oversight

HA of the City of New Orleans, Executive Monitor Contract with Moten & Associates, New Orleans, LA

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-01-19.

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

                                                                       Issue Date
                                                                              January 19, 2000
                                                                      Audit Case Number
                                                                               00-FW-201-1001




TO:    Chet Drozdowski
       Director
       Office of Public Housing, 6HPH


FROM:          D. Michael Beard
               District Inspector General for Audit, 6AGA

SUBJECT:       Housing Authority of the City of New Orleans
               Executive Monitor Contract with Moten & Associates
               New Orleans, Louisiana


We performed an audit of the Executive Monitor’s contract with Moten & Associates. The
purpose of the review was to determine whether: (1) the Executive Monitor properly procured the
Moten & Associates contract; (2) Moten & Associates charged only eligible and supportable
costs; and (3) the contract provided measurable benefits to the Housing Authority of New Orleans.

The report contains two findings requiring follow up actions by your office. We will provide a
copy of this report to the Housing Authority of New Orleans, Tulane, and Moten & Associates.

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

Please call William Nixon, Assistant District Inspector General for Audit, at (817) 978-9309 if
you or your staff have any questions.
Management Memorandum




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00-FW-201-1001                Page ii
Executive Summary
We performed an audit of the Executive Monitor’s contract with Moten & Associates.1 The
Executive Monitor contracted with Moten & Associates to perform various technical services to
improve the Housing Authority of New Orleans (HANO) operations. Our audit objectives
included determining whether: (1) the Executive Monitor properly procured the Moten &
Associates contract; (2) Moten & Associates charged only eligible and supportable costs; and (3)
the contract provided measurable benefits to HANO.

The review disclosed both Andersen Consulting and the Executive Monitor violated federal
regulations in obtaining the services of Moten & Associates.2 Further, Tulane paid $427,074 in
ineligible and unsupported costs, including $421,760 for unsupported labor and $5,314 in
ineligible travel costs. Neither HANO, the Executive Monitor, nor Moten & Associates could
provide satisfactory evidence that Moten & Associates completed the tasks it was paid to perform.
Consequently, we could not determine whether HANO derived a measurable benefit from the
Moten & Associates contract.

We recommend that your office: recover the $5,314 paid for ineligible travel; determine and
recover any amounts paid for work not performed or duplicative work; require the justification of
additional work to be performed and require concrete deliverables and a performance delivery
schedule; and monitor subsequent work performed.

We presented our findings to the Executive Monitor and officials of Tulane and HANO at an exit
conference on November 22, 1999. At the conference, HANO provided written comments
disagreeing with our findings. On December 3, 1999, Tulane provided its written comments
disagreeing with our findings. We considered the responses in preparing our final report. We
have summarized the Agency’s responses for each finding and included the complete responses
without attachments as Appendix C (Tulane) and Appendix D (HANO).




1
    Due to long time systemic problems, HUD and the City entered into a Cooperative Endeavor in February 1996. The Cooperative
    Endeavor removed the existing Board of Commissioners and appointed an Executive Monitor, as the Acting Assistant Secretary’s
    designee, to fulfill the duties of Board of Commissioners. The Executive Monitor was an official from Tulane University.
2
    We reviewed Andersen’s procurement of Moten & Associates to determine the validity of the Executive Monitor’s assertion that
    Andersen had properly procured Moten & Associates. A proper procurement would have included an assessment of Mr.
    Moten’s skills and a determination of how much the services should cost.

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Executive Summary




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00-FW-201-1001         Page iv
Table of Contents

Management Memorandum                                                     i


Executive Summary                                                      iii


Introduction                                                              1


Findings

1    Andersen and the Executive Monitor Improperly Procured           3
     Moten & Associates

2    HANO Paid $427,074 in Ineligible and Unsupported Costs          11



Management Controls
19



Follow Up on Prior Audits
21



Appendices

      A Schedule of Questioned Costs
23

      B Schedule of Tasks Not Reported as Completed                           25


      C Tulane Comments
27




                                    Page v                    00-FW-201-1001
Table of Contents


        D HANO Comments
39

        E Distribution
41


Abbreviations
       HANO      Housing Authority of the City of New Orleans
       HUD       U.S. Department of Housing and Urban Development
       OIG       Office of Inspector General
       OTAR      Office of Troubled Agency and Recovery




00-FW-201-1001                        Page vi
Introduction
The Mayor of New Orleans and the former Secretary of the Department entered into a
“Cooperative Endeavor Agreement” in February 1996 to manage the Housing Authority of
New Orleans (HANO). This arrangement was unprecedented. The Secretary agreed to the
partnership with the Mayor to avoid a contested HUD takeover of HANO.3 Under the
Cooperative Endeavor Agreement, the Mayor and the former Secretary agreed to take all
necessary actions to improve HANO and the quality of life of HANO residents.

Under the Cooperative Endeavor Agreement, HUD replaced HANO’s Board of
Commissioners with HUD’s Assistant Secretary for Public and Indian Housing. The Mayor
and the former Secretary agreed on an Executive Monitor to oversee HANO’s recovery and
serve in the Assistant Secretary’s absence. That person was Mr. Ron Mason, Tulane
University’s Counsel. The former Secretary allowed Mr. Mason to continue his relationship
with Tulane University despite the obvious conflict of interest. (As part of the HANO
recovery, Tulane was awarded noncompetitive multimillion dollar contracts for Resident
Initiatives and Campus of Affiliates.) The former Secretary improperly waived4 the conflict
of interest saying: “Mr. Mason is aware of the conflict potentials and, I am confident will
conduct himself so as not to present even the appearance of impropriety. I further note that
under the executive monitor services agreement to be executed by HANO, Mr. Mason will
be required to recuse himself from any arrangements involving Tulane University.”

