oversight

St. Louis Housing Authority Paul Simon Tenant Association Board

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-05-31.

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

Table of Contents
                                                                       Issue Date
                                                                               May 31, 2000
                                                                       Audit Case Number
                                                                               00-KC-209-1002




TO: Michael A. Williams, Director, Troubled Agency Recovery Center, PB1



FROM: Roger E. Niesen, District Inspector General for Audit, 7AGA

SUBJECT: St. Louis Housing Authority Paul Simon Tenant Association Board

We have completed an audit of the Tenant Association Board for the Paul Simon Elderly Building.
The objective of our audit was to determine if the Board followed proper procedures and fully
accounted for its funds. The audit was conducted in response to a citizen’s complaint.

We determined that the Board’s officers failed to comply with the requirements governing them. They
did not apply sound financial management principles, and as a result could not account for $15,158 in
funds they received during the audit period. They also did not perform other duties assigned to them
and did not meet individual eligibility requirements to serve on the Board. Therefore, the current
officers should be replaced. The St. Louis Housing Authority needs to establish procedures to monitor
the Association, and execute a written agreement with the Tenant Association that clearly outlines the
Association’s and its Board’s responsibilities.

Within 60 days, please provide us, for the recommendations made in this report, a status report on: (1)
the corrective action; (2) the proposed corrective action and date to be completed; or (3) why action is
considered unnecessary. Also, please provide us copies of any correspondence or directives issued
because of the audit.

Should you or your staff have any questions, please contact me at (913) 551-5870.




                                 Table of Contents
Management Memorandum




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                        Table of Contents
Executive Summary
We completed an audit of the Tenant Association Board for the Paul Simon Elderly Building. The
objective of our audit was to determine if the Board followed proper procedures and if it fully
accounted for its funds. The audit was conducted in response to a citizen’s complaint.

We concluded that the Board’s officers failed to comply with the requirements governing them. They
did not apply sound financial management principles, and as a result could not account for $15,158 in
funds they received during the audit period. They also did not perform other duties assigned to them
and did not meet individual eligibility requirements to serve on the Board. Therefore, the current
officers should be replaced. Additionally, the St. Louis Housing Authority needs to establish
procedures to monitor the Association, and execute a written agreement with the Tenant Association
that clearly outlines the Association’s and its Board’s responsibilities.



                                      The Tenant Association Board for the Paul Simon Elderly
 The Board Failed To Meet
                                      Building did not comply with the requirements for
 Its Requirements
                                      performing their duties or properly conducting themselves.
                                      The officers failed to follow HUD’s requirements, the
                                      Association’s by-laws, the Code of Conduct, or their
                                      dwelling leases. They did not manage their funds, document
                                      their meetings, or meet individual eligibility requirements.
                                      These shortcomings resulted from the Board’s
                                      incompetence. The problems went undetected because the
                                      St. Louis Housing Authority did not have a process to
                                      oversee or monitor the Association. In addition, the
                                      Authority did not enter into a written agreement with the
                                      Tenant Association. A written agreement should have
                                      required the Board to provide an accounting for the
                                      Association’s funds to the Authority. As a result, HUD, the
                                      Authority, and the Paul Simon tenants have no assurance
                                      that $15,158 was expended appropriately.

                                      We recommend that the Director, Troubled Agency
 Recommendations
                                      Recovery Center, take administrative action against the
                                      Board members. Additionally, the Director should ensure
                                      the St. Louis Housing Authority withdraws its recognition
                                      of the current Board and takes steps to replace them.
                                      Further, the Housing Authority should execute a written
                                      agreement with the Tenant Association, assist them in
                                      implementing an accounting system with effective controls,
                                      develop and implement procedures to monitor the Tenant
                                      Association, and assess the feasibility of recouping lost
                                      funds in a civil legal action.


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Executive Summary


                       We held exit conferences and provided our draft finding to
                       the Finance Director of the St. Louis Housing Authority and
                       to the officers of the Paul Simon Tenant Association Board
                       on April 20, 2000. We received written comments from the
                       Corporate Council for the Housing Authority on May 11,
                       2000 and from the Tenant Board on May 15, 2000. We
                       considered the comments in preparing our final report and
                       incorporated them into the finding as appropriate.




