            93.3
     1998 OS & I                                                     0         105.2             105.2

                            Totals                           $134.9           $154.2           $289.1


Procurement Requirements

The PHA’s procurement and associated management controls are governed by Title 24, Code of
Federal Regulations (CFR), Subpart 85.36. These standards provide a set of basic principles that are
to be followed in obtaining and paying for goods and services. The regulations allow the PHA to use its
own procurement procedures, provided that they conform to the Federal standards. The PHA’s
procurement regulations dated August 13, 1993, incorporate the Federal standards but also impose
additional requirements.

HUD Handbook 7460.8, Rev-1, Procurement Handbook for Public Housing Agencies and Indian
Housing Authorities, dated January 1993, supplements the Federal regulations.

Audit Objectives, Scope, and Methodology

Our audit objectives were to determine whether the PHA: (1) had procurement policies and procedures
that complied with HUD requirements; (2) followed the policies and procedures; (3) adequately
determined the need for goods and services; and (4) had adequate management controls to ensure
receipt of quality goods and services and to preclude duplicate payments.

The review was conducted at the PHA’s office in Rio Piedras, Puerto Rico and included visits to
housing projects and other locations in the San Juan area to verify receipt of selected purchases. The
audit primarily covered PHA procurement and related disbursement activities using HUD funds carried
out by its central office during the period July 1996 through June 1998. Prior period activities were
reviewed as necessary to meet our audit objectives. Audit testing was extended through December
1998 and the procurements and management controls through June 1999. For the first several months

                                      Page 3                              00-AT-201-1003
Introduction


of the audit period, the PHA was under the direction of a prior administrator. Following that
administrator’s departure, the PHA was headed by several acting and interim administrators. The
current administrator, John S. Blakeman, was appointed in December 1997. Our audit field work was
performed from July 1998 through May 1999.

To accomplish our audit objectives, we:

    -    analyzed Federal and PHA procurement requirements and guidance;
    -    reviewed prior OIG and IPA audit and HUD monitoring reports and related correspondence;
    -    interviewed Department of Housing, PHA and HUD officials, suppliers, and contractors;
    -    examined procurement and payment records related to use of credit cards, petty cash
         accounts; purchase orders, and formal contracts; and
    -    assessed related management controls.

We did not review management agent procurement activities or assess the central office’s procurement
of management agent services.

In total, we examined about $35.8 million in procurements made by the PHA during the period July
1996 through December 1998. We examined 71 percent of the charges or about $4,600 out of
$6,527 made during the period July 1996 to June 1998 using PHA credit cards. To test the petty cash
account, we selected transactions totaling $1,986 and examined two replenishment vouchers and
supporting documents for transactions made during the period November 1997 through April 1998
totaling about $900, or 45 percent of the charges.

We reviewed about $10.2 million expended on 51 purchase orders. In general, we examined purchase
orders over $5,000. Other purchase orders were judgmentally selected. For FY 1997 we examined
65 percent of the charges, or about $1,241,827 out of $1,916,184. For FY 1998 we examined 93
percent of the charges, or about $9,049,863 out of $9,707,176. To assess whether conditions found
during the review existed after June 1998, we examined five judgmentally selected purchase orders
valued at about $1.4 million (see Appendix B).

From the PR Department of Housing contract register, we selected 10 contracts valued at
approximately $19.6 million or 72 percent of the contracts made during the 2 year review period.

In general, we chose contracts of $500,000 or more for review. Other contracts were judgmentally
selected. We also reviewed another six contract actions worth about $3.8 million that were not listed
on the register as of June 30, 1998 (see Appendix D).

The audit was conducted in accordance with generally accepted government auditing standards.




00-AT-201-1003                        Page 4
                                                                                        Finding 1


     PHA Management Disregarded Procurement
                Requirements
The PHA did not comply with Federal and agency procurement requirements and did not maintain
control over its central office procurement activities. Although HUD program officials and independent
auditors had repeatedly cited the agency for noncompliance and lack of control over purchases, actions
taken to correct the systemic weaknesses were not effective. This occurred because PHA management
disregarded requirements and associated management controls for planning, soliciting, and awarding
purchase orders and contracts. As a result, the PHA obtained goods and services without full and open
competition, incurred excessive costs, and allowed program waste, abuse, and potential fraud to occur.
We identified ineligible costs totaling about $8.8 million (see Appendices C and E).



                                       Title 24 CFR, part 85.36, dated April 1, 1995, allows agencies
 Criteria
                                       to use their own procurement procedures if they conform to
                                       applicable Federal requirements and do not restrict full and
                                       open competition.       In general, the PHA Procurement
                                       Regulation, Article 5.28 requires formal public bid procedures
                                       to be used by the Administration to acquire any goods or
                                       services which exceeded ten thousand dollars ($10,000) (e.g.,
                                       equipment). 24 CFR 85.36 (d) (2) states that in the formal bid
                                       method, bids are publicly solicited and a firm-fixed-price
                                       contract is awarded.

                                       Additionally, 24 CFR 85.43 (a) (2)-Enforcement, provides
                                       remedies for noncompliance. If a grantee materially fails
                                       to comply with any term of an award…the awarding
                                       agency may disallow (that is, deny both use of funds and
                                       matching credit for) all or part of the cost of the activity or
                                       action not in compliance.

                                       All formal contracts require Department of Housing legal
                                       department review. These contracts were also required to be
                                       reported to HUD and to the Puerto Rico Comptroller’s Office.
                                       All procurements over $30,000 require Puerto Rico Housing
                                       Secretary approval. In addition, a price and/or cost analysis is
                                       required to be performed for each procurement (purchase
                                       orders and formal contracts) including any contract
                                       modification.



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Finding 1


                             Prior HUD reviews and OIG and IPA audits have reported
                             serious noncompliance and management control weaknesses
                             involving the PHA's central procurement system. Our review of
                             this system found that the PHA still needs to improve its
                             procurement operations.

                             We found continued noncompliance regarding the PHA’s
 The PHA did not comply
                             solicitation and award of all procurements reviewed.
 with requirements for
                             Deficiencies included: (1) performing no independent price
 planning, soliciting, and
                             and/or cost analyses; (2) using false or altered vendor quotes;
 awarding purchase orders,
                             (3) splitting purchases to avoid advertising requirements; and
 contracts, and contract
                             (4) awarding procurements sole-source or to other than low
 modifications
                             bidders without justification (see Appendices B and D).

                             In addition, we determined that the PHA used purchase orders
                             rather than formal written contracts to acquire goods valued at
                             $10,000 or more. Of the 56 purchase orders reviewed, 15
                             were for items that should have been obtained using formal
                             written contracts. These purchases ranged from $26,400 for
                             33 digital cameras to $2,604,000 for 12,000 electric stoves.
                             Most of the purchases were made from sealed bids solicited
                             through a public advertisement. However, purchase order
                             documents used to authorize the procurements did not contain
                             any of the legal provisions (specifications, warranties, delivery
                             and payment requirements, etc.) necessary to protect the
                             PHA’s interests. Also, management controls such as legal
                             department review, Housing Secretary approval, and
                             Comptroller’s Office and HUD notification, were circumvented
                             by using purchase orders rather than contracts. A responsible
                             PHA official said that this method was used because it was
                             quicker than using formal contracts. Generally, written
                             contracts were used to acquire professional services when
                             services were valued at $10,000 or more.

                             The result was that the PHA routinely purchased goods and
                             services without full and open competition. We identified
                             significant excess costs, waste, abuse, and potential fraud.




00-AT-201-1003               Page 6
                                                   Finding 1


 For example:

     Purchase Order No. 98-703

     In April 1998, the PHA purchased for its housing projects,
     79 Xerox digital copiers with built-in faxes ($6,800 each)
     and 48-month copier maintenance contracts ($3,360 each).
     It charged its operating fund $802,640. The acquisition
     was made through a purchase order which made reference
     to contract No. C-40-192 that had been procured by the
     Puerto Rico General Services Administration. However,
     the PHA did not provide the list of models and prices that
     should have been attached to the contract. This contract
     required the PHA to document a written justification if the
     equipment being acquired was not the lowest price. The
     contract also provided that the agencies could purchase
     only the models in the contract. Changes in models had to
     be approved by the General Services Administration.

     There was no evidence that the procurement was approved
     by the Housing Secretary as required. A PHA contracting
     officer told us that the Deputy Administrator personally
     negotiated with Xerox. Both the current Administrator and
     his deputy signed the purchase order. The contracting
     officer refused to sign it because he did not know the
     reasonability of the changes or how it was procured. The
     officer also stated that there was not a procurement file for
     the acquisitions and that the Deputy Administrator
     negotiated the price and model of the equipment directly
     with Xerox.

     Our visits to three projects to locate the equipment found
     no more than 3 staff at each site. They informed us that
     their old copiers were broken. However, two projects’
     faxes were working and the staff used them. We could not
     determine from the PHA inventory records that all the
     equipment had been recorded (see Finding 4). According
     to amendment No. 50 to contract No. C-40-192, the
     PRPHA could have purchased less costly copiers and
     service agreements. Therefore, we disallowed $536,015;
     the difference between the price in the amendment and the
     price paid. This included the maintenance contract.


Page 7                           00-AT-201-1003
Finding 1


                      Purchase Order No. 98-821

                      In May 1998, the PHA acquired 12,000 electric stoves
                      from White Westinghouse for $2,604,000. We determined
                      that the PHA did not: (1) document the performance of a
                      price and/or cost analysis to assess whether bids were
                      reasonable; (2) obtain Secretary of Housing approval; (3)
                      get written HUD approval; (4) advertise the solicitation
                      twice as required by its regulations; and (5) provide
                      adequate time for bidders to respond to the solicitation. In
                      addition, the PHA did not select the low bidder but
                      negotiated a lower price with a higher bidder. There was
                      no documentation to indicate that negotiations were held
                      with the other bidders. In addition, the purchase order was
                      dated May 1, bids opened May 6, and the price revision
                      made on May 22. There was also no explanation in the file
                      for these discrepancies.

                      The stoves were purchased because appliances used by
                      tenants to cook were not safe. However, the new stoves
                      were given to the tenants because the PHA did not want to
                      maintain them. Tenants were required to sign an agreement
                      stating that the stoves were their property and they must
                      maintain them and take them when they vacate. This policy
                      could cause future safety and possible legal problems when
                      these low-income tenants do not comply with their
                      agreements. HUD did not provide written authorization for
                      the donations. Unless HUD specifically approves the
                      donation of the stoves to the tenants, the stoves become
                      property of the PHA. Therefore, we are disallowing the
                      $2,604,000 charged against HUD funds.

                      Purchase Order No. 98-822

                      Also, because of tenant safety concerns, in May 1998, the
                      PHA bought 21,428 nineteen (19) gallon water heaters
                      from a local distributor for $2,365,437. They were
                      delivered to management agents from July to December
                      1998. However, as of April 1999, 16,495 heaters (77
                      percent) had not been installed. This occurred primarily
                      because many of the housing projects had only one water
                      line. The heaters required two lines. For example, 2,554
                      heaters were delivered to one management agent between

00-AT-201-1003   Page 8
                                                     Finding 1


     September and November 1998 to install but as of April
     1999 only 927 had been installed. In August and
     September 1998, 1,246 heaters were delivered to another
     management agent. None of the equipment had been
     installed 7 months later. As of April 1999, nine heaters had
     been reported stolen from project warehouses.

     We found that the PHA performed no price and/or cost
     analysis nor obtained Secretary of Housing approval prior
     to procurement. Had these actions occurred, the PHA may
     have determined the need for two water lines to be in place
     prior to purchasing the heaters. In addition, the one year
     parts warranty will have expired on many of the heaters by
     the time they are installed.

     Subsequently, the PHA reported that at November 1999,
     12,898 water heaters had been installed. Therefore, we
     disallowed $941,627, representing the cost of 8,530
     (21,428 - 12,898) water heaters that have not been
     installed.

     Purchase Order No. 97-267

     In December 1996, the PHA acquired a desk-top
     computer for $8,200 and charged the cost to the CGP.
     The solicitation was not performed by purchasing staff but
     by the former director of the PHA’s Technological
     Information Department, who also certified the computer’s
     receipt. The order was given to the vendor with the lowest
     quote. However, we found that one of the other two
     quotes used to justify the price paid was false. The owner
     of the computer company whose name was on the quote
     told us that his firm did not submit it and the signature on it
     was not his. He said that the price paid for the computer
     was excessive. At the time of the purchase, a similar
     computer cost about $2,000. The PHA performed no
     price and/or cost analysis. In addition, we could not find
     the equipment on the PHA’s inventory ledger or positively
     confirm its location at the PHA (see Finding 4). The
     computer did not benefit the CGP. Because of these
     deficiencies, we disallowed all the cost charged to the
     program. This purchase, along with several others that
     were similar, were referred for investigation.

Page 9                            00-AT-201-1003
Finding 1



                     Contract No. 97-6773

                     In March 1997, the PHA awarded a firm fixed price
                     contract totaling $632,150 to a local accounting firm
                     (Cardona, Irizarry and Co.) to reconcile and reconstruct
                     1992 and 1993 CGP accounting records at the PHA and
                     its management agents. The PHA received six proposals
                     with fixed prices ranging from $127,425 to $1,600,000.

                                 Contractor                 Price       Score
                           A                          $     127,425        76
                           B                                160,000        65
                           C                                222,506        81
                           D                                444,347        86
                           Cardona, Irizarry & Co           632,150        97
                           E                              1,600,000        84

                     The PHA awarded the contract to the fifth highest bidder.
                     Although the contractor received a higher score on its
                     proposal than the others, the contract file did not document
                     the basis for the scores and ranking factors. The
                     contractor’s proposal also contained detailed PHA
                     accounting data to which its competitors did not have
                     access. (The contractor was doing other work at the PHA
                     at the time it submitted its proposal.)

                     According to a Bid Board official, the amount proposed by
                     the winning contractor was close to the $700,000 the PHA
                     had remaining in its budget. However, the PHA performed
                     no price and/or cost analysis to assess whether the bids
                     were reasonable (had a comprehensive analysis been
                     performed, the PHA may have determined that the work
                     could have been accomplished with less costly contracted
                     employees (see Finding 2). Also no competitive range was
                     established and no negotiations were held with any of the
                     other prospective contractors or requests made for best
                     and final prices. Because of these deficiencies, there was
                     no assurance that the PHA procured the best services at the
                     lowest cost. We disallowed $504,725; the difference
                     between the lowest proposal submitted and the contract
                     amount.


00-AT-201-1003   Page 10
                                                                           Finding 1


                              The PHA also paid $752,986 more to the firm than the
                              original contract allowed without any signed contract
                              amendments. The contractor submitted separate fixed-
                              priced proposals and the PHA verbally agreed to pay for
                              the work. No price and/or cost analyses were done to
                              assess reasonableness of the proposals. Some of this work
                              was included in the scope of the original fixed-price
                              contract and should have been completed at no additional
                              cost. Other effort was outside the scope of the contract
                              and should have been solicited and contracted separately.
                              We considered only one of the proposals an acceptable
                              contract modification; however, there was no signed
                              amendment for this modification.

Modification Description                           Comments                 Amount
Reconstruction of Management Agent CGP Records     Original Contract        $ 184,850
Reconciliation of CGP Records                      Original Contract          123,485
Reconciliation Period Extension                    Contract Modification       79,651
Reconciliation of 1987-1991CIAP Records            Change in Scope            300,000
Rent Subsidiary and Other Accounting Work          Change in Scope             65,000
Total                                                                       $ 752,986

                              Based on these procurement deficiencies, we disallowed all
                              the amendment costs.

                              Contract No. 97-3715

                              In March 1997, the PHA executed an 11-month contract
                              with a local firm (Fiddler, Gonzalez & Rodriquez) for legal
                              services (primarily for litigation work). The PHA awarded
                              the contract without any effort to compete it and without
                              justification. The PHA also did not perform a price and/or
                              cost analysis or obtain HUD’s approval as required to
                              obtain litigation services. The contract provided the firm
                              $75-$125 per hour for services (up to $30,000 each
                              month) plus reimbursement of miscellaneous expenses
                              (mileage, telephone, photocopy, stamps). In January 1998,
                              the PHA extended the contract another year and increased
                              the monthly maximum to $60,000 plus expenses. According
                              to the contract amendment, the increase was due to an
                              increase in the legal work volume that needed to be done.
                              However, the PHA did not conduct a required price and/or
                              cost analysis or obtain HUD approval. The PHA paid the
                              firm $1,118,974 ($1,050,000 for services plus $68,974
                         Page 11                          00-AT-201-1003
Finding 1


                                  miscellaneous expenses). We consider all costs ineligible to
                                  be charged against HUD funds because of the procurement
                                  and administrative deficiencies.

                              The PHA may have restricted competition by charging potential
 The PHA charged excessive
                              contractors excessive costs for copies of contract proposal
 fees for contract proposal
                              documents. The fees charged were not in accordance with
 documents
                              PHA procurement regulations. We determined that the PHA
                              charged competitors $40 to $500 to obtain PHA proposal
                              packages. PHA regulations limited the fee to $10 when
                              purchases are of goods and services. The cost of the packages
                              (up to $600) were allowed when procurements involved
                              extraordinary construction, modernization and maintenance.

                              A former PHA Procurement Director stated that high fees were
                              charged to reduce the number of proposals received and time
                              and cost of reviewing them. A PHA official stated that charging
                              $500 for obtaining bid packages for services is contrary to the
                              approved PHA regulation. The official stated that he did not
                              know how the PHA determined the fee. However, the PHA
                              Administrator stated that the price varied based on the size of
                              the bid package. As a result, the practice of charging high fees
                              restricted open and free competition as required by 24 CFR
                              85.36.

                              Of the 72 purchase orders and contracts reviewed, no
 The PHA did not maintain
                              procurement files were maintained to support 20 purchases (28
 adequate solicitation and
                              percent). These procurements ranged in costs from about
 award records
                              $7,000 to $6.7 million. Of these purchases, 7 were over $.5
                              million. Of the remaining transactions, the PHA did not
                              document complete procurement histories on 35 purchases (49
                              percent). This included not maintaining all quotes, bids, and
                              proposals submitted and properly documenting the basis for
                              contractor selection and justification of sole-source
                              procurements (see Appendices B and D). Because adequate
                              documentation was not maintained, we could not always assess
                              whether the PHA procurement system provided for full and
                              open competition.


                              There is no support for the vast majority of the IG’s assertions
 PHA Comments
                              in Finding One. First, the IG continues to insist that formal
                              contracts be used rather than purchase orders, even though

00-AT-201-1003                Page 12
                                                     Finding 1


 PRPHA has demonstrated that the regulations upon which the
 IG relies do not include such a requirement, and that PRPHA’s
 use of purchase orders did not circumvent any processes
 required by Puerto Rico law or federal regulations. With regard
 to the specific purchase orders identified in Finding One:

     (1)   PRPHA and GSA regulations clearly allow the
           purchase of the copiers, and the IG improperly
           calculated its supposed disallowance.

     (2)   The electric stoves were purchased with the full
           knowledge of HUD, if not with written HUD
           approval. In addition, PRPHA has provided the IG
           with documentation contradicting the IG’s assertions
           about the alleged deficiencies in the purchasing of
           those stoves.

     (3)   As documented to the IG, PRPHA has been installing
           the purchased water heaters and continues to do so.
           There was absolutely no requirement that the water
           heaters be installed by a certain date, and there is
           therefore no basis for disallowing the cost of heaters
           that have not yet been installed.

     (4)   PRPHA has no information to substantiate the IG’s
           claim that a false quote was submitted for the
           desktop computer, and the IG has not provided
           PRPHA with documentation to support that claim.
           Moreover, the computer is in use and is providing
           PRPHA with ongoing benefits.