HUD provided the funds for the Executive Monitor and his staff through a technical
assistance grant agreement with HANO. In addition, HUD hired Andersen Consulting
(Andersen) to provide HANO with technical support services including developing a short
and long-term plan to improve HANO’s operations.

At the urging of the Executive Monitor, Andersen subcontracted with Moten & Associates.
When Andersen’s contract expired, the Executive Monitor retained Moten & Associates
under its agreement. Emmet Moten established Moten & Associates in 1996 as a real estate
consultant firm. Emmet Moten is its sole employee. Previous to forming Moten &
Associates, Mr. Moten worked in redevelopment for local governments and a national
corporation.

HANO maintains its records at 4100 Touro Street.



                                                    Our audit objectives were to determine whether: (1)
    Audit Objectives, Scope,                        Andersen and the Executive Monitor properly procured the
    and Methodology

3
    At a congressional hearing in July 1996 the former Secretary stated: “. . . the mayor informed me that if negotiations successfully
    produced a meaningful partnership agreement that would work from a New Orleans standpoint, then he would work to ensure that
    the board of commissioners would deliver possession of HANO to HUD without litigation, without protest, without obstruction, as
    subsequently occurred. It was a peaceful transformation.”
4
    See Audit Memorandum 96-FW-201-1802, Housing Authority of New Orleans, Procurement of Resident Initiatives, July 5, 1996.

                                                                Page 1                                           00-FW-201-1001
Introduction


                                                  Moten & Associates contract;5 (2) Moten & Associates
                                                  charged only eligible and supportable costs; and (3) the
                                                  contract provided measurable benefits to HANO.

                                                  To achieve the audit objectives we:

                                                  •    Reviewed Federal Acquisitions Regulations; HUD
                                                       procurement guidelines; HUD procurement, grant
                                                       agreement, and Cooperative Endeavor Agreement files;
                                                       and other related documentation;

                                                  •    Interviewed the Executive Monitor; HANO, HUD, and
                                                       Andersen officials; and community representatives;

                                                  •    Reviewed the procurement of Moten & Associates under
                                                       Andersen and the Executive Monitor agreements and
                                                       contracts; and

                                                  •    Reviewed the supporting documentation for payments to
                                                       Moten & Associates under the Executive Monitor
                                                       agreement.

                                                  We performed field work at HUD Headquarters and HANO
                                                  offices from November 1998 through July 1999. The audit
                                                  generally covered the period of July 1997 through December
                                                  1998, although the period was extended as appropriate. We
                                                  performed the audit in accordance with generally accepted
                                                  government auditing standards.




5
    We reviewed Andersen’s procurement of Moten & Associates to determine the validity of the Executive Monitor’s assertion that
    Andersen had properly procured Moten & Associates.

00-FW-201-1001                                              Page 2
                                                                                                                 Finding 1



    Andersen and the Executive Monitor Improperly
            Procured Moten & Associates
Neither Andersen nor the Executive Monitor followed procurement requirements in
awarding contracts to Moten & Associates. At the urging of the Executive Monitor,
Andersen subcontracted with Moten & Associates in May 1996. When Andersen’s contract
expired, the Executive Monitor retained Moten & Associates under his agreement. HUD
required both Andersen and the Executive Monitor to follow federal procurement guidelines.
However, HUD contributed to the problem by relinquishing its approval responsibilities and
allowing the Acting Assistant Secretary, who had a conflict of interest, to approve the
procurement under the Executive Monitor’s agreement. In fact, the Acting Assistant
Secretary suggested the improper award of this contract. The improper procurements
prevented competition. Thus, HUD and HANO do not know if it paid a reasonable price for
the services received.



                                                 Federal Acquisition Regulation6, Part 52.244-5 states, “The
    Federal regulations
                                                 Contractor shall select subcontractors (including suppliers)
    regarding procurement.                       on a competitive basis to the maximum practical extent
                                                 consistent with the objectives and requirements of the
                                                 contract.” HUD regulation 24 CFR 85.367 also requires
                                                 Public Housing Authorities to use competitive procurement
                                                 practices.

                                                 At a May 1996 status meeting, Andersen officials, the
    Executive Monitor                            Executive Monitor and HANO’s Executive Director
    strongly urged Andersen                      discussed the need for Andersen to have a consultant to
    to use Moten &                               interact with the community.8 Andersen claimed to not have
    Associates.                                  the expertise. The Executive Monitor, HANO, and
                                                 Andersen officials agreed that this community development
                                                 consultant needed certain qualifications including
                                                 experience in the New Orleans area; a proven track record
                                                 of urban development; and the ability to work with banks
                                                 and community leaders.

                                                 The Executive Monitor believed Moten & Associates of
                                                 Detroit, Michigan, met these qualifications. The Executive
                                                 Monitor met Mr. Moten during the early days of the

6
    The Andersen contract states that Andersen must follow Federal Acquisition Regulation 52.244-5, Competition in
    Subcontracting.
7
    The Executive Monitor agreement requires Tulane to follow the same procurement requirements that HANO must follow.
8
    Andersen officials did not recall whether a HUD official attended this meeting.

                                                            Page 3                                        00-FW-201-1001
Finding 1


                                                   Cooperative Agreement. The Executive Monitor wrote that
                                                   Mr. Moten “presented his significant accomplishments and
                                                   expertise in the area of urban redevelopment, economic
                                                   development, and organizational and community relations.”
                                                   He decided that Andersen should put Moten & Associates
                                                   under its contract. The Executive Monitor explained that by
                                                   having Moten & Associates under the Andersen contract,
                                                   HUD would directly pay the costs. Further, by placing
                                                   Moten & Associates under Andersen, the Executive Monitor
                                                   believed that he would limit his exposure to criticism of
                                                   favoritism because HUD, not he, would approve the
                                                   procurement and rates paid to Moten & Associates.

