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 THIS PAGE LEFT BLANK INTENTIONALLY 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. Page iii 00-FW-201-1001 Executive Summary THIS PAGE LEFT BLANK INTENTIONALLY 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 THIS PAGE LEFT BLANK INTENTIONALLY 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 THIS PAGE LEFT BLANK INTENTIONALLY 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. Page 19 00-FW-201-1001 Management Controls THIS PAGE LEFT BLANK INTENTIONALLY 00-FW-201-1001 Page 20 Follow Up on Prior Audits This is the first Office of Inspector General audit of Moten & Associates. Page 21 00-FW-201-1001 Follow Up on Prior Audits THIS PAGE LEFT BLANK INTENTIONALLY 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 THIS PAGE LEFT BLANK INTENTIONALLY 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 00-FW-201-1001 Page 28 Appendix C Page 29 00-FW-201-1001 Appendix C 00-FW-201-1001 Page 30 Appendix C Page 31 00-FW-201-1001 Appendix C 00-FW-201-1001 Page 32 Appendix C Page 33 00-FW-201-1001 Appendix C 00-FW-201-1001 Page 34 Appendix C Page 35 00-FW-201-1001 Appendix C 00-FW-201-1001 Page 36 Appendix C Page 37 00-FW-201-1001 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
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)