 With regard to the two contracts identified in Finding One, the
 IG is wrong. There is no justification for the IG’s insistence that
 PRPHA should have selected the lowest bidder for Contract
 No. 97-6773, when that bidder was given an unacceptably low
 score in an assessment of the various bids. Indeed, an
 independent Bid Board assessed the scores and proposals of
 the six bidders and approved the contractor selected.
 Moreover, the IG’s description of the contract award process
 is inaccurate.

 With regard to contract No 97-3715, the IG’s analysis ignores
 both Puerto Rico law and the realities of hiring outside
Page 13                            00-AT-201-1003
Finding 1


                     contractors. First, Puerto Rico law does not require a
                     competitive procurement process when prices are regulated by
                     law, and the Government of Puerto Rico has established rates
                     of $75 to $125 per hour for legal representation of government
                     entities. Second, those rates are self-evidently reasonable and
                     have in fact been approved by HUD. Third, both the Cannons
                     of Professional Ethics for Attorneys in Puerto Rico and HUD’s
                     regulations regarding House Counsel for public housing
                     agencies make the OIG’s recommendations inapposite.



                     As indicated in Paragraph 4-6 of HUD Handbook 7460.8
 Evaluation of PHA
                     REV-1, for housing authority requirements above the small
 Comments            purchase limitation, competitive procurement is conducted by
                     either sealed bidding or competitive proposals. Small purchase
                     procedures are those relatively simple and informal, allowing for
                     the use of purchase orders. The sealed bidding and the
                     competitive proposals methods are formal procedures and as
                     provided in 24 CFR 85.36 a formal written contract should be
                     issued. Formal written contracts should include the contract
                     provisions required by 24 CFR 85.36 (i). A purchase order is
                     a written contract, but it is not a formal written contract, and
                     does not contain the required provisions. With regard to the
                     specific purchase orders identified, we offer the following:

                         (1)   We are not questioning the purchase of the copiers,
                               but the procurement procedures used in the
                               acquisition. We based the disallowance on the GSA
                               price list of the less costly copiers and service
                               agreements.




00-AT-201-1003       Page 14
                                                    Finding 1



     (2)   Our concern regarding the electric stoves was that
           the PHA donated them to the tenants. Our position
           is that unless HUD specifically approves the
           donation, the costs are disallowed.

     (3)   Although there is no specific time requirement for the
           installation of the water heaters, the fact that 8,530
           heaters (40 percent) had not been installed two years
           after their acquisition is not a sound management
           practice and denotes poor planning on the PHA’s
           part. It also indicates there was not a real need for
           the heaters.

     (4)   The evidence of the false quote was provided to the
           OIG Office of Investigation. The PHA did not
           address the real concern regarding the purchase of
           the computer. The computer was not procured by
           the PHA purchasing staff and the cost was excessive.

 With regard to contract No. 97-6773, the PHA’s records did
 not show that the selection was justified. The PHA did not
 provide documentation to show: 1) the basis for the scores
 assigned; and 2) evidence that they conducted technical and
 price/cost evaluations. A written plan for evaluating technical
 and cost proposal is needed before the request for proposal is
 issued. The plan shall include a rating sheet for each offer,
 which lists each of the evaluation criteria and the weight
 assigned.

 With regard to contract No. 97-3715, HUD Handbook
 7460.8 Rev. 1, Chapter 4, Paragraph 4-27 provides guidance
 for the procurement of legal and other professional services.
 The handbook states that the procurement of legal services
 should follow the competitive proposal procedures. Contracts
 for litigation services must also meet the requirements of HUD
 Handbook 1530.1. As provided in this Handbook, with the
 exception of litigation involving a housing authority acting as a
 Section 8 developer, a housing authority must submit to HUD’s
 Regional Counsel for prior written concurrence any contract
 with a private attorney for litigation services involving housing
 authority programs, projects, or activity receiving loans, grants,
 or subsidy assistance from HUD.

Page 15                           00-AT-201-1003
Finding 1




 Recommendations   We recommend that you:

                   1A. Assess the improvement in the PHA’s procurement
                       management system. If the PHA fails to improve to
                       acceptable levels, consider declaring the PHA in
                       substantial default and breaking it up into smaller more
                       manageable housing authorities.

                   1B.       Consider placing the agency on a reimbursement
                             basis for funding, if its procurement management
                             system does not improve to acceptable levels.

                   1C. Require that the PHA terminate use of purchase
                       orders for other than small purchases.

                   1D. Review and approve the PHA’s annual
                       procurement plan in accordance with HUD
                       Handbook 7460.8, Rev-1 requirements.

                   1E.       Require that the PHA reduce fees for contract proposal
                             documents to conform to the regulations and refund the
                             overcharges.

                   1F.       Require the PHA to reimburse HUD $8,841,638 from
                             non-Federal sources for the ineligible costs associated
                             with the procurement deficiencies (see Appendices C and
                             E).




00-AT-201-1003     Page 16
                                                                                          Finding 2


 The PHA Paid Excessive Costs For Professional
    Services On Two Sole-Source Contracts
The PHA paid about $4.9 million more than necessary for professional services provided by two
contractors. This occurred because it contracted for the services without competition and without
performing comprehensive price and/or cost analyses. The PHA improperly justified these sole-source
procurements under an emergency declaration by the Puerto Rico Department of Housing Secretary.
The PHA may incur additional excess costs of about $2.1 million if corrective actions are not taken (see
Appendix A).




                                       Title 24 CFR, part 85.36 requires that grantees conduct all
 Criteria
                                       procurements using full and open competition, perform price
                                       and/or cost analyses (including sole-source procurements), and
                                       fully document all procurement activities. Noncompetitive
                                       proposals may be used only when contract award is not feasible
                                       under small purchase procedures, sealed bids or competitive
                                       proposals and one of the following circumstances applies: (1)
                                       the item is available only from a single source; (2) the public
                                       exigency or emergency for the requirement will not permit a
                                       delay resulting from competitive solicitation; (3) the awarding
                                       agency authorizes noncompetitive proposals; and (4) after
                                       solicitation, competition is determined inadequate.

                                       PHA procurement regulations define an emergency as a
                                       situation which causes unexpected and unforeseen public needs
                                       and which requires immediate action because of the danger to
                                       life, health, or public safety. Similar criteria is provided by
                                       HUD Handbook 7460.8 Rev 1. It also states that an
                                       emergency is a situation that “would otherwise cause injury to
                                       the PHA, as may arise by reason of a flood, earthquake,
                                       epidemic, riot, equipment failure or similar event.”

                                       On October 30, 1997, the Housing Secretary declared an
 Background
                                       emergency existed at the PHA. The Secretary stated in the
                                       declaration that the two sole-source contracts were necessary
                                       to: (1) avoid the PHA being placed back on HUD’s troubled
                                       list; (2) keep it from losing $150 million within the next 2 years
                                       because of “lack of efficient financial and contract management
                                       procedures;” (3) keep it off the “mod-troubled” list or risk

                                                        Page 17                           00-AT-201-1003
Finding 2


                        losing $200 million per year; and (4) obtain financial
                        management services that the PHA could not provide. On
                        December 23, 1997, after reviewing documentation submitted
                        by the PHA, the HUD office in Puerto Rico approved the
                        awarding of the sole-source contracts.

                        However, we question the justification for the declaration
                        because the situation did not meet the PHA’s own definition of
                        an emergency or HUD’s. It was not a situation that caused
                        unexpected and unforeseen needs and required immediate
                        action. There was no threat to life, health, or public safety
                        which required immediate action as for a natural disaster.

                        In addition, the situation did not meet the requirement for sole-
                        source contracting. We found that 69 days elapsed from the
                        declaration of emergency to when the contracts were awarded.
                        The PHA had adequate time to competitively award the
                        contracts. Also, contractor actions were not immediate. The
                        term of the contracts ranged from 18 to 36 months.

                        We estimate that the PHA paid excess costs totaling about $4.9
                        million on the two contracts because it did not perform price
                        and/or cost analyses and did not compete the awards. Also
                        $2.1 million in additional excess costs may be paid if corrective
                        actions are not taken.

                        On January 8, 1998, the PHA awarded CVR Puerto Rico, Inc.
 Contract No. 98-3465
                        an 18-month $4.4 million contract to provide technical
                        assistance to ensure the PHA’s implementation and efficient
                        administration of all components of the modernization program.
                        The work included developing policies and procedures and
                        providing expertise and staff necessary to develop and
                        implement a system for the PHA to administer all aspects of the
                        program including planning, contract administration,
                        procurement, and financial reporting. The contract provided for
                        payments based on services rendered by about 20 individuals at
                        rates from $20 to $137 per hour plus overhead, profit, and
                        reimbursement of miscellaneous expenses (travel, phone,
                        equipment purchases, rent). As of January 1999 the PHA had
                        paid the contractor about $2.6 million.

                        All three of the contractor’s principals had been providing the
                        PHA consulting services through affiliate firms since at least

00-AT-201-1003          Page 18
                                                   Finding 2


 1995. In May 1995, the PHA contracted with Vargas and
 Associates for $95 per hour plus expenses to provide advice
 regarding the Federal budget and regulations, and help prepare
 reports required by HUD. The contract was effective from
 May 1995 to June 1996. However, the PHA made only one
 payment to the contractor in October 1995 of $12,862.

 On October 14, 1995, HUD’s central office contracted with
 CVR Associates, Inc., to provide technical assistance to the
 PHA on the modernization program including creating
 monitoring controls, developing program close-out procedures,
 recruiting and training staff, and developing procurement
 procedures. The contractor provided services under this
 contract through March 1998. In its November 1997 progress
 report submitted to HUD, the contractor stated it “developed
 procurement processes to retain the services of firms for
 modernization and finance.” This was the same time that CVR
 Associates, Inc. submitted its proposal to contract with the
 PHA direct. CVR Puerto Rico, Inc. (incorporated in Delaware
 on November 13, 1997) was given the contract based on a
 proposal submitted by the other contractor.

 We determined that the PHA did not conduct a required price
 and/or cost analysis which included alternative ways to staff the
 project. There were other firms in Puerto Rico capable of
 providing such consulting services. For example, in 1996 the
 PRPHA contracted with three firms to manage its 1994 and
 1995 CGP funds.

 The PHA also routinely contracted direct with individuals for
 services rather than hire them as full-time employees. Many of
 the staff working in the PHA finance office were contracted
 employees. The PHA could have paid fixed price or an hourly
 rate for the professional services of a firm’s principals and
 contracted for the other staff direct. Interviews with a contract
 specialist and an administrative assistant found that the
 contractor hired them in Puerto Rico when the contract began
 and paid them $17.30 and $11.54 per hour respectively, plus
 fringe benefits. The PHA paid the contractor $60 and $20 per
 hour for these individuals’ services. The PHA also paid the
 contractor about $537,000 more for overhead and profit and
 $296,000 for miscellaneous expenses. Hourly rates charged by


Page 19                           00-AT-201-1003
Finding 2


                                              consulting firms include these costs (see Contract No. 98-
                                              3464).

                                              Included in the miscellaneous costs charged the PHA was
                                              $22,600 for a 1997 Ford Taurus and a 1997 Mitsubishi Mirage
                                              bought by the contractor just after the contract began. Also
                                              included were the costs of several computers. The PHA paid
                                              the contractor’s invoices without reviewing supporting
                                              documentation.


                                              Hourly      ___ _
                                          Hours     Contract        OIG            Paid         Eligible      Ineligible
                                          Billed       Rate         Rate 1         Costs         Costs        Difference
Principal                                   1,715    $130-137         $ 130        $222,950      $222,950           0
Project Director                            2,920      80-84          $ 80          233,600        233,600          0
CGP Director                                4,932      50-53        $21.441         246,600        105,742       $ 140,858
Construction Manager                        1,899      70-74        $21.441         132,930         40,715          92,215
Senior Monitors/Cont. Specialists          13,211      60-63        $21.441         792,660        283,244         509,416
Contract Monitors                           4,051      40-42        $21.441         162,040         86,853          75,187
Accountants                                 3,617      30-32        $21.441         108,510         77,548          30,962
Administrative Assistants                   6,306      20-21        $14.301         126,120         90,176          35,944
Other Costs                                                                         296,302         0              296,302
Overhead/Profit                                                                     537,429         0             537,429


                                                                    Totals       $2,859,141     $1,140,828     $1,718,313


                                              Based on the percent of ineligible costs paid, we estimate that
                                              additional unnecessary costs of $683,047 could be paid on this
                                              contract.

                                              On January 8, 1998, the PHA also executed a 3-year $9.5
    Contract No. 98-3464
                                              million contract with Cardona, Irizarry & Co. to provide: (1)
                                              financial management services including establishing
                                              management controls, training staff, and assisting in the PHA’s
                                              finance and administration areas, and (2) acquiring computer
                                              equipment.      The contract provided that payments for
                                              professional services were to be made based on services
                                              rendered at hourly rates ranging from $20 to $175 per hour.
                                              The contractor’s overhead costs, profit, and miscellaneous
                                              costs were included in these rates.



1
    Hourly rate paid by the contractor plus 20 percent fringe benefits and 3.28 percent PHA indirect costs.


00-AT-201-1003                                Page 20
                                                   Finding 2


 The PHA did not compete the award of this contract or
 conduct a required cost and/or price analysis. If these actions
 had taken place, significant cost savings could have been
 achieved. The PHA could have paid a fixed price or an hourly
 rate for professional services of a company’s principals and
 contracted directly with individuals to do the hands-on work.
 This is what the contractor did. One of the firm’s partners even
 set up a temporary employment agency (C&C Resources) that
 provided most of the staff on the contract.

 Interviews with 12 contractor staff (11 special staff and 1
 senior) found that they were paid $6.50 to $12.50 per hour
 plus benefits (about 10 percent) by the employment agency.
 The PHA paid the contractor $20 to $58 per hour respectively
 for their services. The three other staff (1 senior and 2
 managers) interviewed were paid $13-14 per hour plus benefits
 as full-time employees of the contractor. The PHA paid up to
 $84 an hour for their services.

 For services through April 1999, the PHA paid the contractor
 $4.6 million or about 68 percent of the maximum amount
 allowed under the contract although 20 months remained. This
 occurred because the contractor billed, and the PHA paid, for
 more staff effort than was allowed under the contract. No
 contract amendment had been approved for this additional
 effort. For example, the contract provided that in the second
 year of the contract, about 19 individuals would work on the
 contract at an average monthly cost of $168,625 or annual cost
 of about $2 million. However, for the 4 month period ended
 April 1999, the contractor had billed and the PHA paid
 $1,266,630; an average of $316,657 per month for services of
 32 individuals. At this rate, the cost for the second year of the
 contract could total about $3.8 million.

 In March 1999, the PHA requested HUD’s approval for what
 it and the contractor had been doing for some time. The PHA
 wanted to modify the contract to increase the contractor’s staff
 and work effort, add about $377,000 to the contract’s
 maximum cost for professional services ($6.8 million), and
 reduce the contract period from 3 to 2 years. HUD denied the
 request on May 10, 1999. In June 1999, the PHA contracted
 directly with 12 individuals that had been working at the PHA
 for the contractor. The PHA paid an average of $12.31 per

Page 21                           00-AT-201-1003
Finding 2


                                            hour for their services. These subcontractors were responsible
                                            for paying their own benefits. This saved the PHA about
                                            $87,720 per month over what the PHA had been paying the
                                            contractor for the same services.

                                            We determined that the PHA paid excess costs on the contract
                                            totaling about $3.1 million as of May 1999 and could incur
                                            additional excess costs of about $1.5 million if corrective
                                            actions are not taken.

                                                     Hourly      ___ _
                                 Hours         Contract     OIG            Paid           Eligible       Ineligible
                                 Billed           Rate      Rate 2         Costs           Costs         Difference
                 Partners          2,386       $156-175     $165-175      $ 396,284        $ 396,284     $     0
                 Managers         20,850         $80-88      $18.681       1,690,997           389,483       1,301,514
                 Seniors          40,609         $55-60      $12.712       2,265,987           516,137       1,749,850
                 Special Staff    11,343         $20-25      $12.712         234,519           144,173          90,346

                                                             Totals       $ 4,587,787      $ 1,446,077     $ 3,141,710

                                 1
                                     Hourly rate contract employees by the PHA plus 3.28 percent indirect costs.
                                 2
                                     $12.71 X 147 percent (ratio of $88/$60 rate charged for manager/senior)


                                            C&C Resources has also solicited the PHA’s business. On
                                            August 6, 1999, the PHA advertised its plans to procure
                                            temporary employment agency services. On August 26, 1999,
                                            it advertised its intention to privatize its accounting department.

                                            The contract also included $2,755,000 for 411 computers and
                                            associated costs and for project design, management and
                                            training. According to PHA officials, this part of the contract
                                            was canceled and the computers were purchased through the
                                            Puerto Rico General Services Administration for $1,327,975.
                                            However, the PHA did not amend the contract with Cardona,
                                            Irizarry & Co..


                                            There is absolutely no basis for the IG to criticize PRPHA’s
 PHA Comments
                                            actions with regard to the two contracts identified in Finding
                                            Two. Both of those procurements, as well as the contracts
                                            themselves, were approved by HUD based upon extensive
                                            documentation provided by the PRPHA. 24 CFR 85.36 (d)(4)
                                            specifically allows HUD’s approval, either because of a public
                                            exigency or emergency or at HUD’s discretion. The IG’s

00-AT-201-1003                             Page 22
                                                                       Finding 2


                     attempts to find problems with the approval process and these
                     contracts are completely unfounded.


                     We acknowledged HUD’s approval of the contract in the
Evaluation of PHA
                     finding. However, we are questioning the justification provided
Comments             by the PHA to HUD for the approval request. Also, the PHA
                     did not conduct a price or cost analysis, and thus, did not
                     comply with Title 24 CFR, part 85.36 (d) (4). As a result, the
                     PHA paid excessive and/or unnecessary costs on these
                     contracts.




Recommendations      We recommend that you:

                     2A.          Ensure that future emergency declarations for or by
                              the PHA meet Federal and local requirements.

                     2B.      Determine whether the procurement of temporary
                              employment agency services was in accordance with
                              Federal and PHA requirements and take appropriate
                              corrective action, if applicable.

                     2C.      Require that the PHA reimburse HUD $4,860,023
                              from non-Federal sources for the ineligible costs paid
                              the two contractors (see Appendix E).

                     2D.      Assess eligibility of $2,133,404 corresponding to
                              payments made subsequent to our review and recover
                              excess costs (see Appendix E).




                    Page 23                           00-AT-201-1003
Finding 2




                 (THIS PAGE LEFT BLANK INTENTIONALLY)




00-AT-201-1003             Page 24
                                                                                            Finding 3


        The PHA Did Not Adequately Administer
        Procurement Disbursements and Payments
             Involving Management Agents
PHA management controls were not effective in deterring waste, abuse, and fraud. The PHA paid: (1)
invoices without proper authorization or signed agreements; (2) invoices that were not original; (3)
invoices without proof of delivery; (4) invoices that exceeded contract limits; (5) unallowable advanced
payments (per PHA regulations); and (6) invoices without any support. In addition, the PHA routinely
charged costs to inappropriate fund sources. Both HUD and IPAs had previously reported similar
deficiencies to the PHA. The deficiencies continued to occur because PHA management did not
enforce Federal and PHA requirements and ensure effective management controls were in place. We
identified other ineligible costs totaling $8.1 million. Also the PHA may incur additional ineligible costs
of about $2 million unless corrective actions are taken (see Appendix A).



                                         Title 24 CFR, part 85.20 requires that grantees must have
 Criteria
                                         adequate controls to safeguard all assets including cash,
                                         property and other assets and assure that such assets are used
                                         solely for authorized purposes. In addition, part 85.36 requires
                                         that grantees maintain a contract administration system which
                                         ensures that contractors perform          in accordance with
                                         procurement terms, conditions, and specifications. PHA
                                         procurement regulations require similar controls.

                                         Although an entity may have a procurement system that
                                         provides for full and open competition, the system must also
                                         include effective procedures and management controls to ensure
                                         contractors comply with agreement terms, purchased goods
                                         and services are received, and correct payments are made and
                                         charged to the proper fund source.