                                                   HUD’s Office of Troubled Agency and Recovery (OTAR)
    HUD had concerns
                                                   had concerns regarding the Moten & Associates contract.
    regarding the Moten &                          However, whatever objections OTAR raised Secretary
    Associates Contract.                           Cisneros overruled them. After one such objection, HUD’s
                                                   General Deputy Assistant Secretary for OTAR told staff that
                                                   the Moten & Associates’ subcontract “was going to happen.”
                                                   The HUD official believed that the extraordinary measures
                                                   required by the Cooperative Endeavor Agreement drove
                                                   HUD’s agreement. Both HUD and Andersen officials stated
                                                   that the Executive Monitor spoke with the Secretary quite
                                                   often. The Executive Monitor explained that Secretary
                                                   Cisneros promised him that he could hire the staff or
                                                   consultants needed to correct HANO’s problems.

                                                   Andersen’s contract required it to competitively procure
    Andersen’s procurement
                                                   subcontracts to the “maximum practical extent.”9 As the
    of Moten & Associates                          facts above indicate, Andersen did not consider any other
    violated federal                               outside providers before subcontracting with Moten &
    procurement                                    Associates.
    requirements.
                                                   HUD and Andersen both stated that Andersen met the
                                                   procurement requirements. Andersen asserted that Mr.
                                                   Moten was uniquely qualified to interact with the community
                                                   as discussed in the May 1996 status meeting. Andersen
                                                   argued that its current subcontractor did not meet the
                                                   necessary qualifications, and Andersen knew that no other
                                                   provider existed. Andersen did not provide any
                                                   documentation to support its argument that Mr. Moten was
                                                   the only person qualified to interact with the community.
                                                   HUD relied upon Andersen’s determination that Mr. Moten
                                                   was uniquely qualified. According to a HUD official, HUD
                                                   did not care whether Andersen sole-sourced the contract as
9
     Federal Acquisition Regulations 52.244-5 “Competition in Subcontracting.”

00-FW-201-1001                                               Page 4
                                                                            Finding 1


                        long as the subcontractor was qualified and charged a
                        reasonable price. Andersen never performed a cost analysis
                        of the rates for such services.

                        According to Anderson, Moten & Associates unique
                        qualification was the capability for “community interaction”
                        in New Orleans. Under Andersen’s final list of major
                        deliverables to HUD and HANO, it made Moten &
                        Associates responsible for nine of them. These included:
                        preparing a plan for implementing Neighborhood
                        Redevelopment Strategies; preparing a plan for
                        Comprehensive Homeownership; and providing assessment
                        recommendations on the feasibility of transferring
                        Modernization Section 8 Certificates from the City to
                        HANO. Community interaction does not seem a unique
                        qualification for these tasks and it is not credible that Mr.
                        Moten is the only person capable of performing them.
                        Andersen should have followed requirements and
                        competitively procured these services.

                        Neither Andersen nor HUD determined a reasonable charge
Value of Moten’s
                        for Mr. Moten’s services or compared the agreed on price to
contract not based on
                        rates paid for similar work. HUD allowed Mr. Moten to
reasonableness.         charge $160 per hour based on his previous salary and
                        benefits as Vice President of Development of Little Caesars’
                        Enterprises, Inc. They further agreed to pay his weekly
                        travel expenses from his home in Detroit. HUD and
                        Andersen should have based compensation on the skills and
                        abilities needed to perform the tasks rather than on previous
                        employment. As a result of not competitively awarding this
                        subcontract, HUD does not know whether it paid a
                        reasonable compensation rate to Mr. Moten.

                        Before the Andersen contract had expired, the Executive
Executive Monitor
                        Monitor wanted to extend the Andersen contract,
improperly included     specifically for the Moten & Associates subcontract.
Moten & Associates      According to the Executive Monitor, HUD’s delay in
under his agreement.    approving the Moten & Associates subcontract prevented the
                        subcontractor from completing his deliverables. According
                        to Andersen, Moten & Associates completed all of its
                        deliverables. However, Andersen stated that HANO would
                        need additional modernization technical assistance after its
                        contract expired. The Acting Assistant Secretary refused to
                        extend Andersen’s contract. Instead, he suggested that the
                        Executive Monitor directly subcontract with Moten &
                        Associates. Because the Acting Assistant Secretary also

                            Page 5                                   00-FW-201-1001
Finding 1


                                                  served as HANO’s Board, he should have recused himself
                                                  and allowed another HUD official who did not have a
                                                  conflict of interest to review the matter.

                                                  In the agreement with Moten & Associates, the Executive
                                                  Monitor refers to a January 7, 1997 letter as HUD’s
                                                  approval of Moten & Associates. However, the letter
                                                  referred to is actually HANO’s concurrence of Moten &
                                                  Associates’ scope of work and the associated budget.

                                                  The Executive Monitor agreement required Tulane to follow
                                                  HANO’s procurement requirements. The requirements
                                                  allow a non-competitive award only after determining that
                                                  awarding the contract under normal procurement methods is
                                                  infeasible and one of four circumstances applies:

                                                  •    Available only from one source;

                                                  •    Public exigency or emergency;

                                                  •    HUD authorization; and

                                                  •    Competition is deemed inadequate.

                                                  Tulane did not show that this contract could not be awarded
                                                  using competitive proposals. Also, no documentation exists
                                                  that any of the other four conditions existed. Therefore,
                                                  Tulane should have competitively procured this contract.
                                                  Tulane paid Mr. Moten the same amount that he had earned
                                                  under the Andersen contract.

                                                  As stated above, HANO concurred regarding Moten &
                                                  Associates’ inclusion in the Executive Monitor Agreement.
                                                  Further, HUD provided HANO the funds to reimburse
                                                  Tulane through a technical assistance grant. As a result,
                                                  HANO had a responsibility to ensure that all procurement
                                                  requirements were followed. However, HUD’s
                                                  involvement may have led HANO to believe it did not have
                                                  that responsibility.