                                         Examples of PHA administrative deficiencies:

                                             Security Service Agreements

                                             The PHA paid excess costs totaling $920,691 for security
                                             services they did not receive. The services were provided
                                             by two security firms during the period March 1996 through
                                             September 1998. Additional excess costs estimated at
                                             about $2 million may be incurred for subsequent periods if

                                                         Page 25                            00-AT-201-1003
Finding 3


                                       costs are not properly allocated. This occurred because
                                       adequate management controls were not established to
                                       ensure that all costs charged against PHA funds directly
                                       benefited the PHA. For example, invoices paid by the
                                       PHA included cost of services provided to the Department
                                       of Housing. Other charges may have benefited both
                                       agencies (e.g., day care security) but were paid in part by
                                       the PHA. To avoid paying more than their share of the
                                       costs, the PHA budgeted less than the contract limits. The
                                       control was not effective. The PHA paid most of the
                                       security costs billed. None of the costs were allocated to
                                       the Department of Housing.

                        Contract                            Paid          Paid       Estimated
  Number        Firm      Term      Limit       Budget     Amount        Excess       Excess
  C56-031   Domenech   3/96-3/97    $603,096    $189,947   $ 631,641      $441,694
            Security
  C47-106   Domenech   4/97-3/98    $642,959    $281,964      642,959     360,995
            Security
  UNK       Island     4/98-9/98    $730,858    $139,272      257,274     118,002    $ 473,584
            Security
  UNK       Island     9/98-9/00   $1,735,078   $214,265            0           0     1,520,813
            Security
                                       Total               $ 1,531,874   $ 920,691   $ 1,994,397


                                       The PHA obtained the services under intergovernmental
                                       agreements managed by the Puerto Rico General Services
                                       Administration. Under these agreements, the PHA could
                                       choose any vendor from an approved list. Instead of formal
                                       contracts with the firms, the PHA executed three agreement
                                       letters. As a result, these contracts were not listed on the
                                       PHA contract register or reported to the Puerto Rico
                                       Comptroller’s Office.

                                       Contract No. 98-3465

                                       In January 1998, the PHA executed an emergency sole-
                                       source contract with CVR Puerto Rico, Inc. to provide
                                       technical assistance and administrative services to the
                                       agency’s modernization program. The 18-month contract
                                       totaled about $4.4 million. Seven days after the contract
                                       was signed the PHA paid the contractor $211,117 in
                                       advance. This is contrary to Title 24 CFR, subpart 85.36
                                       (b) (8) which states that grantees should make awards only
                                       to responsible contractors possessing the ability to perform

00-AT-201-1003                     Page 26
                                                                               Finding 3


                                 successfully under the terms and conditions of a proposed
                                 procurement. Consideration must be given to the potential
                                 contractor’s technical and financial resources. We found
                                 that although the owners of the company had prior public
                                 housing experience, the company was constituted just prior
                                 to receiving the contract thus, their past experience did not
                                 meet the criteria (see Finding 2). In addition, the Puerto
                                 Rico Treasury Department Regulation No. 31 prohibits
                                 advance payments.

                                 Fictitious Training Invoices
Other payments involving
management agents were
                                 During the period April 1995 through January 1997, the
not administered properly
                                 PHA paid about $2.6 million to Corporación de
                                 Adiestramiento y Empleo en los Residenciales (CAER). Of
                                 this amount, approximately $1.9 million was for services
                                 that were not rendered. All the costs were charged to the
                                 CGP. The payments were for training public housing
                                 resident councils to help establish small businesses. The
                                 goal was to create 3,000 jobs for public housing residents.

                                 The PHA did not contract with CAER. However, PHA
                                 officials endorsed the training and recommended that
                                 management agents promote it to the councils. Using the
                                 agents, CAER convinced at least 222 councils to sign
                                 $8,000 sole-source contracts and send the invoices to the
                                 PHA for payment. The training was to be given in two
                                 stages. The first stage was for 15 hours of classroom
                                 training to be given each council; cost $4,000 each. The
                                 second stage was for CAER to assist resident councils to
                                 select and implement one of five business concepts
                                 promoted by CAER. The cost of this effort was also
                                 $4,000 per council.

                                 Under the first stage, the PHA paid CAER over $430,000
                                 for training that was not provided. Training agendas and
                                 resident interviews revealed that only 8 hours or less of
                                 training were provided rather than 15 hours. Invoices
                                 submitted to the PHA showed training given 1 day.
                                 However, it paid the invoices without questioning how at
                                 least 2 days of training could be given on 1 day.



                            Page 27                           00-AT-201-1003
Finding 3


                     The PHA also paid CAER $888,000 for assisting resident
                     councils to start businesses. However, we found that only
                     44 of 222 councils actually received assistance. Also, the
                     assistance provided was not effective. As of January 31,
                     1998, only 2 council businesses were operating that
                     employed 13 residents.

                     In addition, the PHA paid CAER $776,000 in duplicate
                     payments. The payments were approved by PHA officials
                     without original invoices. Some payments were made
                     without any invoices.

                     PHA management controls were not effective in ensuring
                     that payments were for legitimate services. The scheme
                     was disclosed only when a PHA employee not involved in
                     the payment process, expressed concern to HUD regarding
                     the contractor’s work.     We consider all the costs
                     ($2,568,000) paid ineligible because services were not
                     rendered or effective and were not for allowable CGP
                     activities.

                     Five individuals including two former PHA employees and
                     the owner of CAER were recently indicted for fraud in
                     connection with this contractor. Two of the former
                     employees pled guilty.

                     Fictitious Management Agent Claims

                     During the period September 1996 through July 1997, the
                     PHA paid over $1 million from CGP funds based on
                     fictitious reimbursement claims. Four checks ranging from
                     $108,000 to $486,000 were issued to Inter Island Rental
                     Corporation, a PHA management agent. The agent did not
                     submit the claims or receive the payments. Two individuals,
                     in collusion with a former PRPHA employee, opened two
                     checking accounts doing business as the management agent
                     and deposited the checks. Two of the individuals pled
                     guilty and have been sentenced. The former employee pled
                     guilty. The scheme was discovered when a bank
                     questioned the deposits.




00-AT-201-1003   Page 28
                                                                          Finding 3


                             Although three of the claims were duplicates previously paid
                             the management agent, PHA management controls were not
                             effective in keeping the claims from being processed again
                             or identifying the duplicate payments. Therefore, charges of
                             $1,034,733 are ineligible grant costs and must be
                             reimbursed HUD.

                         The single-audit report on 1992-1993 financial statements
Prior reviews cited
                         issued in October 1995, identified numerous management
control weaknesses
                         control weaknesses involving PHA procurement and related
involving procurement
                         disbursements. The single-audit report issued in August 1998,
and disbursements
                         on the 1994-1997 financial statements also cited the continuous
                         deficiencies and management control weaknesses in these
                         areas. Prior OIG and HUD reviews also cited similar
                         problems. As a result, the PHA agreed to strengthen controls.

                         We found that although the PHA has made many organizational
                         changes such as creating a central procurement division and
                         hiring an IPA firm to help manage many of its accounting
                         functions, the actions have not been effective in reducing
                         procurement and related disbursement deficiencies. Our tests
                         of PHA procurements (as recent as December 1998) and
                         disbursements showed continued noncompliance.




                         PRPHA has provided the IG with extensive documentation
PHA Comments             demonstrating that the IG’s assertions regarding the Security
                         Services Agreements are simply incorrect. With regard to the
                         fictitious training invoices and fictitious management agent
                         claims, it has been well-documented that PRPHA completely
                         cooperated with law enforcement officials as soon as these
                         fraudulent schemes were discovered, and PRPHA has
                         instituted new procedures to prevent a recurrence of such
                         schemes. The advance payments that the IG seeks to disallow
                         are not prohibited by 24 CFR 85.36, the cited Treasury
                         regulation, or any other statute or regulation. Moreover, that
                         payment was approved by HUD. Finally, the IG does not fully
                         and accurately describe either PRPHA’s audit reports or the
                         organizational changes instituted by PRPHA.




                        Page 29                          00-AT-201-1003
Finding 3



                     We considered the documentation provided by the PHA
 Evaluation of PHA
                     regarding the Security Services Agreements, but it did not
 Comments            constitute a basis for changing the finding. With regard to the
                     fictitious training invoices and management agent claims, as
                     stated the PHA’s management controls were not effective to
                     detect or prevent the criminal fraud.

                     We are not disallowing the advance payment made to CVR.
                     Our point was that the advance payments made to CVR are
                     prohibited by the Puerto Rico Treasury Department regulations.



 Recommendations     We recommend that you:

                     3A.           Perform cost reviews of major programs at least
                               annually to determine whether the PHA properly
                               allocated costs and require appropriate cost
                               adjustments and/or recovery of ineligible charges.

                     3B.       Require that the PHA reimburse HUD ineligible costs of
                               $4,506,396 from non-federal funds improperly charged
                               to HUD programs and paid for services not received
                               (see Appendices C and E).

                     3C.       Require that the PHA reimburse $2,568,000, less any
                               restitution, for the fictitious training invoices.

                     3D.       Require that the PHA reimburse $1,034,733, less any
                               restitution, for the fictitious management agent claims.

                     3E.       Assess the eligibility of $1,994,397 that had not been
                               paid on the security service contracts at the time of our
                               review and require PHA reimbursement, if applicable
                               (see Appendix E).




00-AT-201-1003       Page 30
                                                                                           Finding 4


 Property Management and Related Procurement
          Controls Need Improvement
The PHA did not maintain adequate property management and related procurement documents. Its
inventory records were not accurate or did not contain required data such as property location. PHA
purchase orders, contract registers and procurement regulations also need improvement. This occurred
because the PHA did not ensure that past actions taken to improve controls were effective. As a result,
there was no assurance that personal property was properly accounted for and used or if effective
controls were in place to safeguard assets. The PHA’s June 30, 1997, Balance Sheet showed that
personal property was valued at about $8.6 million. However, the inventory report, as of June 30,
1997, provided to OIG in February 1999, showed an adjustment increasing the inventory value from
$8.6 to $15.3 million, an increase of about 80 percent.



                                       Title 24 CFR, part 85.20(b)(3) states that effective control and
 Criteria
                                       accountability must be maintained over all assets. Subpart
                                       85.32(d)(1) further requires that personal property (equipment)
                                       records must be maintained that include a description of the
                                       property, a serial or other identification number, the source,
                                       cost, location, use and condition of the property. PHA
                                       regulations state that inventory controls apply to all items valued
                                       at $50 or more.

                                       Since at least 1994, auditors and HUD program officials have
                                       repeatedly recommended that the PHA improve controls over
                                       property management and procurement including maintaining
                                       accurate inventory and procurement records and developing
                                       and issuing a procurement manual. For example, a HUD
                                       monitoring report issued in August 1994, cited the PHA for not
                                       having an annual equipment inventory. The single-audit reports
                                       on the PHA’s FY 1992 and 1993 financial statements issued in
                                       October 1995, cited many control problems regarding property
                                       management. The IPA recommended that the PHA take a
                                       physical inventory and prepare and maintain a fixed assets
                                       subsidiary ledger. However, the PHA did not develop the
                                       ledger until 1998.




                                                       Page 31                             00-AT-201-1003
Finding 4



                 Our tests of the ledger showed that it was not complete nor
                 accurate. We attempted to trace 285 items purchased during
                 the review period from source documents (purchase orders,
                 invoices, and receiving reports) to the ledger dated June 30,
                 1998. We could not positively confirm any of the items were
                 on the list. For example, we found 34 vehicles on the list with
                 the same purchase date and price as those tested but no
                 identifier (serial/plate number) or detailed description was
                 shown. We did not find the other 12 vehicles purchased in
                 August 1997 on the list. We also found none of the 59 Xerox
                 photocopiers purchased and received in April 1998 on the list
                 or 177 pieces of office furniture purchased from February to
                 April 1998. Although we could not be certain, three notebook
                 computers bought for $3,300 each in February 1998, were
                 listed as one notebook worth $9,900. The ledger did not show
                 the location for any of the items on the list. The inventory list
                 cannot be effectively used unless all personal property items are
                 accurately recorded with all required information.

                 In general, we physically located the personal property items
                 tested. However, we could not be certain that some items
                 located were the items procured. For example, we could not
                 positively confirm three computers purchased (purchase order
                 number 97-341) in January 1997 were the computers we saw
                 at the PHA Finance and Administration Office. The inventory
                 ledger and the purchase order did not show the manufacturer or
                 any other identifier (serial number).

                 PHA purchase order and contract registers were not accurate.
                 They were required to be maintained as a management control.
                 We found purchase orders were not sequentially numbered on
                 the register and all contracts were not shown. We also
                 determined that the purchase order and contract registers did
                 not show fund sources or always reflect actual purchase
                 amounts.

                 In addition, PHA procurement regulations did not contain all
                 HUD requirements. We found that the regulations did not:

                           •   prohibit use of cost-plus contracts,
                           •   include detailed steps for rejecting contractors,


00-AT-201-1003   Page 32
                                                                       Finding 4


                              •   provide procedures       to   ensure    contractor
                                  performance,

                              •   include steps to preclude awards to contractors on
                                  Federal debarment lists, and

                              •   require contract solicitations remain open 15 days
                                  minimum.

                     In 1998, a contractor developed a comprehensive procurement
                     manual for the PHA which included these requirements.
                     However, it had not been issued as of December 1999.


                     PRPHA does not dispute that additional improvements in its
PHA Comments
                     property management and procurement systems are desirable.
                     Indeed, PRPHA welcomes HUD’s assistance in instituting such
                     changes. However, the problems are not nearly so extensive as
                     suggested by the IG audit.


                     We had no assurance that personal property was properly
OIG Evaluation of
                     accounted for and used or if effective controls were in place to
Auditee Comments     safeguard assets.



Recommendations      We recommend that you require the PHA to:

                     4A.          Submit detailed policy and procedures for: (1)
                              maintaining a personal property ledger that complies
                              with Federal requirements that includes a detailed
                              property     description, identification/serial number,
                              location, and source document reference, and (2)
                              conducting an annual physical inventory, comparing
                              results to the ledger, and reconciling differences
                              including steps to investigate missing items.




                    Page 33                           00-AT-201-1003
Finding 4



                 4B.       Properly record all personal property items included in
                           this review in the ledger, physically locate the items we
                           could not find, and investigate those that are missing.

                 4C.       Establish management controls to ensure reliability of
                           purchase order and contract registers.

                 4D.       Issue the procurement manual and policy on its use.




00-AT-201-1003   Page 34
Management Controls
In planning and performing our audit, we considered the PHA’s management controls to determine our
audit procedures and not to provide assurance on those controls. Management is responsible for
establishing effective management controls to ensure that its goals are met.

Management controls include the plan of organization, methods and procedures adopted by
management to ensure that its goals are met. Management controls include the processes for planning,
organizing, directing, and controlling program operations. They include the systems for measuring,
reporting, and monitoring program performance.

We determined that the controls most relevant to our objectives pertained to the following:

    1. Procedures and practices used to accumulate and charge costs to the Program.

    2. Procedures used for contract administration.

    3. Procedures used to comply with Federal and PHA’s procurement requirements and maintain
       control over its central office procurement activities

    4. Procedures to ensure that personal property was properly accounted for and to maintain
       inventory control.

    5. Procedures used to monitor procurement activities.

We assessed controls in place. We obtained an understanding of the PHA’s procedures and HUD's
requirements, assessed control risk, and performed various substantive tests of the controls.

A significant weakness exists if management controls do not give reasonable assurance that resource use
is consistent with laws, regulations, and policies; that resources are safeguarded against waste, loss, and
misuse; and that reliable data are obtained, maintained, and fairly disclosed in reports.

Based on our review, we believe that significant weaknesses existed in all five management control areas
mentioned above. The specific weaknesses are discussed in the findings.




                                                         Page 35                            00-AT-201-1003
Management Controls




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00-AT-201-1003             Page 36
Follow-Up On Prior Audits
Prior audit reports contained findings which impact the objectives of this audit.

    •   An OIG audit report (No. 96-AT-201-1821 dated June 26, 1996) on the PRPHA concluded
        that the PHA did not (1) document the history of each procurement including basis for
        contractor selection or rejection and contract price; (2) perform required price and/or cost
        analyses prior to procurements; and (3) provide all required standard contract provisions in its
        contracts. At the time of this review, these findings were unresolved. HUD has referred them
        to its legal staff for further action.

    •   A single audit of the PHA’s FY 1992-1993 financial statements, management controls, and
        compliance (issued October 31,1995) by PriceWaterhouseCoopers, LLP, found numerous
        significant deficiencies. The IPA disclaimed an opinion on both years’ statements. Among the
        items reported was that the PHA did not: (1) maintain bid and contract documents; (2) have
        records supporting disbursements; (3) adequately solicit procurements; and (4) prepare written
        contracts for professional services. These findings were also unresolved at the time of our
        review.

    •   A single audit of the Department of Housing including the PHA’s FY 1994-1997 financial
        statements, management controls, and compliance (issued August 17, 1998) by the same firm,
        found numerous significant deficiencies. Because of these deficiencies and their impact on the
        statements, the firm disclaimed an opinion on the 1994-1996 statements. Although all the
        deficiencies continued into the next year, the firm was able to give an unqualified opinion on the
        1997 statements. It reported that the PHA: (1) did not maintain contract nor related
        procurement documents; (2) made procurements without using competitive procedures; (3)
        performed no price and/or cost analyses and; (4) made payments for professional services
        without signed contracts. These findings were not resolved at the time of our review.

As discussed in detail in the “Findings and Recommendations” section of this report, the above
conditions continue to exist. This report stresses the importance of developing and implementing
management controls to ensure that the conditions do not continue.




                                                          Page 37                          00-AT-201-1003
Follow-Up On Prior Audits




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00-AT-201-1003              Page 38
                                                                                                     Appendix A


Schedule Of Ineligible Costs and Cost
Efficiencies

        Recommendation                           Ineligible                 Efficiency
             1F.                                $8,841,638
             2C.                                 4,860,023
             2D.                                                               $2,133,404
             3B.                                  4,506,396
             3C.                                  2,568,000
             3D.                                  1,034,733
             3E.                                                                1,994,397

                                     Total      $21,810,790                    $4,127,801




Ineligible - Costs not allowable by law, regulation, contract, or HUD or local agency policy.
Cost Efficiency - An action to prevent an ineligible obligation or expenditure, or to increase revenue.