                                                  Our agency has been reporting for years that HANO needs to
                                                  follow HUD requirements especially as it relates to
                                                  procurement. 10 For HANO to ever fully recover

10
     See audit reports: 94-FW-201-1005, dated June 29, 1994; 98-FW-201-1002, dated October 24, 1997; and 98-FW-201-1004, dated
     June 15, 1998.

00-FW-201-1001                                              Page 6
                                                                      Finding 1


                   operationally it needs to follow its own procurement policy
                   and HUD requirements. HUD should not encourage HANO
                   to circumvent requirements by casually approving waivers
                   or “rubber stamping” HANO or the Executive Monitor’s
                   intentions on sole-source contracts.


Auditee Comments   Tulane disagreed with the finding. Tulane believed the
                   finding lacked merit and did not present a fair and accurate
                   depiction of the contractual relationship between Tulane and
                   Moten & Associates. Further, Tulane believed it was
                   irrelevant to include the procurement of Moten & Associates
                   under the Andersen contract in this finding.

                   Tulane maintained that it was not bound by the Federal
                   Acquisition Regulation cited in the draft report. Tulane
                   cited three reasons why it was not subject to procurement
                   requirements: (1) Tulane contended that it only needed to
                   follow procurement requirements if a specific clause was
                   inserted into Tulane’s contract, which it was not. Tulane
                   also disputed that the Executive Monitor Services
                   Agreement required it to follow the same procurement
                   requirements that HANO must follow; (2) Tulane argued that
                   HUD’s knowledge and inclusion of Moten & Associates in
                   the budgets attached to the Executive Monitor Services
                   Agreement evidenced that HUD approved of Tulane’s hiring
                   of Moten & Associates; (3) Tulane maintained that neither
                   itself nor the Executive Monitor were government
                   contractors. Consequently, they were not subject to
                   competitive bidding requirements. Instead, the Executive
                   Monitor was a HUD “designee,” functioning as HANO’s
                   Board of Commissioner. This was a unique and special
                   relationship that cannot be reduced to an arms-length
                   contractual relationship between a government agency and
                   an outside vendor.

                   Tulane through its attorney argued that Mr. Moten had
                   extensive experience in the fields of real estate development
                   and consulting. Further, it disagreed that the Executive
                   Monitor’s recollection of Mr. Moten’s procurement differed
                   from Andersen’s version. Tulane cited the ultimate hiring of
                   Mr. Moten by Andersen as evidence that there was a
                   consensus reached to retain Mr. Moten.




                       Page 7                                   00-FW-201-1001
Finding 1


                    HANO maintained that it “is or was not a party to the Moten
                    & Associates contract. As such, HANO had no role in the
                    procurement or the administration of the contract.”



                    Although Mr. Moten may have had experience with real
OIG Evaluation of   estate development, he had no consulting experience before
Auditee Comments    Andersen hired the newly formed company, Moten &
                    Associates. Moten & Associates had no other customers
                    before its work with Andersen.

                    The OIG was not offered any evidence that anyone
                    performed due diligence or reference checks of Mr. Moten’s
                    expertise. More importantly, neither HUD, Andersen nor the
                    Executive Monitor determined whether any other consultants
                    met the qualifications deemed necessary to assist HANO.
                    We still have no assurances that Andersen or Tulane paid
                    Moten & Associates a reasonable fee based upon the work
                    and skills needed.

                    We agree that Tulane is not bound by Federal Acquisition
                    Regulation 52.244-5. As stated in the finding, Andersen –
                    not Tulane – was bound by this regulation. We disagree that
                    Tulane was exempted from following 24 CFR 85.36. We
                    have added additional language to the final report that
                    further explains Tulane’s requirement to follow 24 CFR
                    85.36. In simplest terms, the Executive Monitor Services
                    Agreement required the Executive Monitor to follow all
                    regulations that HANO must follow; and HANO must follow
                    competitive procurement requirements, specifically 24 CFR
                    85.36.

                    HANO was part of the contract because the funds flowed
                    through it.




 Recommendations    We recommend your Office:




00-FW-201-1001             Page 8
                                              Finding 1


1A. Require HANO and the Executive Monitor to terminate
    existing contracts with Moten & Associates, and
    properly procure any of the needed services.


1B. Require HANO and the Executive Monitor, especially
    on consultant contracts, to follow procurement
    requirements without exception.




    Page 9                              00-FW-201-1001
Finding 1




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00-FW-201-1001          Page 10
                                                                                                   Finding 2



                          HANO Paid $427,074 in
                     Ineligible and Unsupported Costs
Through the Executive Monitor agreement, HANO paid Moten & Associates $421,760 in
unsupported labor and $5,314 in ineligible travel expenses. The $421,760 in unsupported
costs included budget overruns and undocumented labor costs. Neither HANO nor the
Executive Monitor could produce sufficient evidence that it received benefit for the labor
hours billed by Moten & Associates. Moreover, HANO personnel and other HANO
contractors performed similar duties or had similar tasks. Additionally, HANO paid Moten &
Associates $5,314 for profit on reimbursed travel expenses.




     Executive Monitor could                      In July 1997, the Executive Monitor let a technical
     not adequately support                       assistance contract to Moten & Associates for services in
                                                  the areas of Modernization, Financial Development,
     $421,760 charged for
                                                  Management Operations and Overall Economic
     labor by Moten &
                                                  Development. 11 Between July 1997 and December 1998,
     Associates.
                                                  Mr. Moten invoiced $493,283 for services and travel under
                                                  this contract. The work plan did not require specific
                                                  deliverables other than monthly reports to the Executive
                                                  Monitor. Mr. Moten did not report his time consistent with
                                                  work items performed. Furthermore, Mr. Moten’s work
                                                  plan duplicated or overlapped work performed by other
                                                  contractors and/or HANO employees. The lack of
                                                  documentation and the duplication of efforts between Moten
                                                  & Associates, other contractors, and HANO personnel made
                                                  it impossible to determine the amount of benefit HANO
                                                  received from the Moten & Associates’ contract.