                                                              Page 39                                     00-AT-201-1003
Schedule Of Ineligible Costs and Cost Efficiencies




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00-AT-201-1003                         Page 40
                                                                         Appendix B


Summary Of Purchase Order Deficiencies
Number    Vendor                                  Procurement Deficiencies
97-279B   Bus Rental                              1, 3, 7, 10, 11, 12, 14, 20
97-528    Bus Rental                              1, 3, 5, 7, 10, 11, 12, 14, 20
97-578    Bus Rental                              1, 3, 7, 10, 11, 12, 14, 20
97-585    Bus Rental                              1, 3, 7, 10, 11, 12, 14, 20
97-014    Colortaal                               5, 11
97-460    DRC                                     4, 8, 11
97-271    Ferreteria Martin Gonzalez              5, 7, 8, 11, 19, 20
97-299    Ferreteria Martin Gonzalez              2, 5, 7, 8, 11, 19, 20
97-342    Ferreteria Martin Gonzalez              5, 8, 11, 15, 19, 20
97-409    Ferreteria Martin Gonzalez              8, 11, 13, 17, 21
97-592    Ferreteria Martin Gonzalez              8, 11, 13
97-458    IBM                                     4, 6, 8, 11, 14
97-032    Michica International                   6, 11, 14
97-031    Motorola de Puerto Rico                 6, 11, 14, 21
97-057    Nu-Vue Ind. Service                     7, 11, 19, 20
97-191    National Security Institute             1, 2, 3, 7, 10, 11, 13, 14, 19, 20
97-220    National Security Institute             1, 2, 3, 7, 10, 11, 13, 14, 19, 20
97-370    National Security Institute             1, 2, 3, 7, 10, 11, 13, 14, 19, 20
97-461    National Security Institute             1, 3, 5, 7, 8, 10, 11, 12, 13, 14, 19
97-231    Plebiscito Storm Shutter                2, 5, 7, 8, 11, 19, 20
97-338    PR Computer Services                    1, 4, 8, 11, 20, 21
97-263    Standard Forms, Inc.                    1, 2, 5, 11, 19, 20, 21
97-228    The Capicorn Group                      2, 5, 6, 8, 11, 19
97-267    The Capicorn Group                      1, 2, 5, 8, 11, 19, 20
97-275    The Capicorn Group                      1, 2, 5, 8, 11, 16, 19, 20
97-318    The Capicorn Group                      1, 2, 5, 8, 11, 19, 20
97-341    The Capicorn Group                      1, 2, 5, 8, 11, 15, 16
98-487    Belfra Interiors                        1, 7, 11, 20
98-478    COMPUTERLINK                            5, 11, 13, 21
98-723    Fire Control Corporation                6, 7, 11, 12, 16
98-469    Future Data Visions                     1, 3, 4, 8, 10, 11
98-551    Future Data Visions                     1, 3, 5, 8, 10, 11
98-684    J&K Printers                            11
98-070    Kane Caribbean                          6, 7, 9, 10, 11, 12, 14, 18, 20, 21
98-074    Losada Auto Truck, Inc.                 4, 9, 10, 11, 12, 14, 16, 17, 20, 21
98-763    MORS Inc.                               5, 11
98-631    MV Electrical Contractor                1, 5, 7, 11
98-829    Office Gallery                          2, 3, 8, 10, 11
98-830    Office Gallery                          2, 3, 8, 10, 11
98-566    Office Gallery                          5, 11, 13, 21



                                        Page 41                             00-AT-201-1003
Summary Of Purchase Order Deficiencies




00-AT-201-1003                     Page 42
                                                       Summary of Purchase Order Deficiencies



Number              Vendor                                        Procurement Deficiencies
98-822              Rafael J. Nido                                6, 7, 9, 10, 11, 12, 14, 16, 21
98-752              Royal International                           7, 8, 11, 14
98-071              Royal Motors Corp.                            4, 6, 8, 9, 10, 11, 12, 14, 20
98-708              Speedy Office                                 3, 10, 11, 20, 21
98-707              Speedy Office                                 3, 7, 10, 11, 20, 21
98-541              Speedy Office                                 4, 7, 8, 11, 14, 20, 21
98-595              The Atmospheric Group                         1, 4, 7, 8, 11, 14
98-073              Triangle Dealers                              6, 9, 10, 11, 12, 14, 20
98-821              White Westinghouse                            6, 7, 9, 10, 11, 12, 14, 18, 20, 21
98-405              Xerox Corporation                             6, 8, 11, 12, 13
98-703              Xerox Corporation                             6, 8, 11, 12, 13, 21
99-248              Abreu Power Cars                              6, 7, 8, 10, 11, 20
99-246              Autos Vega                                    6, 7, 10, 11, 20
99-326              COMPUTERLINK                                  6, 10, 11, 20
99-245              Empresas Losada                               6, 7, 10, 11, 20
99-247              Triangle Dealers                              6, 7, 10, 11, 20



Solicitation and Award Deficiencies

      1       Procurement did not involve purchasing department
      2       False or altered questions
      3       Splitting acquisition to avoid formal procurement, not advertised
      4       Lowest quotation/bid not selected
      5       No or insufficient number of quotations obtained
      6       Purchase order issued instead of written contract
      7       Purchase order with incorrect or incomplete information
      8       Excessive costs
      9       Insufficient time to respond to the request for bid/proposal
     10       Not advertised twice
     11       No independent cost and/or price analysis
     12       Acquisition over $30,000 without required Housing Secretary approval



Inadequate Procurement Records

     13       No procurement file
     14       File did not show complete procurement history




                                      Page 43                           00-AT-201-1003
Summary Of Purchase Order Deficiencies

Inadequate Payment/Contract Administration

     15      Payment not supported by an invoice
     16      Payment without adequate support demonstrating that goods/services were received
     17      Payments made without proper PHA authorization
     18      Invoice paid without having proper vendor certification
     19      Invoice/supporting documents not marked “paid” to avoid duplicate payment
     20      Cost not allocable to HUD program
     21      Sampled item(s) not on inventory list and/or not physically located




00-AT-201-1003                       Page 44
                    Summary of Purchase Order Deficiencies




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          Page 45                  00-AT-201-1003
                                                                                              Appendix C


Summary Of Purchase Order Cost Exceptions
Number      Date             Vendor                   Goods/Services      Amount     Grant Ineligible     Reason      A/F
                                                                                           Costs            @
97-279B   11/14/96   Bus Rental               Transportation                $3,750 DEP           $3,750      20        3
 97-528    5/5/97    Bus Rental               Transportation                 4,150 DEP            4,150    5, 20       3
 97-578    6/3/97    Bus Rental               Transportation                 6,760 DEP            6,760      20        3
 97-585   6/10/97    Bus Rental               Transportation                 6,320 DEP            6,320      20        3
 97-014   7/22/96    Colortaal                Copy of Plans                  5,052 OS&I           5,052    5, 11       1
 97-460   3/13/96    DRC                      Network Services               2,500 OS&I           1,100       8        1
 97-271   12/4/96    Ferreteria Martin        6 Electricity Generators       9,000 DEP            9,000   5, 8, 20     3
                     Gonzalez
97-299    12/12/96   Ferreteria Martin        10 Chain Saws                  4,500   DEP          4,500 2, 5, 8, 20    3
                     Gonzalez
97-342    1/24/97    Ferreteria Martin        Cleaning Materials             8,785 OS&I           8,785    8, 13       3
                     Gonzalez
97-409    2/25/97    Ferreteria Martin        Maintenance Equipment          7,004   DEV          7,004    8, 13       1
                     Gonzalez
97-592    6/13/97    Ferreteria Martin        Tools                          9,818 OS&I           9,818    8, 13       1
                     Gonzalez
97-458    3/12/97    IBM                      Software License             319,501   CGP       129,635       8         1
97-032    7/31/96    Michica International    200 Batteries and 50          50,500   DEP
                                              Chargers
97-031    7/31/96    Motorola de Puerto Rico 247 Portable Radios           707,710 DEP
97-057    8/19/96    Nu-Vue Ind. Service      Storm Shutters                 3,756 OS&I           2,518       20       3
97-191    10/22/96   National Security        Aerial Photographs of 11       9,945 DEP            9,945   2, 13, 20    3
                     Institute                Public Housing Projects
97-220    11/6/96    National Security        Scanning &                     8,775   DEP          8,775   2, 13, 20    3
                     Institute                Digitalization of Aerial
                                              Photographs
97-370     2/5/97    National Security        Aerial Photographs of 7        7,050   DEP          7,050   2, 13, 20    3
                     Institute                Public Housing Projects
97-461    3/13/97    National Security        RETA-1 Seminar                 9,900   DEP          9,900   5, 8, 13     1
                     Institute
97-231    11/18/96   Plebiscito Storm Shutter Storm Shutters                 5,160 OS&I           2,580   2, 5, 20     3
97-338    1/22/97    PR Computer Services     1 Laptop Computer              7,365 CGP            7,365    8, 20       3
97-263    11/29/96   Standard Forms Inc.      50 Antiglare Filters and       7,075 CGP            7,075   2, 5, 20     3
                                              25 Wrist Rests
97-228    11/12/96   The Capricorn Group      Office Furniture               5,950   DEP          5,950   2, 5, 8      1
97-267    12/3/96    The Capricorn Group      1 Desk-top Computer            8,200   CGP          8,200 2, 5, 8, 20    1
97-275    12/5/96    The Capricorn Group      2 Desk-top Computers           5,600   CGP          5,600 2, 5, 8, 20    1
97-318    12/3/96    The Capricorn Group      3 Desk-top Computers           8,400   DEP          8,400   2, 5, 8      1
97-341    1/23/97    The Capricorn Group      3 Desk-top Computers           9,300   CGP          9,300 2, 5, 8, 20    1
98-487     2/6/98    Befra Interiors          Rehab Modernization            9,800   CGP          9,800     20         3
                                              Office
98-478     2/5/98    COMPUTERLINK             3 Laptop Computers             9,900   OS&I         9,900    5, 13       1
98-469     5/1/98    Future Data Visions      55,000 Fire Extinguishers    684,750   OS&I         2,252                1
98-723     2/2/98    Fire Control Corporation Server Back-up Drive           8,419   OS&I                    8
98-551     3/2/98    Future Data Visions      Installation and Training      4,800   OS&I         4,800     5, 8       1


                                                            Page 47                              00-AT-201-1003
Summary Of Purchase Order Cost Exceptions

                                                   of Back-up Drive
 98-684        4/14/98   J&K Printers              Reproduction of PHA             6,000 OS&I
                                                   Forms
 98-070        8/13/97   KANE Caribbean            7 Steer Loader/Backhoes      243,852    CGP      243,852       20       3
 98-074        8/14/97  Losada Auto Truck Inc. 43 Vehicles                     1,295,453 CGP       1,295,453     20        3
 98-763        5/15/98  MORS Inc.                Toners                            6,750 OS&I          6,750    5, 11      1
 98-631        3/29/98  MV Electrical Contractor Electrical Work at                6,800 OS&I          6,800 1, 5, 7, 11   1
                                                 Modernization Office
 98-829         6/4/98  Office Gallery           Office Furniture                  6,525   OS&I       6,525      2, 8      1
 98-830         6/4/98  Office Gallery           Office Furniture                  3,775   OS&I       3,775      2, 8      1
 98-566        3/17/98 Office Gallery            Office Furniture                  7,192   OS&I       7,192     5, 13      1
 98-822         5/1/98  Rafael J. Nido, Inc.     21,428 Water Heaters          2,365,437   OS&I     941,627        a       1
 98-752        5/12/98 Royal International       Fax and Copiers                   7,775   OS&I       4,418        8       1
 98-071        8/13/97 Royal Motors Corp.        11 Vehicles                     168,719   CGP      168,719     8, 20      3
 98-708        4/27/98 Speedy Office             Office Furniture                  7,930   CGP        7,930       20       3
 98-707        4/27/98 Speedy Office             Office Furniture                  6,840   CGP        6,840       20       3
 98-541        2/26/98 Speedy Office             100 Chairs                        6,250   OS&I       6,250     8, 20      1
 98-595        3/12/98 The Atmospheric Group Analysis of Lead                      9,570   OS&I       1,875        8       1
                                                 Abatement Waste
 98-073        8/14/97 Triangle Dealers          12 Vans                         296,686 CGP         273,864    6, 20      3
 98-821         5/1/98  White Westinghouse       12,000 Electric Stoves        2,604,000 OS&I      2,604,000     20        1
 98-405         1/7/98  Xerox Corporation        96 Copiers                      480,000 OS&I        346,080    8, 13      1
 98-703        4/24/98 Xerox Corporation         Maintenance                     802,640 OS&I        536,015 8, 11, 12,    1
                                                 Agreements                                                      13
 99-248       11/101998 Abreu Power Cars         5 Skymaster Trucks              238,500   OS&I      238,500    8, 20      3
 99-246        11/10/98 Autos Vega               13 Pick-ups                     358,225   OS&I      358,225     20        3
 99-326        12/22/98 COMPUTERLINK             33 Digital Cameras               26,400   CGP        26,400     20        3
 99-245        11/10/98 Empresas Losada          14 Dump Trucks                  595,196   OS&I      595,196     20        3
 99-247        11/10/98 Triangle Dealers         6 Vans                          135,732   OS&I      135,732     20        3
                                                            Total            $11,645,743          $8,137,302




Grant
CGP       -    Comprehensive Grant Program
DEP       -    Drug Elimination Program
DEV       -    Development Fund
OS&I      -    Operational Subsidy & Income



A/F- Audit Finding                    Ineligible
        1                    $4,688,218
        3                    $3,449,084
        Total                $8,137,302



a - Heaters not installed 19 months after purchased
@ - See Appendix B for legend




00-AT-201-1003                                 Page 48
          Summary of Purchase Order Deficiencies




Page 49                  00-AT-201-1003
                                                                                            Appendix D


Summary Of Contract Deficiencies
Number         Vendor                                 Procurement Deficiencies
97-6773        Cardona, Irizarry & Company            5, 8, 9, 10, 11, 12, 15, 17, 25
97-3715        Fidler, Gonzalez & Rodriguez           1, 2, 3, 4, 10, 11, 12, 15, 16, 17, 19, 20, 23
97-134         Guirimar Construction                  2, 10, 11, 12, 17
98-416         American Fundware                      1, 2, 3, 4, 10, 11, 12, 13, 16, 17
98-427         Analytical Environment                 5, 6, 7, 10, 12, 17, 18
98-2311        Cardona, Irizarry & Company            2, 5, 7, 8, 10, 11, 12, 17, 18, 22, 25
98-3464        Cardona, Irizarry & Company            1, 2, 3, 4, 11, 12, 13, 16, 17, 25
98-3465        CVR Puerto Rico, Inc.                  1, 2, 3, 4, 11, 12, 13, 16, 17, 24, 25
98-3823        Global Panzardi Joint Venture          5, 6, 8, 10, 12, 13, 17, 18, 24, 25
98-5121        Habibe Computer                        5, 7, 10, 12, 13
98-431         Price Waterhouse Coopers               5, 7, 8, 10, 12, 17, 21
UNK            Cardona, Irizarry & Company            1, 2, 4, 10, 12, 13, 14, 16, 17, 18, 19, 20, 21, 23
UNK            Domenech Security                      9, 10, 12, 13, 16, 17, 20, 27
UNK            Domenech Security                      9, 10, 12, 13, 16, 17, 20, 27
UNK            Island Security                        9, 10, 12, 13, 16, 17, 20, 27
UNK            Island Security                        9, 10, 12, 13, 16, 17, 27
UNK            National Security Institute            1, 2, 4,10, 12, 13, 14, 16, 17, 18, 19, 20, 21, 23, 25,
                                                      26


Solicitation and Award Deficiencies

      1       Inappropriate procurement method
      2       Inadequate competition
      3       Sole-source contract not justified
      4       Not advertised
      5       Not advertised twice
      6       No due date to submit proposal
      7       Insufficient time to respond to the request for bid/proposal
      8       Request for proposal did not contain all evaluating factors and weighted importance
      9       Contract awarded to other than lowest bidder without justification
     10       Contract not approved by HUD and Housing Secretary
     11       Excessive costs
     12       No independent cost and/or price analysis
     13       Contract did not include all required clauses
     14       No written contract executed

Improper Contract Modifications

     15       Change order not approved by HUD and/or Housing Secretary



                                                      Page 51                                  00-AT-201-1003
Summary Of Contract Deficiencies



Inadequate Procurement Records

     16      No procurement file
     17      File did not show complete history
     18      File did not include all bid/proposals received
     19      File did not document the basis for contractor selection

Inadequate Payment/Contract Administration

     20      Payment made above the budgeted and/or contract amount
     21      Payment made without contract
     22      Payment made without original invoice
     23      Payment made without proper PHA authorization
     24      Payment made in advance or without evidence of completion of service
     25      Payment made without detail of services provided
     26      Payment made without proper contractor certification
     27      Cost not allocable to HUD program




00-AT-201-1003                         Page 52
                                                                                               Appendix E


     Summary Of Contract Cost Exceptions
Number       Date            Vendor            Goods/         Amount       Grant         Audit            Reason
                                               Services                              Classification           @
97-6773    03/10/1997   Cardona, Irizarry Accounting          $1,385,136    CGP         $1,257,711 1 9, 11, 15
                        & Co.             Services
97-3715    03/12/1997   Fiddler, Gonzalez Legal Services       1,118,974    OS&I        1,118,974 1 2,3,10,11,
                        & Rodriguez                                                                 15,16,20
                                                                                                  1
 97-134    07/24/1996   Guirimar          Demolition           1,189,000 URD,CGP            4,000 2,10,11
                        Construction
 98-416    07/18/1997   American          Computer              977,400     CGP           953,014 1 2,3.16
                        Fundware          Services
 98-427    09/12/1997   Analytical        Lead Risk             659,317      LB
                        Environment       Assessment
98-2311    11/17/1997   Cardona, Irizarry Accounting           1,068,660    CGP           819,721 1 2,10,11
                        & Co.             Services
98-3464*   01/08/1998   Cardona, Irizarry Accounting           6,762,610 CGP/OS&I       3,141,710 1 2,3,11,16
                        & Co.             Services
                                                                                        1,450,357 2
98-3465    01/08/1998   CVR Puerto Rico, Modernization         4,418,326    CGP         1,718,313 1 2,3,11,16
                        Inc.             Area Services
                                                                                          683,047 2
98-3823    09/25/1997   Global Panzardi Lead Disposal          1,365,756    CGP
                        Joint Venture
98-5121    03/27/1998   Habibe Computer Computer                675,340     CGP
                                          Services
 99-431    08/13/1998   Price Waterhouse Single Audit           802,211    Various
                        Coopers           Services
 UNK         UNK        Cardona, Irizarry Accounting             62,300     CGP            62,300 1 2,10,16,20,21
                        & Co.             Services
 UNK         UNK        Domenech          Security Services     642,959     OS&I          360,995 1 9,10,16,20, 27
                        Security
 UNK       10/31/1996   Domenech          Security Services     603,096     OS&I          441,694 1 9,16,20, 27
                        Security
 UNK       04/06/1998   Island Security   Security Services     730,858     OS&I          118,002 1 9,10,16,20, 27
                                                                                          473,584 2
 UNK         UNK        Island Security   Security Services    1,735,078    OS&I        1,520,813 2 9,10,16,27
 UNK         UNK        National Security Security Seminar        74,321    DEP            74,321 1 2,10,16,20,21
                        Institute
 UNK         UNK        CAER              Business             2,568,000    CGP         2,568,000 1 11,27
                                          Establishment
 UNK         UNK        Fictitious Claims                      1,034,733    CGP         1,034,733 1 27
                                Total                       $24,271,342              $13,673,488 1
                                                                                      $4,127,801 2




                                                              Page 53                              00-AT-201-1003
Summary Of Contract Cost Exceptions




                     Grant
                      CGP- Comprehensive Grant Program
                      DEP- Drug Elimination Program
                      DEV- Development Fund
                      LB-    Lead Based Program
                      OS&I- Operational Subsidy & Income
                      URD- Urban Renewal Development (HOPE VI) Program


                     Audit Classification
                      1- Ineligible Cost
                      2- Cost Efficiency




A/F- Audit Finding                  Ineligible                Efficiencies
        1                           $4,153,420                    $0
        2                           $4,860,023                $2,133,404
        3                           $4,660,045                $1,994,397
        Total                      $13,673,488        $4,127,801


* Contract reduced by $2,754,920
@- See Appendix D for legend




00-AT-201-1003                              Page 54
                                                                                                Appendix F


Purchase Order Cost Exceptions
Number          Vendor        Ineligible Reason A/F                         Remarks
                                Costs      @
97-279B   Bus Rental              $3,750   20   3   Transportation to ballet was not among the DEP
                                                    activities approved by HUD, therefore is not an eligible
                                                    DEP activity.
 97-528   Bus Rental               4,150  5,20  3   Transportation to the Corps of Volunteers facilities at
                                                    Aibonito town & other trips was not among the DEP
                                                    activities approved by HUD, therefore is not an eligible
                                                    DEP activity.
 97-578   Bus Rental               6,760   20   3   Transportation to the Corps of Volunteers facilities at
                                                    Aibonito town & other trips was not among the DEP
                                                    activities approved by HUD, therefore is not an eligible
                                                    DEP activity.
 97-585   Bus Rental               6,320   20   3   Transportation to the Corps of Volunteers facilities at
                                                    Aibonito town & other trips was not among the DEP
                                                    activities approved by HUD, therefore is not an eligible
                                                    DEP activity.
 97-014   Colortaal                5,052    5   1
 97-460   DRC                      1,100    8   1   The lowest quote was not selected & the explanation
                                                    was not documented, therefore the difference between
                                                    the lowest & the paid price is ineligible ($125/hr. less
                                                    $70/hr.= $55 x 20hrs.= $1,100).
 97-271   Ferreteria Martin       9,000   5,8,20   3    Excessive costs per comparable prices obtained by
          Gonzalez                                      auditor of $1,000 per electricity generator. Purchases
                                                        for emergency situations are not DEP eligible cost.
                                                        Also, two generators were not used for the intended
                                                        purpose. Therefore, the $9,000 is ineligible.
 97-299   Ferreteria Martin       4,500 2,5,8,20 3      Excessive costs per comparable prices obtained by
          Gonzalez                                      auditor. Purchases for emergency situations are not
                                                        DEP eligible cost. Therefore, the $4,500 is ineligible.