                                                  The Executive Monitor Services Agreement (Services
     Moten & Associates did                       Agreement) outlined tasks for Moten & Associates to
     not relate time to work                      perform. Similarly, the Grant Agreement between HUD and
     performed.                                   HANO included a work plan that gave a detailed description
                                                  of Moten & Associates’ tasks and the number of hours it
                                                  allowed to complete them. Furthermore, the Grant
                                                  Agreement required HANO to incur costs in “conformance
                                                  with the budget and tasks/work items outlined” in the Grant
                                                  Agreement. For instance, to complete the task of “Monitor
                                                  and assist in the implementation of the Comprehensive Grant
                                                  Construction Program” the budget allowed for 96 hours.
                                                  This allowed HUD and HANO to ensure that it only

11
     The improper procurement of Moten & Associates is discussed in Finding 1.

                                                            Page 11                          00-FW-201-1001
Finding 2


                         reimbursed Mr. Moten for tasks performed within budgeted
                         hours. Any modification of either the tasks or budgeted
                         hours required an amendment to the Grant Agreement. Both
                         Agreements allowed reimbursement to Mr. Moten at a rate
                         of $160 per hour.

                         Mr. Moten submitted monthly time sheets to support his
                         hours. The time sheets only included total hours worked per
                         day. The time sheets did not include a description of tasks
                         or work performed by Mr. Moten. As a result of Mr. Moten
                         being the only employee of Moten & Associates, there was
                         no supervisory or independent review of the time sheets.
                         Furthermore, without this information, it is impossible to
                         determine the hours Moten & Associates spent on any
                         specific task. Tulane should have required Mr. Moten to
                         provide a detail of work performed on the time sheets before
                         payment. However, the Executive Monitor’s knowledge is
                         not adequate supporting documentation for Moten &
                         Associates’ invoices.

                         The Agreements did not require Moten & Associates to
  Poorly written
                         perform specific tasks or produce concrete deliverables.
  agreements.
                         Tasks included such vague phrases as: “Assist in the
                         development of HANO Acquisition and Disposition policy;”
                         “Continue to focus on the Section 8 units to assist in the
                         marketing and counseling of residents . . .;” and “Continue to
                         coordinate with operations in the implementation of the
                         Vacancy Reduction Program.” As such, the Agreements did
                         not require Moten & Associates to produce the Acquisition
                         and Disposition policy, only “assist” in the development of
                         it. Likewise, Mr. Moten was not responsible for
                         implementing the Vacancy Reduction Program, only for
                         coordinating it. Without specific measurable tasks, the
                         Executive Monitor, HANO, HUD, or others have no
                         objective measure of Moten & Associates performance or
                         accomplishments.

  Moten & Associates     Moten & Associates could not provide evidence that it
  could not provide      completed the tasks that Tulane had paid it to accomplish.
  adequate evidence of   Mr. Moten could not provide such documentation as
  work performed.        correspondence between HANO staff and himself, personal
                         notes, or journals. Ideally, Mr. Moten should have
                         submitted time sheets that indicated the tasks that he
                         performed. According to Mr. Moten, he did not keep written
                         documentation of his work other than the monthly reports.
                         He communicated most things verbally to HANO or the

00-FW-201-1001                  Page 12
                                                    Finding 2


Executive Monitor. Regarding the lack of documentation,
Mr. Moten stated, “I was doing what [the Executive
Monitor] told me to do.” In its response, Tulane stated that
Mr. Moten meant he was not specifically directed to keep
any documentation.

Mr. Moten offered completed work products and monthly
reports as evidence of its work. For instance, Moten &
Associates provided HANO’s Relocation Policy as
evidence that it monitored and assisted in the development
of a Comprehensive Relocation Policy. The policy itself
lacked any evidence that Mr. Moten performed the work.
Also, a HANO staff member claimed to have solely written
the policy without input from Mr. Moten. In another
instance, HANO provided a training syllabus to support that
Moten & Associates had worked to train the Modernization
and Development staff. However, the syllabus appeared to
have been created by another contractor. The syllabus does
not indicate what involvement, if any, Mr. Moten had in
planning or providing the training. Therefore, final work
products do not provide any evidence that Mr. Moten
contributed to their completion.

Several individuals interviewed were complimentary of Mr.
Moten’s work. For example, a HANO official did state that
Mr. Moten was a tough negotiator.

The monthly reports also did not provide enough supporting
documentation. The reports described activities that Mr.
Moten claimed to have performed, but did not detail the
hours worked on the activities. Also, the reports did not
relate the activities performed to specific tasks required
under Moten & Associates’ work plan. In many instances,
judgment had to be used to match the reported work to the
tasks listed on the work plan. However, from the reports,
we could determine the work plan tasks Mr. Moten did not
perform. Moten & Associates did not complete 13 of 33
(40%) tasks listed on its 1997 work plan. The work plan
did not state the hours necessary to accomplish these tasks.
Therefore, the monetary total of tasks not completed could
not be determined. In its 1998 work plan, Moten &
Associates did not complete 8 of 21 (38%) tasks. The work
plan allocated 546 budgeted hours to complete these tasks
for a total of $87,360. Therefore, Moten & Associates’
invoiced labor should not exceed $229,440 for 1998
($316,800 budgeted - $87,360 tasks not completed). Moten

   Page 13                                   00-FW-201-1001
Finding 2


                             & Associates invoiced $272,320 for labor for 1998. See
                             Appendix B for a table of those tasks that Mr. Moten did not
                             report as having completed.

  Duplication of services.   In addition to the tasks not completed, some of the tasks
                             listed duplicated the work of HANO personnel and at least
                             two other contractors. The Executive Monitor Agreement
                             required the Executive Monitor to ensure that the duties and
                             responsibilities of his staff will not duplicate the duties and
                             responsibilities of HANO employees or other contractors.
                             HANO’s position descriptions, Moten & Associates’ work
                             plan, and the work plans of two other contracts included
                             instances of duplicative and triplicative efforts.

                             For example, the work plan required Mr. Moten to assist in
                             the implementation of the HOPE VI developments, such as
                             St. Thomas. Similarly, HANO’s Director of Development
                             also had responsibility for the redevelopment of St. Thomas.
                             Also, HUD hired another contractor to ensure that HANO
                             effectively implemented its HOPE VI grants. The work plan
                             required Mr. Moten to develop additional relocation
                             resources to enable HANO to meet its demolition and
                             development schedule. This appears to duplicate another
                             contractor responsibility to prepare an estimate of the
                             overall current and long-term needs and resources related to
                             the revitalization of a development.

                             The vague time sheets, lack of documentation, and
                             duplication of efforts create uncertainty of exactly what
                             Moten & Associates accomplished for the $421,760
                             invoiced for labor and paid by Tulane reimbursed with HUD
                             funds. HANO should not reimburse Tulane for unsupported
                             costs. Tulane should either provide adequate documentation
                             to support these costs or reimburse HANO for amounts it
                             cannot support. At a minimum, Tulane should reimburse
                             HANO for the $42,880 ($272,320 - $229,440) paid for
                             work that exceeded the budgeted hours.

                             The Executive Monitor wrote that Mr. Moten may not have
  Executive Monitor
                             reams of documentation to support its efforts, but the
  believed Moten &
                             Executive Monitor looks at bottom line results. However,
  Associates provided a      the Executive Monitor acknowledged that Moten &
  quality work product.      Associates did not complete some tasks because the
                             Executive Monitor redirected Moten & Associates’ efforts.
                             Regardless of this, there should be some evidentiary matter
                             to support the amounts charged and any modifications to the

00-FW-201-1001                       Page 14
                                                                                 Finding 2


                            grant. Tulane, HANO, and HUD should require
                            documentation to support a consultant’s work, especially
                            when more than one person could claim performance.
                            Maintaining an audit trail is a prudent business practice that
                            HANO and the Executive Monitor should follow.

                            Moten & Associates was allowed reimbursement for Mr.
Moten & Associates
                            Moten’s travel expenses to and from his Detroit residence
claimed $5,314 for profit
                            and the New Orleans area, and for living expenses within
on its travel cost.         the New Orleans area. Mr. Moten invoiced for $66,431 in
                            travel cost for the audit period. On his travel voucher,
                            Moten & Associates charged an additional 8% of the total
                            travel cost as “profit.” Neither the Executive Monitor
                            Services Agreement, Grant Agreement, Agreement for
                            Consulting Services, nor federal requirements allow for
                            profit on travel costs.

                            The Moten & Associates Contract for Consulting Services
                            states:

                                 “Tulane shall reimburse Moten & Associates
                                 for reasonable travel, lodging, telephone, and
                                 directly related business expenses. Moten &
                                 Associates shall substantiate amounts invoiced
                                 with satisfactory evidence.” [Emphasis added]

                            The Grant Agreement required that Tulane follow OMB
                            Circular A-21 when incurring costs. OMB Circular A-21
                            allows travel costs to be reimbursed “on an actual basis, on
                            a per diem or mileage basis...or a combination of the two....”
                            The Circular clearly does not allow profit on travel
                            expenses.



                            Tulane strongly disagreed with the finding. Tulane, through
Auditee Comments            its attorney, maintained that its payments to Moten &
                            Associates were properly “documented under the terms of
                            the relevant contract, and moreover officials at HANO and
                            Tulane - particularly Ronald Mason, Executive Director of
                            the Tulane/Xavier National Center for the Urban Community
                            and the Executive Monitor who functions as HANO’s Board
                            of Commissioners - were intimately familiar with the nature
                            and value of the Moten firm’s work.”




                               Page 15                                    00-FW-201-1001
Finding 2


                    Based upon the investigation performed by Tulane’s
                    attorney, “the Moten firm made important contributions in
                    numerous areas described in its work plans. . . .” Tulane
                    also stated that the finding “repeatedly jumps to unsupported
                    conclusions and raises false issues with respect to the firm’s
                    contract performance. . . .”

                    Tulane took exception to the depiction in the draft of the
                    Executive Monitor telling Mr. Moten not to keep an audit
                    trail. Tulane supplied a letter from Mr. Moten stating that
                    OIG misunderstood or misconstrued his statements.

                    HANO disagreed with the finding. It maintained that all
                    payments to Tulane were properly supported.


                    Tulane did not provide any tangible documentation of Moten
OIG Evaluation of   & Associates’ involvement in any of the accomplishments
Auditee Comments    claimed. Further, it appears that Tulane’s attorney based its
                    opinion of Mr. Moten’s accomplishments on hearsay from
                    two or three people, and principally on the Executive
                    Monitor. Tulane states that Mr. Moten “played a key role in
                    persuading the Louisiana State Housing Finance Authority to
                    increase - from $300,000 to $500,000 - the per project limit
                    on state tax credits for HANO’s HOPE VI projects.”
                    However, an official from the Louisiana Housing Finance
                    Agency credited the National Council of State Housing
                    Agencies and not Mr. Moten for pushing this change.
                    Regarding Mr. Moten’s statements on keeping
                    documentation, we provided further explanation.

                    Tulane agreed that Moten & Associates should return the
                    $5,314 charged as profit on travel.