 97-342   Ferreteria Martin       8,785   5,8,20   3    Some of the supply items appear to be overpriced per
          Gonzalez                                      auditor's experience (i.e., propane gas can for approx.
                                                        $2 vs. $4.25 paid by PHA). Purchases for emergency
                                                        situations are not eligible public housing operating
                                                        costs , thus the $8,785 is ineligible.
 97-409   Ferreteria Martin       7,004    8,13    1    Some of the maint. equipment appears to be overpriced
          Gonzalez                                      (i.e., elect. handsaw $169, lawn mower $1,200). There
                                                        was no procurement file, thus no assurance that the
                                                        lowest quote was selected & charges reasonable.
                                                        Therefore, the $7,004 is deemed ineligible.
 97-592   Ferreteria Martin       9,818    8,13    1    Same as above for P.O.#97-409. The $9,818 is deemed
          Gonzalez                                      ineligible.
 97-458   IBM                   129,635     8      1    The lowest bid was not opened because the bidder did
                                                        not attend or was late for the pre-bid conference. This
                                                        is contrary to HUD HBK. 7460.8 REV-1, Parag. 4-11.
                                                        The diff. between the awarded & the lowest bid
                                                        ($319,501 - $189,866=$129,635) is ineligible.


                                                       Page 55                                     00-AT-201-1003
Purchase Order Cost Exceptions

  97-032   Michica
           International
  97-031   Motorola de Puerto
           Rico
  97-057   Nu-Vue Ind.           2,518       20      3   Per physical inspection, the PHA purchased more
           Service                                       storm panels than needed to protect its Tech.
                                                         Information Office Adjacent areas of the Dept. of Hsng.
                                                         were apparently covered with the extra panels. The
                                                         cost of the extra panels was determined to be $2,518.
  97-191   National Security     9,945     2,13,20   3   The aerial photographic services of 11 public housing
           Institute                                     projects were not included in the PHA's FY 95 DEP
                                                         application, therefore the services were not authorized
                                                         by HUD. The services are not allocable to the program.
  97-220   National Security     8,775     2,13,20   3   The scanning & digitalization services for the above
           Institute                                     indicated photographs (P.O. #97-191) were not
                                                         included in the PHA's FY 95 DEP application, therefore
                                                         the services were not authorized by HUD. The services
                                                         are not allocable to the program.
  97-370   National Security     7,050     2,13,20   3   The aerial photographic services of seven public
           Institute                                     housing projects were not included in the PHA's FY 95
                                                         DEP application, therefore the services were not
                                                         authorized by HUD. The services are not allocable to
                                                         the program.
  97-461   National Security     9,900     5,8,13    1   There was no procurement file for the RETA-1
           Institute                                     seminars. No price analysis or quotations, etc..
                                                         Therefore, price reasonability could not be determined.
                                                         The payment documents did not include the required
                                                         attendance sheet.
  97-231   Plebiscito Storm      2,580     2,5,20    3   The PHA paid for the installation of more storm panels
           Shutter                                       than needed to protect its T.I. Office. Adjacent areas of
                                                         the Dept. of Hsng. were apparently covered with the
                                                         extra panels. The cost of installation of the extra panels
                                                         was determined to be $2,580.
  97-338   PR Computer           7,365      8,20     3   The charges for the laptop computer were not an
           Services                                      eligible expense of the CGP. Although if they were, the
                                                         selected quote was $1,700 over the lowest quote.

  97-263   Standard Forms        7,075     2,5,20    3   The charge for the acquisition of computer equipment
           Inc.                                          was not an eligible expense of the CGP. In addition, the
                                                         25 wrist rests & 50 anti-glare screens could not be
                                                         physically located at the PHA facilities.
  97-228   The Capricorn         5,950      2,5,8    1   The 10 executive type desks & chairs purchased could
           Group                                         not be traced from the inventory record to the P.O.. In
                                                         addition, the receipt in the pymt. file showed a different
                                                         type of chair, thus we have no certainty that the
                                                         equipment was in fact received.
  97-267   The Capricorn         8,200 2,5,8,20 1        The computer was allegedly assigned to the T.I. Office.
           Group                                         We could not verify this from the inventory & P.O.
                                                         records. At the T.I Office., it does not benefit the CGP
                                                         where it is charged. Also, a more advanced computer
                                                         could be purchased for $4,000 less.


00-AT-201-1003                           Page 56
                                                                       Purchase Order Cost Exceptions

97-275   The Capricorn            5,600 2,5,8,20 1        For two computers purchased, one could not be
         Group                                            positively identified as the one purchased, due to the
                                                          state of the inventory records. The other was
                                                          reassigned to an unknown unit. A more advanced
                                                          computer could be obtained for about the same price.
97-318   The Capricorn            8,400       2,5,8   1   None of the three computers purchased could be
         Group                                            identified due to the state of the inventory records. A
                                                          false quote was detected. A more advanced computer
                                                          could be obtained for about the same price.
97-341   The Capricorn            9,300 2,5,8,20 1        None of the three computers purchased could be
         Group                                            identified due to the state of the inventory records.
                                                          Two false quotes were detected. A more advanced
                                                          computer could be obtained for about the same price.
98-487   Befra Interiors          9,800        20     3   Rehabilitation work done at the PHA's Modernization
                                                          Office is not an eligible CGP expense.

98-478   COMPUTERLINK             9,900       5,13    1
98-469   Future Data Visions      2,252        8      1   Per auditor's inquiry with two vendors, the price for a
                                                          computer backup drive & software could be obtained
                                                          for $2,252 less than the amount paid by the PHA, if
                                                          proper procurement procedures had been followed.
98-723   Fire Control
         Corporation
98-551   Future Data Visions      4,800        5,8    1   Per auditor's review, the installation & training of the
                                                          HP backup drive could had been done by the PHA's
                                                          personnel & consultant.
98-684   J&K Printers

98-070   KANE Caribbean         243,852        20     3   Per auditor's physical inspections & interview of
                                                          project staff, the seven Skid Steer Loader/Backhoes
                                                          purchased with CGP funds were used to provide
                                                          ordinary maintenance to public hsg. projects, which
                                                          was an ineligible CGP activity (HUD HBK. 7485.3G).
98-074   Losada Auto Truck     1,295,453       20     3   Per auditor's physical inspections & interview of
         Inc.                                             project staff, the 38 trucks & 1 Blazer were used to
                                                          provide ordinary maintenance to public. hsg. projects.
                                                          The Blazer was used for executive staff which was not
                                                          eligible CGP activities (HUD HBK. 7485.3G).
98-763   MORS Inc.                6,750        5      1
98-631   MV Electrical            6,800        5      1
         Contractor
98-829   Office Gallery           6,525        2,8    1   PHA officials did not perform a price analysis & did not
                                                          follow other procurement procedures, which resulted in
                                                          excess charges to the operating funds.

98-830   Office Gallery           3,775       2,8     1   Same as above for P.O #98-829
98-566   Office Gallery           7,192       5,13    1
98-822   Rafael J. Nido,        941,627        a      1   Weak management practices and poor planning.
         Inc.




                                           Page 57                              00-AT-201-1003
Purchase Order Cost Exceptions

  98-752   Royal International       4,418        8     1   The PHA did not perform a price/cost analysis ,
                                                            therefore it charged excessive costs to operations. A
                                                            more economical fax could be acquired for $189 & a
                                                            copier for $1,395. The difference between the paid price
                                                            & the above was $4,418 of ineligible costs.
  98-071   Royal Motors Corp.      168,719       8,20   3   The PHA acquisition of cars for the transportation of
                                                            its employees to the PHA & projects facilities was an
                                                            on going operating expense, which is an ineligible
                                                            management improvement cost. An unsolicited bidder
                                                            offered a lower price for pick-up trucks.
  98-708   Speedy Office             7,930        20    3   The PHA acquired office furniture for the CGP office,
                                                            but for employees of a consultant which are considered
                                                            on going operating expense not CGP expense as
                                                            charged.
  98-707   Speedy Office             6,840        20    3   Ongoing operating expense not eligible under CGP
  98-541   Speedy Office             6,250       8,20   1   File did not show how this equipment relates to public
                                                            housing. Other lower bidder was not selected.

  98-595   The Atmospheric           1,875        8     1   Difference between lowest bidder and selected
           Group                                            contractor ($7,975-$6,100).
  98-073   Triangle Dealers         273,864      6,20   3   Ongoing operating expense not eligible under CGP
  98-821   White                  2,604,000       20    1   Not approved by HUD in Operating Budget. HUD did
           Westinghouse                                     not approve the donation to the residents.
  98-405   Xerox Corporation       346,080       8,13   1   No cost analysis performed. The need, economy, and
                                                            efficiency were not documented. Auditor allowed
                                                            $1,395 for 96 units & maintenance.
  98-703   Xerox Corporation       536,015       8,13   1   No cost analysis performed. The need, economy, and
                                                            efficiency were not documented. Auditor allowed
                                                            $3,375 for 79 units (equipment & maintenance).

  99-248   Abreu Power Cars        238,500       8,20   3   Not approved by HUD in Operating Budget.
                                                            Additionally, the bid was for $41,700; however, PHA
                                                            charged $47,700 per unit.
  99-246   Autos Vega               358,225       20    3   Not approved by HUD in Operating Budget.
  99-326   COMPUTERLINK              26,400       20    3   Ongoing operating expense not eligible under CGP
  99-245   Empresas Losada          595,196       20    3   Not approved by HUD in Operating Budget.
  99-247   Triangle Dealers         135,732       20    3   Not approved by HUD in Operating Budget.
                                 $8,137,302




00-AT-201-1003                                Page 58
                                                     Purchase Order Cost Exceptions




Grant

CGP- Comprehensive Grant Program
DEP- Drug Elimination Program
DEV- Development Fund
OS&I- Operational Subsidy & Income

A/F - Audit Finding               Ineligible

              1                   $4,688,218
              3                   $3,449,084
              Total               $8,137,302

a- Heaters not installed 15 months after purchased
@- See Appendix B for legend




                                          Page 59          00-AT-201-1003
Purchase Order Cost Exceptions




                  (THIS PAGE LEFT BLANK INTENTIONALLY)




00-AT-201-1003                   Page 60
                                                                                                       Appendix G


PHA Comments

                                          VERNER. LIIPFERT
                                      BERNHARD McPHERSON HAND
                                                            LCHARTERED/


                                                    901 - 15T H STREET , N.W.
                                                . WASHINGTON, D..C. 20005-2301
                                                          (2O2) 371-6000
                                                      FAX: (202) 371-6279

JAMES F. HIBEY (202) 371-6045

WILLIAM R. SHERMAN (202) 371-6075


                                                         January 31, 2000

            BY TELECOPIER and FIRST CLASS MAIL

            Nancy H. Cooper
            District Inspector General for Audit
            Southeast/Caribbean, 4 AGA
            75 Spring Street, S.W.
            Room 330 Box 42
            Atlanta, GA 30303

            Re:         Draft Audit of Puerto Rico Public Housing Administration Procurement System

            Dear Ms. Cooper:

                      In accordance with the agreements reached at the December 7, 1999 exit conference, your
            letter dated January 12, 2000, and the extension granted via phone message from Sonya Lucas of
            your office, please find attached hereto the following:

                        1.          PRPHA's general response to the revised draft audit report; and

                        2.          Summaries of PRPHA's responses to each of the specific audit findings, to be
                                    inserted in the specified places in the text of the audit report.

                     You agreed on December 7 to insert PRPHA's summary comments verbatim, subject to
            certain conditions, including that those summaries be brief. We have, therefore, endeavored
            concisely to summarize our comments regarding each finding. It is our understanding that the
            Inspector General's office will incorporate the attached summaries from PRPHA and issue the
            audit report to HUD only, and that any wider distribution of the report will await PRPHA's full
            response. Obviously, PRPHA's concern that proper and agreed-upon distribution procedures be
            followed is heightened by the premature release, to a wide distribution list, of your November 15,
            1999 memorandum to Harold Lucas regarding Finding Two of the audit report.

                                                   ·     WASHINGTON, DC · HOUSTON · AUSTIN
                                · HONOLULU             · LAS VEGAS · McLEAN    · MIAMI



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                          Additional PRPHA Comments to Revised Draft Audit Report

                                             Dated January 12, 2000

         I.       Overall Comments

                  The Puerto Rico Public Housing Administration ("PRPHA") appreciates the opportunity
         to review the above referenced revised draft audit report, and to provide the following summary
         comments. PRPHA also appreciates the two meetings held with representatives of the Office of
         Inspector General (OIG), at which PRPHA attempted to explain the many inaccuracies in the
         draft audit report. Unfortunately, while a handful of changes have been made from the earlier
         version discussed both at the November 4, 1999 working session and the December 7, 1999, exit
         conference, PRPHA's overall reaction to the revised draft is one of disappointment. As
         discussed at those meetings, PRPHA vehemently disagrees with many of the factual findings and
         recommendations in the draft audit report. PRPHA's concerns generally include (1) items which
         the OIG agreed to reconsider which were not changed or were only partially revised; (2) issues
         which the OIG indicated it would reconsider based on additional documents supplied by
         PRPHA, but, no changes were made; (3) standards which were incorrectly applied to PRPHA;
         (4) "facts" which are incorrect or misleading; (5) failure to differentiate clearly between past
         (5) problems and efforts already in place to improve operations; (6) documents which the OIG
         agreed to forward to PRPHA which have not been supplied; and (7) use of an audit methodology
         which unfairly prejudices PRPHA.

                   The HUD OIG Handbook 2000.6 Rev-3 - Audits Management System, Section 2-1(B),
         states that "[t]he final audit report should consider the results of the exit conference and contain
         references to specific areas of disagreement between the auditor and program participant for any
         recommendation where differences exist." PRPHA's disagreements with the OIG are not fully
         or accurately reported in the revised draft. Again, PRPHA asks that the OIG revise its audit to
         include the points raised at the exit conference, many of which are described below.

                  1.       Agreements Made at the Exit Conference Not Fully Carried Through In
                          the Revised Draft

                   During the exit conference, PRPHA made a number of requests for revisions regarding
         specific recommendations. In several cases, the OIG agreed to make those changes; however,
         the draft audit report does not reflect the revision, or else the change was made in one place, but
         not carried through in other parts of the report. PRPHA recognizes that such inconsistencies may
         simply be the result of an oversight, or incomplete notes of the exit conference, or a
         misunderstanding. However, it was precisely to avoid such circumstances that PRPHA requested
         that the exit conference be tape recorded. Specific instances include the following:


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    •   Executive Summary - page 3 - first bullet point - The sentence beginning, "The
        large amount of HUD funds available to the PHA to spend may have contributed
        to the problem" remains, although this finding has been removed from other
        sections of the report per our agreement at the exit conference.

    •   Finding 1 - page 12 - second paragraph - PRPHA acknowledges the removal of
        some language regarding the use of purchase orders, as we discussed at the exit
        conference. Given that agreement, PRPHA asks that you also remove the rest of
        this section, which implies that PRPHA's use of purchase orders for purchases
        over $10,000 is inappropriate. The OIG has not cited any applicable authority
        which forbids the use of purchase orders in these situations. The Secretary of
        Housing approves all purchases over $ 30,000, whether they are done by purchase
        order or other contract; therefore, the assertion that purchase orders are used to
        circumvent internal control processes is incorrect.

    •   Finding 1 - page 13 - Purchase Order No. 98-703 - At the exit conference, the
        OIG agreed to remove the sentence beginning "The contracting officer...", as the
        statement was taken out of context. The contracting officer did not sign this
        purchase order because he did not believe he had authority to authorize purchases
        of that dollar amount.

    2. Additional Documentation Sent To The OIG Not Reflected in the Revised Draft

     In some situations where the OIG and PRPHA disagree, the OIG gave PRPHA two
weeks after the exit conference to submit additional documentation to support its points. The
OIG agreed to review and, if appropriate, reconsider several of its positions based on these
documents. On December 22, 1999, PRPHA submitted to the OIG four large binders containing
numerous records. A list of the documents supplied to the OIG is attached to this document. It
does not appear that the OIG made any revisions based on this information. Examples include the
following:

    •   Finding 1 - page 13-14 - Purchase Order No. 98-703 - The OIG agreed to review
        and revisit its conclusions regarding this contract based on additional
        documentation submitted. While the revised draft audit report reflects some
        changes, it still does not show an understanding of the GSA procurement process,
        as reflected in the submitted materials.

        PRPHA procured Xerox copiers in accordance with the GSA process permitted
        under Article 10 of its procurement policy. The GSA contract under which these
        copiers were purchased permits PRPHA to substitute copier models if a model
        contained in the contract was discontinued or if better technology became
        available. PRPHA provided evidence that the copier originally selected was
        discontinued and that the new copier selected was of new digital technology. The
        agency also supplied correspondence between PRPHA, Xerox, and GSA


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                     documenting the change. Because the selected model was discontinued, PRPHA
                     selected a new model from Xerox, and specifically chose a model which could
                     handle the large volume of photocopying required in property management
                     offices. A cost analysis was also performed to support the purchase.

                     Contrary to the OIG's assertion, the GSA process does not prohibit agencies from
                     negotiating with approved suppliers under these circumstances. Information
                     provided to the OIG also indicates that PRPHA received a substantial discount on
                     this equipment. As the documentary evidence indicates, PRPHA followed the
                     GSA process and purchased a better value photocopier after the originally selected
                     model was discontinued. The subject finding should be removed from the audit
                     report.

                 •   Finding 1 - Page 14 - Purchase Order No. 98-821 - Again, the OIG's office
                     invited PRPHA to submit documents supporting its position that these purchases
                     were in accordance with regulations. Contrary to the OIG's assertions, this
                     documentation clearly shows that (1) prices and costs of bids were evaluated; (2)
                     the Housing Secretary approved the policy requiring these purchases; (3) HUD
                     worked closely with PRPHA over many months in making the decision to
                     purchase these items; (4) the solicitation was advertised twice; and (5) bidders had
                     14 days to respond, four days in excess of that required by PRPHA Procurement
                     Policy. Moreover, PRPHA supplied the OIG with minutes from the Bid Board
                     meeting indicating that the selected contractor was the only responsive bidder. It
                     appears that the OIG simply ignored this evidence.

                     In response to the OIG's contention that the disposition of the stoves was
                     improper, PRPHA provided numerous memoranda and information dating back to
                     1981 indicating HUD's concern regarding unsafe resident-owned stoves in its
                     units. In early 1998, PRPHA worked on a task force with HUD that met every
                     two weeks for several months to develop the stove policy and to address other
                     issues related to its PHMAP compliance. PRPHA provided the OIG with sign-in
                     sheets showing HUD staff attendance and minutes detailing the discussions.
                     HUD approved PRPI-IA's PHMAP plan, which included the stove purchases. The
                     OIG cites no support for its assertion that HUD must provide specific written
                     authorization of the stove policy.


                 •   Finding 1 - Page 16 - 17 - Contract No. 97-3715 - The OIG incorrectly suggests
                     that amounts paid under PRPHA's contract for legal services with
                     Fiddler, Gonzalez, and Rodriguez ("FG&R") be determined ineligible because the
                     firm was improperly procured and the contract rates were excessive. PRPHA
                     strongly disagrees on both counts. Not only is it questionable whether
                     procurement is required in this case, but even if competitive proposals could have
                     been solicited, no public purpose would be served. At the very least, PRPHA
                     acted reasonably, based on its interpretation of the law; thus, the fees paid to

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FG&R under this contract should not be disallowed. Again, PRPHA has supplied
the OIG with numerous documents supporting its position.

HUD procurement requirements look first to the law of the State or local
jurisdiction. Puerto Rico Law 66 states that a competitive procurement process
need not be followed when "prices are not subject to competition because there is
only one source or supply or because they are regulated by law, in which case the
purchase may be made in the open market as is usual in prevailing business
practice. " P.R. Law No. 66, § 1006(c). As PRPHA has informed the OIG, the
Government of Puerto Rico has established rates between $ 75 and $125 per hour
for legal representation of government entities. State Department of Puerto Rico,
Circular 7-93. Given that the rates are dictated by the government, Puerto Rico
law allows PRPHA to purchase legal services without competition. Moreover,
considering the usual cost of legal services in Puerto Rico and elsewhere, fees in
the $75 to $125 range are incredibly reasonable and far from excessive, especially
given the quality of legal representation provided by FG&R and firms of similar size
and expertise.

This provision also complies with HUD's procurement requirements. Because
FG&R was essentially acting as PRPHA's House Counsel, its procurement was
not subject to competition. Section 4-27 of the HUD Procurement Handbook
states that "the employment of House Counsel is not covered by 24 C.F.R. 85.36,"
Although the HUD Procurement Handbook does not define House Counsel,
FG&R clearly acted in that capacity as the term is commonly understood in the
legal profession. The scope of services provided by FG&R was broad, including
representation and advice to the agency on all legal matters. PRPHA had no in-
house legal counsel at the time; thus, the agency relied heavily on FG&R to meet
its legal needs. Consequently, Puerto Rico law and HUD requirements both
indicate that PRPHA need not have competitively procured its legal services.

Moreover, Cannon 32 of the Cannons of Professional Ethics for Attorneys in
Puerto Rico states that "it would be improper for a lawyer to appear at any auction
concerning the rendering of professional or notarial services before any juridical,
public or private person." By letter dated April 3, 1998, from Oscar Gonzalez
Rivera, Esquire, Deputy Secretary Legal Affairs for the Department of Housing
to Hildamar Ortiz, Esquire, Director of the HUD Caribbean Office of Public
Housing, PRPHA informed HUD that Cannon 32 barred attorneys in Puerto Rico
from responding to a solicitation for legal services. Although HUD has taken the
position that Cannon 32 does not apply, local attorneys believe that they could be
disciplined for responding to a PRPHA request for proposals. As Cannon 32
continues to have a chilling effect on competition, PRPHA gains little to nothing
by issuing a request for proposals. Competition would not result in responses
from quality law firms and would do nothing to reduce legal costs, as fees are set
by the government. Under these circumstances, no public purpose is served by
PRPHA conducting a competition among legal service providers in Puerto Rico.


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                 As reiterated by the OIG, the purpose of HUD's procurement requirements is to
                 obtain the best quality services at the lowest cost. The purposes of HUD's
                 procurement requirements are not served by such a process.

                 As additional support for the claim that amounts paid FG&R should be
                 disallowed, the OIG indicates that PRPHA should have had the contract reviewed
                 and approved by the HUD Office of General Counsel. The HUD Litigation
                 Handbook does state that contracts for litigation should be reviewed by HUD OIG
                 staff. Other legal contracts are not subject to HUD review. The FG&R contract is
                 for both litigation and non-litigation representation. The primary purpose again is
                 to ensure fees are reasonable. At HUD's insistence, PRPHA submitted its 1999
                 legal services contract to the HUD Office of General Counsel in the Atlanta
                 Region for its review in May, 1999, even though the fees were government
                 regulated. PRPHA received confirmation that the contract was approved and the
                 contract rates reasonable on August 6, 1999. The rates in the 1999 contract are
                 identical to those in Contract 97-3715. As PRPHA is now complying with the
                 HUD Litigation Handbook requirement and the rates in the contracts have been
                 deemed reasonable by HUD, there is no compelling argument to disallow these
                 costs. In light of this information, PRPHA encourages the OIG to reconsider its
                 position.

            •    Finding 2 - page 19 - 24 - The OIG agreed to review, and possibly remove,
                 Finding Two, regarding the sole-source procurements of CVR Puerto Rico and
                 Cardona, Irizarry and Company because the applicable regulation permits HUD,
                 in its sole discretion, to approve such procurements, and such approval was
                 obtained by PRPHA. See 24 C.F.R. 85.36 (d)(4). We note that this finding
                 remains part of the Executive Summary and the body of the audit report, although
                 PRPHA provided the OIG with numerous documents in support of its position.

                 PRPHA vehemently denies that it acted inappropriately in awarding the two
                 contracts in question by sole source. On the contrary, PRPHA acted in close
                 consultation with HUD both in determining the need for sole source procurements
                 and in providing the documentation needed to obtain HUD approval. At both the
                 November 4, 1999, and December 7, 1999, meetings, the OIG auditor suggested
                 some irregularity or inconsistency in the documents submitted by PRPHA.
                 PRPHA is unaware of any such irregularity or inconsistency, and has requested, at
                 both meetings, copies of the documents to which the auditor referred. The OIG
                 has refused to provide PRPHA with any such documents.

                 As the OIG points out, 24 C.F.R. 85.36(d)(4) allows for non-competitive
                 procurement when there is no other feasible alternative and one of the four
                 circumstances enumerated in the regulation applies. Those include situations
                 where the public exigency or emergency for the requirement will not permit the
                 delay resulting from competitive solicitation and the awarding agency (in this
                 case, HUD) authorizes the purchase. The Emergency Declaration of the Housing


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         Secretary dated October 30, 1997, seeks HUD approval for the sole source
         procurements under either of the above stated provisions. As the regulation
         clearly provides, HUD can approve sole source procurements in its discretion. See
         24 C.F.R. 85.36(d)(4)(i)(c). By letter dated December 23, 1997, HUD confirmed
         that it received each of the documents needed to justify a sole source procurement
         and approved both contracts . Given that the procurements and the contracts were
         authorized and approved by HUD in accordance with applicable regulations, the
         OIG has not demonstrated that PRPHA has violated any law, regulation, or
         policy, and the OIG's recommendation with regard to those contracts is
         unsupportable.

         The OIG report also fails adequately to describe or account for the justification for
         procuring these contractors without a competitive bid. In the fall of 1997,
         PRPHA received final reports from HUD indicating that its finance and
         modernization departments were performing very poorly. These problems left
         the agency vulnerable to misuse of federal funds and an inability to carry out its
         mission to provide housing to low income citizens. In an effort quickly to rectify
         these very serious findings, PRPHA consulted with HUD regarding strategies
         which should be employed immediately to reform many operations. It was
         decided that PRPHA's finance and modernization divisions should be "taken-
         over" immediately by outside contractors who were currently working for
         PRPHA. Following the Housing Secretary's declaration, PRPHA acted swiftly
         to solicit proposals from these contractors and to obtain HUD approval. Contrary
         to the OIG's assertion, the sole-source process enabled PRPHA to implement
         radical changes much more quickly than if another procurement method had been
         used, particularly given that PRPHA worked closely with HUD in finalizing these
         contracts.

    •    Appendices A - E - PRPHA provided additional back-up documentation refuting
         many of the OIG's allegations that PRPHA did not properly document the
         procurements detailed in appendices A - E. This documentation included two
         advertisements for procurements, although the OIG claimed there had been only
         one, documentation explaining the procurement history, minutes from Bid Board
         meetings explaining the reasons for selecting particular contractors, and other file
         information. The OIG made very few changes in the appendices, despite
         documentation contradicting many of its assertions.

         3.       Incorrect or Misapplied Standards

         The draft audit report indicates that the OIG does not appear to understand certain of the
applicable procurement requirements. In some cases, the OIG evaluates PRPHA's performance
by standards that do not apply to the circumstances of the procurement. In other cases, the OIG
misapplies requirements to support its position that PRPHA acted improperly. Examples include
the following:


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                 •   Finding 1 - Page 12 - second paragraph - PRPHA strongly disagrees with the
                     OIG's insinuation that the sealed bid method is the only method available for
                     purchases over $10,000. The standard cited by the OIG, 24 C.F.R. 85.36(d)(2),
                     indicates that the sealed bid or formal advertising resulting in a firm, fixed price
                     contract "is the preferred method for procuring construction ." In other cases
                     when a sealed bid is not appropriate, the Federal and PRPHA regulations permit a
                     public bid process through competitive proposal. See 24 C.F.R. 85.36(d)(3). A
                     fixed price or cost reimbursement contract may be used in these cases. Virtually
                     all of PRPHA files reviewed by the OIG involve services other than construction
                     and were procured under the regulations for competitive proposal. Consequently,
                     the standard does not apply. Even in cases where contracts were procured by
                     sealed bid, a purchase order is by definition considered a firm contract under both
                     the HUD Procurement Handbook and PRPHA Procurement Policy.


                 •   Finding 1 - Page 14 - 15 - Purchase Order No. 98-822 - The OIG inappropriately
                     cites 24 C.F.R. 85.43 in support of its contention that $ 941,627 in costs incurred
                     for the purchase of hot water heaters which have not yet been installed should be
                     disallowed. This provision applies in cases where the program participant (in this
                     case, PRPHA) "fails to comply with any term of an award..."

                     As discussed at the exit conference, PRPHA's program to finally provide safe hot
                     water to public housing residents through the installation of hot water tanks is
                     ongoing. It was approved by both the Housing Secretary and HUD, as evidenced
                     by documents supplied to the OIG. There was no "term of an award" which
                     placed a time limit on the installation of those hot water heaters. The OIG has not
                     shown how this program does not comply with any HUD requirement.
                     Consequently, there should be no disallowance of costs.

                 •   Finding 1 - Page 17 - first and second full paragraphs - There are no Federal
                     requirements regulating the cost of bid packages in 24 C.F.R. 85.36.
                     Consequently, the last sentence of the second paragraph is incorrect and should be
                     deleted.

                 •   Finding 3 - page 26 - In its sole source contract with CVR Puerto Rico, Inc.,
                     which is discussed more fully in Finding 2, PRPHA agreed to advance
                     funds to the contractor to be paid back in equal portions during the 18 month term
                     of the contract. Despite the fact that the advance was part of a HUD-approved
                     contract, the OIG asserts that it is unallowable because it shows that the contractor
                     was not financially responsible as required by 24 C.F.R. 85.36(b)(8). Contrary to
                     the impression created by the OIG's argument, the cited provision requires
                     PRPHA to make awards only to responsible contractors, giving consideration to a
                     number of factors including "contractor integrity, compliance with public policy,
                     record of past performance, and financial and technical resources." PRPHA
                     Procurement Policy contains a similar requirement. Nowhere does either
                     document preclude the possibility of advancing start-up costs.

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                  Moreover, the advance was not made to an unknown, untested and potentially
                  "irresponsible" contractor. Rather, it was made to a new affiliate of a contractor
                  already doing substantial work for PRPHA, and was made specifically to allow
                  the affiliate to begin work for PRPHA immediately. Such a payment was
                  particularly important in this case, because the contractor would be required to
                  establish an office immediately and hire a staff of over 15 in Puerto Rico. At the
                  time, the advance was also needed as PRPHA was having difficulty paying its
                  contractors in a timely fashion. As CVR Associates, Inc. and its affiliate, CVR
                  Puerto Rico, Inc. have the same principals, the same technical expertise, and the
                  same assets, there is no support for the OIG's conclusion that the advance violates
                  the procurement regulations.

                  The OIG also cites Treasury Department Regulation No. 31 as prohibiting
                  advance payments. This regulation does not apply here as it governs only State-
                  funded programs - not Federally-funded agencies like PRPHA. Even if it did
                  apply, this regulation clearly permits advance payments if they are set forth in the
                  contract which is approved by the awarding agency. As the advance was
                  approved by HUD, it complied with both 24 C.F.R. 85.36 and PRPHA
                  Procurement Policy, and it has already been fully paid back through the
                  arrangement established under this contract. Therefore, it is not an ineligible cost.

         •        Finding 2 - page 19-24 - A long discussion was held at the exit conference about
                  the OIG's conclusions regarding the cost of the two sole source contracts. The
                  OIG still has not provided PRPHA with its methodology for determining
                  ineligible costs under these contracts. In addition, there is no regulation or
                  requirement stating that the eligibility of costs should be based on the OIG's
                  determination of what is reasonable. The contractors used by PRPHA were
                  compensated not only to cover the cost of contract employees' services, but to
                  provide expertise and accountability that PRPHA was not able to acquire on its
                  own. Expertise and accountability are what PRPHA required to improve its
                  troubled finance and modernization departments. HUD not only approved the use
                  of private contractors to perform these functions, but it also approved the contract
                  costs and terms. The contract employees' salaries are not relevant to this inquiry.

         4.       Incorrect or Misstated Facts

          Several statements of "fact" in the OIG report are simply not factual. In some places, the
OIG also either does not fully explain or misstates the circumstances in order to support its
findings. Some examples include the following:

         •        Executive Summary - Page 8 - fifth paragraph - In a concern not previously
                  raised, the OIG complains that PRPHA's sole source contract with CVR Puerto
                  Rico includes services similar to those for which CVR Associates was paid under
                  a HUD IQC. The OIG incorrectly implies that these services are duplicative.


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                     Pursuant to a HUD IQC, CVR Associates assisted PRPHA in drafting a new
                     procurement policy and handbook and providing procurement training to staff.
                     CVR Associates successfully completed this task before the IQC expired in
                     March, 1998. The CVR Puerto Rico contract to assist the modernization
                     department includes, as one of many tasks, providing technical assistance in
                     procuring modernization contractors. Under this item, CVR Puerto Rico helped
                     PRPHA develop specifications for bid packages for modernization activities.
                     This is a completely different task from the assistance under the IQC. The OIG
                     has cited no regulation or requirement that would prevent CVR Associates and
                     CVR Puerto Rico from providing these different services under two separate
                     contracts. HUD did not view these items as overlapping as it was well aware of
                     CVR Associates's IQC activities at the time it approved the CVR Puerto Rico
                     contract. This statement is untrue and misleading; thus, it should be removed
                     from the report.

                 •   Executive Summary - page 8 - fifth paragraph - The OIG's determination that a
                     separate procurement unit was established in May 1997 is not correct. As
                     discussed at the exit conference, PRPHA may have intended to implement this
                     suggestion during the prior administration. However, there was not a functioning
                     procurement department at the time the current Administrator took over the
                     agency in December 1997. That department was not fully operational until May
                     1998. Again, PRPHA supplied the OIG with documents describing the
                     establishment of the procurement department in Spring 1998.

                 •   Finding 1 - page 13 - first paragraph - As discussed at the exit conference,
                     PRPHA finds the sentence beginning "A responsible PHA official...
                     " particularly irresponsible, as it insinuates wrongdoing on the part of PRPHA
                     based on hearsay. Such insinuations have no place in an audit report. Again, we
                     specifically ask that this assertion be removed from the report, along with the rest
                     of that paragraph.

                 •   Finding 1 - page 15-16 - Contract No. 97-6773 - The OIG's disallowance for the
                     cost of this contract is based on several factual inaccuracies. First, the bid
                     solicitation documents and minutes from the Bid Board supplied to the OIG
                     clearly show that evaluation criteria were provided to the proposers and used by
                     the Bid Board to select the chosen contractor. All proposers were given an
                     opportunity to review PRPHA financial information in putting together their
                     submissions. Third, the OIG fails to show that other bidders were in a
                     "competitive range" as required to justify additional negotiations. Fourth, the
                     competitive proposal method used to select this contractor specifically allows
                     PRPHA to select a contractor based on qualification, not just the cost. See 24.
                     C.F.R. 85.36(d)(3). Consequently, the OIG's assertion that the difference in cost
                     between the selected contractor and the lowest bidder should be disallowed is
                     without basis and wholly unjustified.


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         •        Finding 1 - page 17 - fourth paragraph - The statement that "no procurement files
                  were maintained to support 20 purchases... "is incorrect and should be stricken
                  from the report. The OIG auditor obviously received procurement files for each of
                  the requested purchases, and they were apparently reviewed as to the adequacy of
                  the documentation, which is detailed in Appendices B-E of the report.

         •        Finding 2 - Page 23 - third and fourth paragraphs - It is not true that an affiliate of
                  one of PRPHA's contractors, C&C Resources, has solicited additional business
                  from PRPHA. Although PRPHA advertised for temporary employment services,
                  C&C Resources did not respond to the request. Even though PRPHA has
                  solicited proposals for private accountants, the OIG has not cited any facts or
                  requirements demonstrating that C&C Resources, Cardona, Irizarry and
                  Company, or PRPHA acted improperly. PRPHA decided not to purchase
                  computers through the contract for accounting services as originally intended,
                  thus funds earmarked for that purchase, can not be used for other purposes.
                  Consequently, there is no need to amend the contract.

         5.       Failure to Delineate Between Past Problems and Current Practices

         As PRPHA stated at the exit conference, the draft audit does not adequately differentiate
between activities which took place under prior administrations and the current one. This is a
particularly important point for PRPHA, as many of the OIG's recommendations would have a
dramatic impact on the agency's future operations, but are supported primarily by evidence of
past problems. The OIG's office indicated a willingness to separate past performance from
current practices. Although some suggested language was added to clarify the time frames,
findings that allegedly occurred well before the recent changes are still used to support
recommendations regarding the future operations of PRPHA. Specific examples include the
following:

         •        Executive Summary - page 2 - second paragraph - PRPHA takes issue with the
                  OIG's assertion that it has done nothing to resolve past problems. This paragraph
                  also implies that PRPHA is the subject of ongoing criminal investigations.
                  PRPHA is not aware that it is the subject of any investigation stemming from acts
                  which occurred after the current administration took over in December, 1997.
                  Again, we ask that this misleading statement be removed from the report.

                  Improvements are evidenced in documents supplied to the OIG, including the
                  following:

                           a)       Letter from John Blakeman to Hildamar Ortiz dated September 3,
                                providing a detailed list of steps being taken to improve the
                                procurement processes. These efforts were already being
                                implemented at the time of the letter, even though Mr. Blakeman
                                had been at PRPHA less than a year.



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                              b)       Report from Cardona, Irizarry & Company dated May 21, 1999
                                       explaining new systems which have been put in place in the
                                       finance department

                              c)       Letter from Price Waterhouse Coopers dated October 28, 1999,
                                       indicating that its audit of PRPHA files determined that PRPHA
                                       complied with applicable regulations. This audit reviewed three
                                       times more files from fiscal year 1999 than the audit conducted by
                                       the OIG.

                              d)       Letter from Hildamar Ortiz to John Blakeman dated April 15, 1998
                                       acknowledging that work in the finance department by Cardona,
                                       Irizarry and Company and CVR Puerto Rico had been effective in
                                       improving PRPHA operations. HUD has also publicly
                                       acknowledged to the HUD Assistant Secretary for Public and
                                       Indian Housing the outstanding work performed by these
                                       contractors.

                 •   Executive Summary - page 2 - paragraph 3-4 - In quoting the April 15, 1998
                     HUD Comprehensive Grant Monitoring Report, the OIG again does not
                     acknowledge any steps PRPHA has taken toward resolving past findings. The
                     OIG fails to cite how these new procedures are still deficient, leaving PRPHA to
                     wonder if they have been reviewed at all. In paragraph 4, the assertion that
                     findings from the 1996 OIG audit remain unresolved is overbroad. As stated
                     above, PRPHA has provided several documents illustrating that it has taken
                     numerous steps to improve its financial and procurement systems.