                    We revised the finding for the $23,011 previously cited as
                    ineligible travel in the draft finding.



 Recommendations    We recommend your Office:

                    2A. Recover the $5,314 paid for ineligible travel from
                        HANO or Tulane.

                    2B. Determine and recover any amounts paid for work not
                        performed or duplicative work from HANO or Tulane.

00-FW-201-1001             Page 16
                                                  Finding 2



2C. Require the justification of any additional work to be
    performed and require concrete deliverables and a
    performance delivery schedule.

2D. Monitor and review work performed by Moten &
    Associates subsequent to the audit period.




   Page 17                                  00-FW-201-1001
Finding 2




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00-FW-201-1001          Page 18
Management Controls
In planning and performing our audit, we obtained an understanding of the management
controls that were relevant to our audit. Management is responsible for establishing
effective management controls. Management controls, in its broadest sense, 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 the following management controls were
 Significant Controls              relevant to our audit objectives:

                                   Administrative Controls

                                   •   Competitive selection and award of contracts
                                   •   Contract administration
                                   •   Eligibility of contract costs
                                   •   Written documentation of contract performance

                                   A significant weakness exists if management controls do not
 Significant Weaknesses            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 the following
                                   items are significant weaknesses, in that HANO and the
                                   Executive Monitor lack internal administrative controls to
                                   ensure:

                                   •   The contract is adequately performed and benefited
                                       HANO shown by use of regular work documentation
                                       including: (1) hours worked; (2) tasks specifically
                                       worked on during the hours charged; and (3) tasks
                                       completed.
                                   •   The contract is procured properly in accordance with
                                       federal regulations.
                                   •   The contract provides a continual benefit to HANO.
                                   •   The contract expends funds that are eligible and
                                       supported.




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Management Controls




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00-FW-201-1001           Page 20
Follow Up on Prior Audits
This is the first Office of Inspector General audit of Moten & Associates.




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Follow Up on Prior Audits




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00-FW-201-1001                 Page 22
                                                                                                                      Appendix A


Schedule of Questioned Costs
                                                                                      Type of Questioned Costs
Issue                                                                                 Ineligible 1/ Unsupported 2/


2A Travel costs                                                                       $5,314

2B Work not performed                                                                                     $421,760




1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity that the auditor believes are not
     allowable by law, contract or Federal, State or local policies or regulations.

2/   Unsupported costs are costs charged to a HUD-financed or HUD-insured program or activity and eligibility cannot be
     determined at the time of audit. The costs are not supported by adequate documentation or there is a need for a legal or
     administrative determination on the eligibility of the costs. Unsupported costs require a future decision by HUD program
     officials. This decision, in addition to obtaining supporting documentation, might involve a legal interpretation or clarification of
     Departmental policies and procedures.




                                                                Page 23                                               00-FW-201-1001
Appendix A




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00-FW-201-1001      Page 24
                                                                                                                     Appendix B

   Schedule of Tasks Not Reported as Completed

                                                                                                                       Amount
                       July 1997 through June 1998 Work Plan1                                                         Budgeted2
Assist in preparation of HOPE VI applications for CJ Peete and Fischer. Oversee
implementation of grant if HUD funds the application.                                                                      N/A
Work with the Campus Affiliates program at CJ Peete to ensure work programs
integration into overall CJ Peete master plan.                                                                             N/A
Develop a HANO Acquisition and Disposition policy.                                                                         N/A
If necessary, cause legislative package to be drafted for the March 1997 Louisiana
session that will empower HANO to use Eminent Domain for acquisition of property.                                          N/A
Develop a fund for continued resident initiatives after HOPE VI funds have ended.                                          N/A
Develop a Financial instrument that HANO may use to carry out overall housing
objectives.                                                                                                                N/A
Continue each development long-term manageability and maintenance to ensure
competitiveness in New Orleans Housing market.                                                                             N/A
Oversee development and implementation of a unified system of building unit
identification to be integrated into the CCS Software Program                                                              N/A
Assist in selection process and the implementation for an asset manager by ensuring
that a contract for said will meet the overall intent of the HANO asset manager's goals
and objectives.                                                                                                            N/A
Assist in developing a business advisory council composed of private business and
public sector leaders that will assist HANO in job development                                                             N/A
Develop a business plan that will assist HANO and the City in business retention and
attraction.                                                                                                                N/A
Work with the City to create a systematic job replacement system that HANO
residents can input into.                                                                                                  N/A
Cause to be called an economic summit to assist in HANO business creation.                                                 N/A
Total Amount Budgeted for Tasks Not Reported as Completed by Moten                                                         N/A




   1
     The Appendix B schedules include tasks that Moten & Associates did not report as having been accomplished in its monthly
     activity reports. Moten & Associates should have performed these tasks which were part of its work plans.
   2
     The work plan did not state the hours necessary to accomplish these tasks. Therefore, the monetary total of tasks not completed
     could not be determined.