                 •    History - page 7-8 - At the exit conference, PRPHA and the OIG discussed at
                     length the lack of balance in this section. Again, PRPHA does not dispute that the
                     agency has had problems maintaining systems in the past; however, the OIG does
                     not acknowledge the improvements which have been achieved. Specifically, the
                     OIG mischaracterizes the exceptions to the 1997 audit and fails even to mention
                     the unqualified 1998 audit. There is also no mention of the increased and more
                     qualified staffing of the procurement office, training programs, and more
                     complete record keeping system. Also not mentioned is the revamping of the
                     finance department, complete with new internal control systems. Information
                     evidencing these improvements has been supplied to the OIG.

                 •   Finding 3 - page 26 - 28 - Two of the allegations contained in the revised draft
                     OIG audit report discuss fraudulent actions of PRPHA employees or their
                     contractors. Both cases stem from actions which took place in 1995, 1996, and
                     1997, prior to the current PRPI-IA administration. In the case of the CAER
                     contracts, it was the current PRPHA Administrator who ordered that PRPHA stop
                     making payments to the contractor and reported the fraud to the appropriate
                     authorities. Also, PRPHA, along with its bank, were instrumental in providing


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                  information which led to the indictments of several individuals involved with
                  Inter Island Rental Corporation. PRPHA's assistance to law enforcement
                  agencies in both situations has been publicly acknowledged. Nowhere in the draft
                  report does the OIG acknowledge PRPHA's work in bringing criminal charges
                  against these parties. Instead, the report leaves the reader with the false
                  impression that PRPHA participated in the illegal activities. PRPHA did not
                  participate in these activities - PRPHA is the victim of them. Despite lengthy
                  discussions at the exit conference of PRPHA's concerns about this section, it
                  remains unchanged.

                  The cited examples also do not support the OIG's unsubstantiated opinion that
                  there are continued weaknesses in PRPHA's systems. This section also fails to
                  recognize PRPHA's ongoing efforts to obtain restitution and to collect on its
                  fidelity bonds. At the very least, the OIG audit report should include a more
                  balanced description of these events, acknowledging PRPHA's assistance in
                  bringing those involved to justice, indicating that the circumstances leading to the
                  indictments occurred during a prior PRPHA administration, and more
                  importantly, making clear that PRPHA has instituted changes which would
                  prevent these types of crimes from happening in the future.

                  Also discussed at the exit conference was the fact that these findings were
                  contained in earlier OIG reports and HUD Limited Monitoring Reports. PRPHA
                  has already acknowledged these past problems and has been developing systems
                  to guard against future such incidents. The draft OIG audit again cites these cases
                  to support its claim that PRPHA's management controls remain deficient.
                  However, few, if any, current examples are cited. PRPHA is not aware of any
                  ongoing law enforcement investigations involving the agency, its contractors, or
                  employees stemming from activities since December 1997. These findings should
                  be removed from the draft audit report, as they are redundant and do not provide
                  grounds for the OIG's assertions about the current management systems.

         6.       Documents To Be Shared By the OIG with PRPHA Not Received

         The OIG's justification of certain findings is not clearly explained in the draft audit
report. At the exit conference, the OIG agreed to provide further information on specified topics
so that PRPHA could better understand and respond to the OIG's positions. However, PRPHA
has received only one document from the OIG since the exit conference on December 7, 1999.
Information which was requested, but still not supplied, include the following:

              •    Finding 1 - page 17 - paragraphs 2 and 3 -The OIG provides no evidence that fees
                  charged for bid documents were "excessive" fees and that the result was to restrict
                  competition, other than the unsupported statement of a disgruntled former PRPHA
                  employee. While PRPHA agrees that it did not always follow the stated limit in
                  its procurement policy, it has taken steps to correct this problem. Moreover,
                  PRPHA's review of the files audited by the OIG does not show any bid packages


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                     which cost $ 600.00. At the exit conference, the OIG auditor agreed to provide
                     the list of bid packages reviewed and their costs, including the one reported to be
                     $ 600.00. PRPHA has yet to receive that information.

                 •    Finding 3 - p. 25-26 - The OIG suggests that PRPHA made excessive payments
                      totaling $ 920,691 for security through its intergovernmental contract with the
                      General Services Administration ("GSA") and that an estimated $ 2 million in
                      ineligible cost may be incurred under this contract in the future. As discussed at
                      the exit conference, the auditor's conclusion for both prior and future payments is
                      simply incorrect. The OIG and PRPHA agreed to exchange reconciliations of
                      these accounts. PRPHA forwarded its summaries to the OIG on December 22,
                      1999. However, the OIG has not provided any basis for its determination that
                     these costs were ineligible.

                     In an effort to obtain the lowest possible cost for security, PRPHA receives its
                     services through a contract between the Department of Housing and the General
                     Services Administration ("GSA"). Under this arrangement, the GSA solicits
                     competitive proposals from security service providers to establish rates to charge
                     government agencies for each of the identified services. The GSA handles all
                     aspects of the procurement process, evaluates the proposals, and enters into
                     contracts with each of the successful bidders to provide services at discounted
                     rates. Government agencies, including the Department of Housing, are then
                     provided with a list of those companies. As one of several housing agencies
                     within the Department of Housing, PRPHA participates in a master contract
                     between the Department and GSA for security services. Each of the sister
                     agencies identifies the type of services, location, and quantity to be provided by
                     each security company at GSA-established rates.

                     This practice is not only permissible under HUD requirements, it is promoted.
                     Part 24 C.F.R. 85.36(b)(5) states, "to foster greater economy and efficiency,
                     grantees and subgrantees are encouraged to enter into State and local
                     intergovernmental agreements for procurement or use of common goods
                     and services." PRPHA's procurement of security services simply follows this policy
                     as the GSA rates secured by the Department of Housing contract are much lower
                     than those PRPHA could have obtained on its own. The GSA process anticipates
                     that agencies, such as PRPHA, execute letter agreements with individual
                     contractors at rates stipulated in the contract. No HUD approval is required.
                     Contrary to the OIG's assertion, contracts of this nature are registered with the
                     Puerto Rico Comptrollers Office by the GSA.

                     The OIG also mistakenly asserts that PRPHA has paid for all security
                     services provided to the Puerto Rico Department of Housing. Security services for all
                     Department of Housing agencies are listed on one monthly invoice. That invoice
                     clearly identifies the project where the services were provided, the type of
                      services, the cost, and the percentage of the overall bill which is allocated to each



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                   agency. Although each agency within the Department of Housing receives a copy
                   of the total bill, that agency is responsible for paying only for the portion of
                   services which its uses. PRPHA's finance department personnel carefully review
                   each invoice and pay only the appropriate percentage allocated to PRPHA
                   properties. PRPHA reconciled these accounts and provided summaries to the OIG.
                   Although these summaries indicate that PRPHA has made some minor payments
                   for services received by the Department of Housing, those payments are being
                   reimbursed to PRPHA and there is no support for the OIG's assertion that there
                   are $ 920,691 in ineligible costs.

         7.        Problematic Audit Methodology

          The audit method used by the OIG is misleading and does not accurately reflect the
procurement practices of PRPHA. In addition, the OIG's method of recording file deficiencies is
faulty. Issues discussed at the exit conference in this regard -- which have not been resolved –
include the following:

         •     Introduction - pages 9 -10 - The OIG should explain more clearly that this was
               not a random file audit, but that files were "judgmentally selected" or pre-selected
               by the OIG for review. PRPHA was given a specific list of contractors who were
               targeted by this audit. In addition, in some cases, PRPHA made numerous
               purchases from the same contractor. However, only a small number of purchases
               were cited in the report as problematic. Nowhere does the draft audit indicate that
              the other purchases were reviewed and found satisfactory.

              The current explanation leaves the reader with the false impression that the OIG
              reviewed a random sample of files and that none were compliant. This simply is not the
              case. As Price Waterhouse Coopers and PRPHA can attest, there are many more files
              which include all appropriate documentation. Given the faulty audit methodology, none
              of the OIG's assertions regarding percent of non-compliant files, percent of funds not
              eligible, etc. reflect reality.

         •    Appendices A-E - The charts prepared by the OIG to catalogue alleged file deficiencies
              incorrectly portray the situation. Problems with the accuracy of the appendices are
              generally explained as follows:

                       a.   Multiple Citations for One Error - There are several situations where the
                            OIG's conclusion that PRPHA chose an incorrect method of procurement
                            result in the auditor to misleadingly citing multiple deficiencies for not
                            following steps in the process which was not selected, rather than the
                            single allegedly incorrect selection of a particular procurement process.
                            For example, the OIG alleges that PRPHA split some purchases between 2
                            or 3 purchase orders to avoid a more lengthy procurement process.
                            Whether or not that allegation is true, once its decision was made, PRPHA
                            followed all of the appropriate steps for a small purchase. The OIG not


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                      only cites PRPHA for the bid splitting, but also indicates deficiencies for
                      not advertising twice, not providing sufficient time to respond, and other
                      infractions which only apply if the competitive proposal process is
                      applied. This type of reporting gives the appearance that there were
                      multiple infractions, when there was, at worst, only one.

                 b.   Misconstruing Applicable Requirements - The OIG does not properly
                      identify or apply the procurement standards and cost allocation standards
                      to some files. This is particularly true in Appendices C and E, where the
                      OIG seeks to declare certain costs ineligible as not being allocable to HUD
                      programs. No justification is cited for determining the cost allowability
                      questions. Moreover, some are just plainly incorrect or contradictory. For
                      example, the OIG cites as ineligible PRPHA's use of comprehensive grant
                      funds for the purchase of passenger vans (See Contract No. 98-073), and
                      another file indicates that the use of operating funds for this purpose is
                      also an ineligible use (See Contract No. 99-247). Under these
                      circumstances, it is impossible to ascertain what the OIG believes is the
                      correct standard.

                      The OIG is also of the mistaken impression that HUD must approve
                      certain procurements. According to the HUD Procurement Handbook,
                      HUD need only approve contracts in excess of two years in duration.
                      Only one of the contracts cited falls into this category, despite the fact that
                      the OIG cites PRPHA repeatedly for violating this inapplicable standard.

                 c.   Factually Incorrect Information - Several alleged deficiencies included in
                      the appendices are simply wrong. In some cases, the OIG indicates that
                      the procurement was not advertised twice when two advertisements were
                      found in the file, that bidders were given insufficient time to respond when
                      the file indicates they were given time in excess of the 10 days required by
                      PRPHA Procurement Policy, or that there is no procurement file when it
                      clearly exists and was reviewed by the OIG. PRPHA provided the OIG
                      with the documentation needed to correct many of these errors, but again,
                      few if any changes were made.

                 d.   PRPHA Needs Additional Explanation of Standard From the OIG - A
                      number of the deficiencies cited by the OIG are not clear. Examples
                      include citations such as "file did not show complete procurement
                      history," "excessive cost," and "purchase order incomplete" when PRPHA
                      files include what the agency believes is complete documentation. The
                      OIG has not provided PRPHA any guidance as to what it considers to be
                      deficient in each of these circumstances.

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II.   Recommendations

      The following are PRPHA's responses to the recommendations contained in the revised
      draft audit report, the justifications for which are discussed above:

      Finding 1

      lA.    Per our discussion at the exit conference, PRPHA strongly disagrees with this
              finding. PRPHA acknowledges that it has had a troubled past; however, it has
              made substantial progress toward recovery in the past two years. These
              improvements have been recognized by PRPHA's independent auditors and by
              HUD. Instead of taking the extreme approach of dismantling PRPHA and
              ignoring all of the recent improvements, PRPHA would be open to more technical
              assistance from HUD which would build on the progress which has already been
              made. PRPHA is not aware of any instance where a HUD-forced take-over or
              break-up of an agency has resulted in permanent reform. In fact, the OIG's semi-
              annual audit report dated March 31, 1999, complains that HUD has had numerous
              problems managing the recovery of agencies which have been declared in
              substantial default. Lasting improvement can only be achieved through the type
              of internal changes which PRPHA has already launched and which have proven
              effective.

      lB.   Many of PRPHA's past problems have been caused by bloated bureaucratic
             procedures. Adding a HUD cost-reimbursement review to existing systems would
             all but paralyze the agency. HUD does not have the capability effectively to
             manage a cost-reimbursement system for an agency the size of PRPHA. As HUD
             has recognized, PRPHA, with the help of a private contractor, has already made
             substantial improvement in the last two years in the area of financial management.
             PRPHA would welcome comments from the OIG on ways to improve its current
             financial management system. Implementation of a cost reimbursement system
             will only impede the agency's progress.

      1C.     At the exit conference, the OIG's office agreed to remove this recommendation.

      1D.   Again, PRPHA does not believe that it would be prudent or effective to have
             HUD staff review and approve each PRPHA purchase. In the past three years,
             PRPHA has averaged approximately 700 separate procurements each year. In its
             most recent experience, PRPHA waited four months for HUD Office of General
             Counsel to approve its contract for legal services.

              Under the new PRPHA Procurement Policy, the decision for competitive awards
              will be made exclusively by the [lid Board, which is made up of individuals from
              outside PRPHA. PRPHA would welcome additional technical assistance from
              HUD on ways to improve its procurement system to ensure compliance with all
              applicable requirements.

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           IE.    As stated above, the OIG has not been able to produce any applicable requirement
                   that purchases over $10,000 should be done only by contract and not by purchase
                   order. Much of the language regarding this issue was removed from the revised
                   draft report per our discussion at the exit conference. We suggest that this
                   recommendation be deleted as well.

           IF.    Per our discussion at the exit conference, the new PRPHA Procurement Policy
                   will not include the current language regarding the cost of bid packages.
                   Consequently, this recommendation is unnecessary.

           1G.    PRPHA strongly disagrees with the OIG's determination of ineligible costs to be
                   reimbursed. As discussed above, the OIG's allegations are largely incorrect and
                   its methodology for calculating ineligible costs is, in many cases, illogical.

           Finding 2

           2A.    The OIG's office indicated that this recommendation would be removed from the
                   report as the contract is already terminated and the OIG has provided no evidence
                   that PRPHA has paid for services not performed.

           2B.    As explained in 1D, PRPHA does not believe HUD has the capacity to review
                   each PRPHA procurement for professional services. Ironically, HUD did review
                   and approve both the staffing proposal and the contracts which the OIG is now
                   criticizing in Finding 2.

           2C.    The Emergency Declaration in question is not dispositive in determining the
                  legitimacy of the sole-source procurements. PRPHA met local and Federal
                  requirements as it sought approval from HUD for the contracts under either its
                  emergency power or its discretionary power. Thus, PRPHA has no objection to
                  ensuring that future declarations are properly supported -- just as this one was.

           2D.   PRPHA abandoned its procurement of temporary agency services before any firm
                  was selected; thus, no corrective action is necessary.

           2E.   For the reasons explained above, PRPHA strongly disagrees with the OIG's
                   determination of ineligible costs paid to the sole source contractors. The agency
                   procured these services in accordance with applicable regulations under HUD
                   approved contracts. Both contractors delivered the services required by the
                   contract; thus, no reimbursement is warranted.

           2F.     As stated above, the OIG has not alleged that PRPHA paid for services it did not
                   receive under these contracts. PRPHA is willing to review the payments made to
                   date under these contracts with the OIG.

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Finding 3

3A.     HUD already reviews PRPHA budgets and financial submissions on an annual
         basis to determine program compliance. Moreover, it conducts an annual
         monitoring review of PRPHA's comprehensive grant program and a yearly review
         of PRPHA's management and financial status under the PHMAP, and now under
         the new PHAS system. Although PRPHA would welcome additional technical
         assistance from HUD on ways to improve its cost allocation systems, any
         additional monitoring would serve no purpose.

3B.     PRPHA does not agree with the OIG's determination of ineligible costs. Despite
         repeated requests, the OIG has not been able to support many of its justifications
         for requiring reimbursement. Moreover, PRPHA provided documents refuting the
         OIG's claims that these are ineligible costs. It does not appear that the OIG has
         reviewed that evidence.

3C-3D    As discussed at the exit conference, PRPHA does not agree that funds lost due to
         fraud perpetrated on the agency should be recovered from the agency. PRPHA
         was the victim of these crimes. As HUD is already due full restitution per the
         plea agreements with the defendants and from monies seized by the FBI, there is
         no justification for the recommendation that PRPHA reimburse HUD. Moreover,
         this suggestion punishes PRPHA residents twice for the bad acts of a few
         individuals by denying them the benefit of both the funds already lost and funds
         which would be used to reimburse HUD. Once all of the perpetrators are
         sentenced, PRPHA also plans to collect from the issuer of the management
         agent's fidelity bond. The provisions of the HUD Financial Management
         Handbook prescribe the follow-up and write-off procedures a housing authority
         must follow in reporting such financial losses. The OIG's suggestion that PRPHA
         should reimburse these amounts to HUD would be contrary to these standards.

3E.     As discussed above and at the exit conference, it appears the OIG misunderstands
         the payment process for the security contracts.

Finding 4

4A.     PRPHA is willing to work with HUD to review and improve its policies and
        practices for maintaining property ledger. It will also work with HUD to develop
        a reasonable auditing method.

4B.     As stated above, PRPHA will work with HUD to review its current property
         ledgers and make corrections where necessary.

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                   4C.       PRPHA established new management controls for purchase and contract registers
                              in early 1998. Additional technical assistance from HUD on ways to improve
                              these processes is welcome.

                   4D.       The new PRPHA manual has recently been reviewed and approved by HUD for
                              implementation.

           III. Conclusion

                     As PRPHA stated at the exit conference, the agency has seriously considered the findings
           in this report. Since this audit began in May, 1998, many hours of PRPHA staff time have been
           dedicated to reviewing the areas of concern cited by the OIG and responding to requests for
           information and documentation. The agency has also sought the help of other government
           officials and outside experts to assist PRPHA in re-evaluating its own performance. Despite the
           information contained in the draft report, the OIG presents little evidence that PRPHA is in
           serious violation of applicable procurement requirements. Although PRPHA continues to
           improve its procurement and other internal control systems, it whole-heartedly denies that its
           current practices are as problematic as portrayed by the OIG.

                    PRPHA is particularly concemed because the OIG's recommendations are
           clearly overbroad. If the OIG's recommendations are implemented, two years of resources, time
           and money which have gone into improving the agency will be wasted. This will result in more
           confusion and delays which will cause the type of waste, fraud and abuse of which the OIG
           complains. Moreover, there is no evidence that more HUD oversight or a reconfiguration of the
           agency will improve its operation. The OIG has repeatedly pointed out that HUD has had little
           success effecting change. To the contrary, such drastic changes are likely to set back the
           progress which has already been made within PRPHA, as HUD oversight will circumvent these
           processes. As discussed at the exit conference, PRPHA invites the OIG to reconsider its severe
           recommendations and, instead, to offer suggestions which will recognize PRPHA's previous
           improvements and target those areas that truly need additional progress.

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                          INDEX OF DOCUMENTS
                     OIG DRAFT AUDIT REPORT OF THE
               PUERTO RICO PUBLIC HOUSING ADMINISTRATION

                             SUPPLEMENTAL DOCUMENTS
                                 DECEMBER 22, 1999

Introduction

1)       September, 1999 PRPHA Status Report
2)       February 17, 1998 Memo to Tomey, Soto, et. al. from Blakeman re: Re-Organization of
    the Procurement Office (Draft Procurement Policy and Manual)
3)       April 28, 1998 Memo to Tomey from Blakeman re: Work Plan for Procurement Office
4)       September 3, 1998 Letter to Ortiz from Blakeman re: activities taken to improve
    procurement under 24 CFR §85.36
5)       December 21, 1998 Memo to Rivera Nazario from Blakeman re: administrative
    personnel changes/creation of office of acquisition of property and contracts (Spanish)
6)       List of PRPHA Employees Terminated Since December 1997(Spanish)
7)       List of PRPHA Procurement Department Staff As of December 1999
8)       November 1, 1999 Letter from Ocasio to Ortiz re: revised procurement manual and copy
    of same
9)       December 3, 1999 Letter from Oritz to Blakeman re: comments to revised procurement
    manual
10)      Chart Showing Corrected Status of PRPHA Accounts


Finding 1

11)       January 1993 Handbook 7460.8 Procurement Handbook for Public Housing Agencies
          (PHAs) and Indian Housing Authorities (IHAs)
12)       PRPHA Procurement Policy re: use of purchase order
13)       January 1993 Chapter 11. HUD Review Requirements (7460.1 REV-i)

Purchase Order No. 98-703

14)       24 CFR 85.36(b)(5) re: intergovernmental procurements
15)       PRPHA Procurement Policy re: purchases through GSA
16)       Puerto Rico GSA Contract C-40-192 for purchase of photocopiers by governmental
      agencies (Spanish)
17)       November 23, 1998 Memorandum from Cordero to all interested parties re: effect of
          Puerto Rico GSA Contract C-40-192 (Spanish)
18)       December 9, 1997 Letter to Baez Puras from Garcia re: confirming conversation re:
          discontinued copier model (Spanish)
19)       March 20, 1998 Cost Analysis of Copier Costs Per GSA Contracting Procedure
20)       April 17, 1998 Letter to Baez Puras from Garcia re: contract of Xerox copiers to be
          installed in the offices of the Administrators of the Public Housing. (Spanish)

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           21)     April 23, 1998 Purchase Order for Xerox Copiers and Maintenance Contracts showing
                   purchases made through GSA
           22)     October 20, 1999 Memorandum from Wangen to Colon re: procurement of Xerox
                   copiers
           23)     November 23, 1999 Letter to Ramos Ferrer to Garcia re: indicating that due the
                   discontinuance of' the Xerox copier model originally contracted, the Xerox Corp.
                   substituted this model for another model as provided for in the GSA Contract (Spanish)
           24)     September 1998 Buyers Laboratories, Inc. listing of Xerox Copier model 220 DC
                   showing average cost substantially more than that paid by PRPHA

           Purchase Order No. 98-821

           25)   October 16, 1981 Letter to Pierlusi from Febres Silva re: Elimination of Provision of
                  Electric Ranges in Public Housing Projects
           26)   August 23, 1982 Procedure for the Disposition of Stoves in Public Housing by the
                  Auxiliary Secretary of Administration of Public Housing
           27)   April 24, 1997 Public Policy and Procedure for the Inspection of Gas Stoves in the Units
                  of PRPHA (Spanish)
           28)   January. 30, 1998 Letter to Wangen from Moreta re: gas cylinder in Public Housing
                  Units (Spanish) and sign-in sheets from series of meetings involving HUD and PRPHA
                  regarding the PRPHA Improvement Plan in which the policies regarding the stoves and
                  hot water heaters were developed
           29)   April 30, 1998 Report of inspection of units for gas stoves and cost analysis of repair of
                  gas shelters (Spanish)
           30)   May 8, 1998 Excerpts from PRPHA Improvement Plan regarding plans for purchasing
                  electric stoves and hot water heaters
           31)   March 19, 1999 Letter from Ortega to Management Agents re: prohibition on use of gas
                  stoves (Spanish)
           32)    24 CFR 85.36(d)(2) re: sealed bidding requiring agency only consider responsive bidders.

           Purchase Order No. 98-822

           33)     April 23, 1996 Letter from Rodriguez to Saez re: waiver for provision of hot water in
                   public housing units.
           34)     May 17, 1996 Memorandum from Saez to Marchman re: waiver for provision of hot
                   water in public housing units
           35)     July 23, 1996 Letter from Saez to Rodriguez re: grant of waiver for provision of hot
                   water in public housing units and suggesting study of alternatives
           36)     May 14, 1997 Letter to Rodriguez from Del Toro re: history of HUD policies re: hot
                   water in public housing (Spanish)
           37)     June 30, 1997 Letter from Wangen to Ortiz re: plan to study installation of hot water in
                   public housing units
           38)     Administrative Order authorizing the inspection of public housing units for hot water
                   heaters
           39)     July 18, 1997 Letter to Bureau of Property Administration from CORA Management
                   Group re: Estimates-Quotes for Water Heaters (Spanish)

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40)      February 28, 1998 Results of inspection of public housing properties in preparation of
        procurement of hot water tanks and electric stoves, including identification of units with
        double water lines
41)      December 9, 1998 Letter from Ortega to Management Agents re: prohibition on use of
        shower heaters in public housing units (Spanish)
42)      December 30, 1998 Memorandum from Ortega to Management Agents re: information
        for study of gas stoves and hot water heaters in public housing units (Spanish)
43)      Results of inspection of public housing units for installation of hot water tanks -
44)      November, 1999 Updated report on installation of hot water heaters
45)      Warranty information on hot water tanks showing overall 5 year warranty

Purchase Order No. 97-3715

46)     PR Canon Ethics No. 32 - Professional and notarial services at auction
47)     January 1993 HUD Procurement Handbook (7460.8 REV-l) Legal and Other
       Professional Services
48)     PRPHA Enabling Legislation - Law 66
49)     March 8, 1993 Memo to All Government Secretaries from Cifuentes re: standards and
    procedures for the contracting of professional and consulting services (Spanish)
50)     August 6, 1999 Letter from Buday to Blakeman re: request for concurrence in contracts
       for legal services

PRPHA Charged Excessive Fees for Contract Proposal Documents

51)     List of Cost of All Bid Packages for contracts cited by the OIG in the draft report.

Large Grant Amounts May Have Contributed to Non-Compliance

52)     Chart Showing Corrected Status of PRPHA Accounts (See Number l0 above)

Finding II

53)     October 30, 1997 Administrative Order of the Housing Secretary declaring emergency
        conditions and authorizing PRPHA to seek approval of sole source procurements of firms
        to operate the PRPHA modernization and finance departments under 24 C.F.R.
        85.36(4)(i)(b) or (c)

54)     November 11, 1997 Letter from Wangen to Oritz proposing sole-source procurements of
        firms to operate PRPHA modernization and finance departments
55)     November 21, 1997 Letter from Ortiz to Wangen concurring with the PRPHA approach
        in using sole source contracts, but requesting the submission of documents before approval
56)     December 23, 1997 Letter from Ortiz to Blakeman acknowledging receipt of all
        documents required under regulations and giving approval to execute sole source
        contracts.
57)     April 15, 1998 Letter from Ortiz to Blakeman re: Comprehensive Grant Program (CGP)
        Limited Monitoring Review (24 CFR § 968.335)
58)     March 9, 1999 Letter from Blakeman to Ortiz re: Amendment to Cardona Irizarry
        contract

                                                3

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59)     May 10, 1999 Letter from Ortiz to Blakeman re: Amendment to Cardona Irizarry contract
60)     May 21, 1999 Letter and Work Plan from Cardona to Rodfiguez re: Information for OIG
        audit and Status of Contract

Finding III

Security Services Contracts

61)     Summary of Reconciliation of Contracts for Security Services

62)     Summary of Evidence of Payments Made By PR Department of Housing for Security
        Services Under GSA Contracts (3 volumes of back-up documentation are available at
        PRPHA for review by the OIG upon request)

Contract Number 97-3465

63)      January 8, 1998 Contract between CVR Puerto Rico, Inc. and PRPHA for consulting
         services related to the modernization department including provision for initial advance
         payment and providing that it be deducted in equal parts from each monthly invoices

Fictitious Training Invoices and Management Agent Claims

64)      April 15, 1999 Letter from Blakeman to Banco Popular re: efforts to obtain restitution
        (Spanish)
65)      August 27, 1999 Letter from Luna to Blakeman attaching July 16, 1999 Letter to Banco
         Gubernamental de Fomento from Banco Popular re: indicating that the fraud at PRPHA is
         not the bank's fault so no money will be paid by the Bank to cover the amount lost in the
         fraud; although the money recovered from one of the fraudulent accounts will be returned
         to PRPHA (Spanish)
66)      Newspapers articles concerning PRPHA cooperation in prosecution of fraud cases
67)      Indictment and Plea Agreements in US v. Ruben Monroig; ~; US v. Rios Ramirez; US v.
         Rodriguez Tirado
68)      Copy of Management Agent contract requiring fidelity bond
69)      December 15, 1999 Report from Cardona to Gonzalez re: Status of Changes in Finance
         Department

Prior Reviews

70)    October 28, 1999 Letter to Blakeman from PriceWaterhouse and Coopers re: Results of
        Procurement Audit




                                               4




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                                         INDEX OF DOCUMENTS
                                    OIG DRAFT AUDIT REPORT OF THE
                              PUERTO RICO PUBLIC HOUSING ADMINISTRATION

                          SUPPLEMENTAL DOCUMENTATION REGARDING
                  SUMMARY OF PURCHASE ORDER DEFICIENCIES (APPENDICES B-C) AND
                      SUMMARY OF CONTRACT DEFICIENCIES (APPENDICES D-E)

                                               DECEMBER 22, 1999

          Summary of Purchase Order Deficiencies

           1)     Bus Rental                          97-279B, 97-528,97-578, 97-585
           2)     Coloraal                            97-014
           3)     DRC                                 97-585
           4)     Ferreteria Martin Gonzalez 97-271, 97-299, 97-342, 97-409, 97-592
           5)     IBM                                 97-458
           6)     Michica International               97-032
           7)     Motorola de PR                      97-031
           8)     Nu Vue Ind. Service                 97-056 (97-057)
           9)     National Security Institute         97-191, 97-220, 97-370, 97-461
           10)    Plebiscito Storm Shutter            97-231
           11)    PR Computer Services                97-338
           12)    Standards Forms Inc.                97-263
           13)    The Capricorn Group                 97-228, 97-267, 97-275, 97-318, 97-341
           14)    Befra Interiors                     97-487
           15)    Computerlink                        97-478
           16)    Fire Control Corporation            98-723
           17)    Future Data Visions                 98-469, 98-551
           18)     J&K Printers                       98-684
           19)     KANE Caribbean                     98-070
           20)     Losada Auto Truck, Inc             98-074
           21)     Mors                               98-763
           22)     MV Electrical Contractor 98-631
           23)     Office Gallery                     98-829, 98-830, 98-566
           24)     Rafel J. Nido Inc.                 98-822
           25)     Royal International                98-752
           26)     Royal Motors Inc.                  98-071
           27)     Speedy Office                      98-708, 98-707, 98-541
           28)     The Atmospheric Group              98-595
           29)     Triangle Dealer                    98-073
           30)     White Westinghouse                 98-82l
           31)     Xerox Corporation                  98-405, 98-703




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            32)     Abreu Power Cars                     99-248
            33)     Autos Vega                           99-246
            34)     Computerlink                         99-326
            35)     Empresas Losada                      99-245
            36)     Triangle Dealers                     99-247



            Summary of Contract Deficiencies

            1)      Cardona, Irrizary & Company          97-6773
            2)      Cardona, lrrizary & Company          98-2311
            3)      Cardona, Irrizary & Company          98-3464
            4)      Cardona, Irrizary & Company          UNK
            5)      Fidler, Gonzalez & Rodriguez         97-3715
            6)      Gurimar Construction                 97-134
            7)      American Fundware                    98-416
            8)      Analytical Environment               97-811
            9)      CVR Puerto Rico, Inc.                98-3465
            10)     Global Panzardi Joint Venture        98-3823
            11)     Habibe Computer                      98-5121
            12)     Price Waterhouse & Coopers           98-431
            13)     Domenech Security                    UNK
            14)     Domenech Security                    UNK




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                                                                                    PHA Comments




                         Summary of PRPHA's Response to Finding One
                                    (to be inserted at p. 17)

          There is no support for the vast majority of the IG's assertions in Finding One. First, the
IG continues to insist that formal contracts be used rather than purchase orders, even though
PRPHA has demonstrated that the regulations upon which the IG relies do not include such a
requirement, and that PRPHA's use of purchase orders did not circumvent any processes
required by Puerto Rico law or federal regulations. With regard to the specific purchase orders
identified in Finding One:

         (1)      PRPHA and GSA regulations clearly allow the purchase of the copiers, and the IG
                  has improperly calculated its supposed disallowance.

         (2)     The electric stoves were purchased with the full knowledge of HUD, if not with
                  written HUD approval. In addition, PRPHA has provided the IG with
                  documentation contradicting the IG's assertions about the alleged deficiencies in
                  the purchasing of those stoves.

         (3)      As documented to the IG, PRPHA has been installing the purchased water heaters
                  and continues to do so. There was absolutely no requirement that the water
                  heaters be installed by a certain date, and there is therefore no basis for
                  disallowing the cost of heaters that have not yet been installed.

         (4)      PRPHA has no information to substantiate the IG's claim that a false quote was
                  submitted for the desktop computer, and the IG has not provided PRPHA with
                  documentation to support that claim. Moreover, the computer is in use and is
                  providing PRPHA with ongoing benefits.

          With regard to the two contracts identified in Finding One, the IG is wrong. There is no
justification for the IG's insistence that PRPHA should have selected the lowest bidder for
Contract No. 97-6773, when that bidder was given an unacceptably low score in an assessment
of the various bids. Indeed, an independent Bid Board assessed the scores and proposals of the
six bidders and approved the contractor selected. Moreover, the IG's description of the
contract award process is inaccurate.

          With regard to Contract No. 97-3715, the IG's analysis ignores both Puerto Rico law and
the realities of hiring outside contractors. First, Puerto Rico law does not require a competitive
procurement process when prices are regulated by law, and the Government of Puerto Rico has
established rates of $75 to $125 per hour for legal representation of government entities. Second,
those rates are self-evidently reasonable and have in fact been approved by HUD. Third, both
the Cannons of Professional Ethics for Attorneys in Puerto Rico and HUD's regulations
regarding House Counsel for public housing agencies make the OIG's recommendations
inapposite.




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                                                                                PHA Comments




                      Summary of PRPHA's Response to Finding Two
                                 (to be inserted at p. 23)

         There is absolutely no basis for the IG to criticize PRPHA's actions with regard to
the two contracts identified in Finding Two. Both of those procurements, as well as the contracts
themselves, were approved by HUD based upon extensive documentation provided by PRPHA.
24 C.F.R. § 85.36(d)(4) specifically allows HUD's approval, either because of a public exigency
or emergency or in HUD's discretion. The IG's attempts to find problems with the approval
process and these contracts are completely unfounded.




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                                 Summary of PRPHA's Response to Finding Three
                                             (to be inserted at p. 28)

                     PRPHA has provided the IG with extensive documentation demonstrating that the IG's
           assertions regarding the Security Services Agreements are simply incorrect. With regard to the
           fictitious training invoices and fictitious management agent claims, it has been well-documented
           that PRPHA completely cooperated with law enforcement officials as soon as these fraudulent
           schemes were discovered, and PRPHA has instituted new procedures to prevent a recurrence of
           such schemes. The advance payments that the IG seeks to disallow are not prohibited by 24
           C.F.R. § 85.36, the cited Treasury regulation, or any other statute or regulation. Moreover, that
           payment was approved by HUD. Finally, the IG does not fully and accurately describe either
           PRPHA's audit reports or the organizational changes instituted by PRPHA.




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                                                                             PHA Comments




                     Summary of PRPHA's Response to Finding Four
                                (to be inserted at p. 31)

        PRPHA does not dispute that additional improvements in its property management and
procurement systems are desirable. Indeed, PRPHA welcomes HUD's assistance in instituting
such changes. However, the problems are not nearly so extensive as suggested by the IG audit.




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                 (THIS PAGE LEFT BLANK INTENTIONALLY)




00-AT-201-1003                 96
                                                                                     Appendix H


Distribution
Administrator, Puerto Rico Public Housing Administration
Puerto Rico Secretary of Housing
Deputy Secretary, SD (Room 10100)
Chief of Staff, S (Room 10000)
Special Assistant to the Deputy Secretary for Project Management, SD (Room 10100)
Acting Assistant Secretary for Administration, S (Room 10110)
Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120)
Senior Advisor to the Secretary, Office of Public Affairs, S, (Room 10132)
Deputy Assistant Secretary of Administrative Services/Director of Executive Secretariat, AX
    (Room 10139)
Director of Scheduling and Advance, AL (Room 10158)
Counselor to the Secretary, S (Room 10234)
Deputy Chief of Staff, S (Room 10226)
Deputy Chief of Staff for Operations, S (Room 10226)
Deputy Chief of Staff for Programs and Policy, S (Room 10226)
Director, Office of Special Actions, AK (Room 10226)
Deputy Assistant Secretary for Public Affairs, W (Room 10222)
Special Assistant for Inter-Faith Community Outreach, S (Room 10222)
Executive Officer for Administrative Operations and Management, S (Room 10220)
Senior Advisor to the Secretary for Pine Ridge Project, W, (Room 10216)
General Counsel, C (Room 10214)
Director, Office of Federal Housing Enterprise Oversight, O (9th Floor Mailroom)
Assistant Secretary for Housing/Federal Housing Commissioner, H (Room 9100)
Office of Policy Development and Research, R (Room 8100)
Inspector General, G (Room 8256)
Assistant Secretary for Community Planning and Development, D (Room 7100)
Assistant Deputy Secretary for Field Policy and Management, SDF (Room 7108)
Government National Mortgage Association, T (Room 6100)
Assistant Secretary for Fair Housing and Equal Opportunity, E (Room 5100)
Chief Procurement Officer, N (Room 5184)
Assistant Secretary for Public and Indian Housing, P (Room 4100)
Chief Information Officer, Q (Room 3152)
Director, Office of Departmental Equal Employment Opportunity, U (Room 5128)
Director, Office of Departmental Operations and Coordination, I (Room 2124)
Chief Financial Officer, F (Room 2202)
Director, HUD Enforcement Center, 451 Portals Bldg, Suite 200, Washington, DC 20140
Director, Real Estate Assessment Center, X, 1280 Maryland Avenue, SW, Suite 800
Director, Office of Multifamily Assistance Restructuring, Y, 4000 Portals Building
Deputy Chief Financial Officer for Finance, FF (Room 2202) (2)
Director, Office of Budget, FO (Room 3270)

                                                  Page 91                         00-AT-201-1003
Distribution




00-AT-201-1003   Page 92
                                                                               Distribution


Secretary's Representative, 4AS
Area Coordinator, Caribbean Office, 4NS
Director , Office of Public and Indian Housing, 4NPH
Audit Liaison Officer, 3AFI
Audit Liaison Officer, Office of Public and Indian Housing, PF (Room P8202)
Departmental Audit Liaison Officer, FM (Room 2206)
Acquisitions Librarian, Library, AS (Room 8141)
Counsel to the IG, GC (Room 8260)
HUD OIG Webmanager-Electronic Format Via Notes Mail (Cliff Jones@hud.gov)
Public Affairs Officer, G (Room 8256)
Director, Housing and Community Development Issue Area, U.S. GAO, 441 G Street N.W.,
  Room 2474, Washington DC 20548 ATTN: Judy England-Joseph
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs,
  United States Senate, Washington DC 20510-6250
The Honorable Joseph Lieberman, Ranking Member, Committee on Governmental Affairs,
  United States Senate, Washington DC 20510-6250
The Honorable Dan Burton, Chairman, Committee on Government Reform,
  United States House of Representatives, Washington DC 20515-6143
The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform,
  United States House of Representatives, Washington, DC 20515-4305
Ms. Cindy Fogleman, Subcommittee on Oversight and Investigations, Room 212,
  O'Neil House Office Building, Washington, DC 20515-6143
Steve Redburn, Chief, Housing Branch, Office of Management and Budget, 725 17th Street, NW,
  Room 9226, New Executive Office Bldg., Washington, DC 20503
Sharon Pinkerton, Deputy Staff Director, Counsel, Subcommittee on Criminal Justice, Drug
  Policy and Human Resources, B373 Rayburn House Office Bldg., Washington, DC 20515
Administrator, Office of Federal Procurement Policy, Office of Management and Budget,
  Old Executive Office Building, Room 352, Washington, DC 20503




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