                                                               Page 25                                          00-FW-201-1001
Appendix B


                                                                                     Amount
                 January 1998 through December 1998 Work Plan                       Budgeted
Focus on Section 8 units to assist in the marketing and counseling of residents who $15,520
have been relocated as a result of HANO revitalization efforts.
Develop HANO's CDC that will act alone or joint venture with non-profit or for       15,360
profit organizations in carrying out HANO's overall revitalization program.
Facilitate the development of a financial instrument that HANO may use on its own 16,000
and in its ability to carry out its overall housing objectives.
Monitor and assist in the implementation of the modernization and development         6,560
organization and staff development.
Coordinate Gilbane capacity building contract with HANO's human resources             6,400
department to ensure proper hiring and training of staff so that after Gilbane's
contract is complete HANO staff can deliver services to its customers without
interruptions.
Assist in selection process and implementation of an asset manager consultant by      6,400
ensuring that a contract for said will meet the overall intent of the HANO asset
manager's goals and objectives.
Assist in developing a business advisory council composed of private business        10,720
and public sector leaders that will assist HANO in job development.
Assist in the development of a business plan that will assist HANO as well as the    10,400
City of New Orleans in business retention and attraction. Such a plan will be
incorporated in a HANO development strategy.
Total Amount Budgeted for Tasks Not Reported as Completed by Moten                  $87,360




00-FW-201-1001                             Page 26
                                Appendix C

Auditee Comments




                   Page 27   00-FW-201-1001
Appendix C




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             Appendix C




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Appendix C




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             Appendix C




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Appendix C




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             Appendix C




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Appendix C




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             Appendix C




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Appendix C




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             Appendix C




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Appendix C




00-FW-201-1001   Page 38
                             Appendix D

HANO Comments




                Page 39   00-FW-201-1001
Appendix D




00-FW-201-1001   Page 40
                                                                                   Appendix E

Distribution
Secretary's Representative, 6AS
Comptroller, 6AF
Director, Accounting, 6AAF
Director, Office of Public Housing, 6APH
Office of Public Housing, 6HPH (4)
Saul N. Ramirez, Jr., Deputy Secretary, SD (Room 10100)
Kevin Simpson, Deputy General Counsel, CB (Room 10214)
Jon Cowan, Chief of Staff, S (Room 10000)
B. J. Thornberry, Special Asst. to the Deputy Secretary for Project Management (Room 10100)
Joseph Smith, Acting Assistant Secretary for Administration, A (Room 10110)
Hal C. DeCell III, A/S for Congressional and Intergovernmental Relations, J (Room 10120)
Ginny Terzano, Sr. Advisor to the Secretary, Office of Public Affairs, W (Room 10132)
Roger Chiang, Director of Scheduling and Advance (Room 10158)
Howard Glaser, Counselor to the Secretary, S (Room 10218)
Rhoda Glickman, Deputy Chief of Staff, S (Room 10226)
Todd Howe, Deputy Chief of Staff for Operations, S (Room 10226)
Jacquie Lawing, Deputy Chief of Staff for Programs & Policy, S (Room 10226)
Patricia Enright,, Deputy A/S for Public Affairs, W (Room 10222)
Joseph Hacala, Special Asst for Inter-Faith Community Outreach (Room 10222)
Marcella Belt, Executive Officer for Admin Operations and Management (Room 10220)
Karen Hinton, Sr. Advisor to the Secretary for Pine Ridge Project (Room 10216)
Gail W. Laster, General Counsel, C (Room 10214)
Armando Falcon, Office of Federal Housing Enterprise Oversight (Room 9100)
William Apgar, Assistant Secretary for Housing/FHA, H (Room 9100)
Susan Wachter, Office of Policy Development and Research (Room 8100)
Cardell Cooper, Assistant Secretary for CPD, D (Room 7100)
George S. Anderson, Office of Ginnie Mae, T (Room 6100)
Eva Plaza, Assistant Secretary for FHEO, E (Room 5100)
V. Stephen Carberry, Chief Procurement Officer, N (Room 5184)
Harold Lucas, Assistant Secretary for Public & Indian Housing, P (Room 4100)
Gloria R. Parker, Chief Information Officer, Q (Room 8206, L’Enfant Plaza)
Frank L. Davis, Director, Office of Dept Operations and Coordination, I (Room 2124)
Office of the Chief Financial Officer, F (Room 2202)
Edward Kraus,, Director, Enforcement Center, 200 Portals Bldg., Wash.D.C. 20024
Donald J. LaVoy, Acting Director, REAC, 800 Portals Bldg., Wash D.C. 20024
Ira Peppercorn, Director, Office of MF Assistance Restructuring, 4000 Portals Bldg.,
        Wash. D.C. 20024
Mary Madden, Assistant Deputy Secretary for Field Policy & Mgmt, SDF (Room 7108) (2)
Deputy Chief Financial Officer for Operations, FF (Room 2202)
David Gibbons, Director, Office of Budget, FO (Room 3270)
FTW ALO, AF (2)
Public Housing ALO, PF (Room 5156) (2)
Dept. ALO, FM (Room 2206) (2)
Acquisitions Librarian, Library, AS (Room 8141)


                                           Page 41                             00-FW-201-1001
Appendix E


Director, Hsg. & Comm. Devel. Issues, US GAO, 441 G St. NW, Room 2474
     Washington, DC 20548 Attn: Judy England-Joseph
Henry A. Waxman, Ranking Member, Comm. on Govt Reform,
     House of Rep., Washington, D.C. 20515
The Honorable Fred Thompson, Chairman, Comm. on Govt Affairs,
     U.S. Senate, Washington, D.C. 20510
The Honorable Joseph Lieberman, Ranking Member, Comm. on Govt Affairs,
     U.S. Senate, Washington, D.C. 20510
Cindy Fogleman, Subcomm. on Gen. Oversight & Invest., Room 212,
     O'Neill House Ofc. Bldg., Washington, D.C. 20515
The Honorable Dan Burton, Chairman, Committee on Govt Reform,
     House of Representatives, Washington, D.C. 20515
Deputy Staff Director, Counsel, Subcommittee on Criminal Justice, Drug Policy & Human
     Resources, B373 Rayburn House Ofc. Bldg., Washington, D.C. 20515
Steve Redburn, Chief, Housing Branch, Office of Management and Budget
     725 17th Street, NW, Room 9226, New Exec. Ofc. Bldg., Washington, D.C. 20503
Director, Office of Supportive Services, PRS (Room 4106)
Inspector General, G
Housing Authority of the City of New Orleans
Mayor, City of New Orleans
Louisiana Legislative Auditor




00-FW-201-1001                             Page 42