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                    Table of Contents
Table of Contents

Management Memorandum                                        i



Executive Summary                                           iii



Introduction                                                1



Finding

Officers Failed To Properly Account For Funds               3




Management Controls                                        15



Follow Up On Prior Audits                                  17



Appendices
   A Schedule of Questioned Costs                          19

   B Auditee Comments                                      21

   C Distribution                                          49




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                    Table of Contents
Introduction
We received a citizen complaint that the Tenant Association Board for the Paul Simon Elderly
Building had not followed proper procedures nor fully accounted for its funds since the Board
took office in 1995. In response to this complaint, we audited the Association. Paul Simon is a
public housing high-rise located at 1241 Hickory Street in St. Louis, Missouri. The Tenant
Association Board qualifies as a resident council. According to HUD’s regulations, the role of a
resident council is to improve the quality of life and resident satisfaction and participate in self-
help initiatives to enable residents to create a positive living environment for families in public
housing. The current Tenant Association Board consists of four members: a President, Vice
President, and Treasurer, who were elected to the Board in the October 1995 and re-elected in
October 1998, and a Secretary who was elected to the Board for the first time in October 1998.
The original Secretary moved and her replacement passed away. In December 1995 and 1998 the
officers were sworn in as applicable. The Tenant Association Board elected in October 1995
opened a bank account in November 1995; therefore, we began our review at that point.



                                      Our audit objective was to determine if the Paul Simon
 Audit Objectives                     Elderly Building Tenant Association Board followed proper
                                      procedures and fully accounted for its funds.


                                      We performed our on-site work in October 1999 and March
 Audit Scope and                      through April 2000 to determine whether the Tenant
 Methodology                          Association complied with applicable regulations related to
                                      the Board and its financial management. We interviewed
                                      the complainant, the Tenant Association Board, St. Louis
                                      Housing Authority staff, and HUD staff. We analyzed
                                      documents from the Tenant Association, their bank, and
                                      their vending and laundry companies, including bank
                                      statements and check copies, receipts, Board meeting
                                      documents, and correspondence.        We also analyzed
                                      corresponding documents at the St. Louis Housing
                                      Authority.

                                      The audit covered the period from November 1995 through
                                      February 2000. We conducted the audit in accordance with
                                      generally accepted government auditing standards.

                                      We provided a copy of our draft finding to the Executive
                                      Director and Finance Director of the St. Louis Housing
                                      Authority. We also provided the draft finding to each
                                      Board officer of the Paul Simon Tenant Association.



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Finding


 Officers Failed To Properly Account For Funds
The officers of the Tenant Association Board for the Paul Simon Elderly Building did not comply with
the requirements for performing their duties or properly conducting themselves. The officers did not
follow HUD’s requirements, the Association’s by-laws, the Code of Conduct, or their dwelling leases.
They did not properly manage funds, document their meetings, or meet individual eligibility
requirements. These shortcomings resulted from the Board’s incompetence, and went undetected
because the St. Louis Housing Authority did not have a process to oversee or monitor the Association.
In addition, the Authority did not enter into a written agreement with the Tenant Association. A
written agreement should have required the Board to provide an accounting for the Association’s
funds to the Authority. As a result, the Board was unable to account for expenditures of $15,158,
and HUD, the Authority, and Paul Simon tenants have no assurance the funds were appropriately used.



                                      24 CFR 964, Tenant Participation and Tenant Opportunities in
 HUD Regulations
                                      Public Housing, says a resident council may only receive
                                      funding from a housing authority under a written agreement
                                      between the two parties, which obligates the resident council to
                                      account to the housing authority for the use of the funds. The
                                      CFR also dictates that agreements on the use of community
                                      space for resident activities should be put in a written
                                      Memorandum of Understanding. In addition, 24 CFR Part 85
                                      requires all subgrantees to keep source documentation and
                                      maintain effective control and accountability. This part also
                                      requires grantees to monitor the subgrantees to assure
                                      compliance.

                                      24 CFR 964 also requires that tenants serving on the resident
                                      council board meet the requirements described in the by-laws
                                      and comply with their leases. If a resident council fails to
                                      satisfy HUD minimum standards for fair and frequent elections,
                                      or fails to follow its own election procedures as adopted, HUD
                                      shall require the housing authority to withdraw recognition of
                                      the council and withhold resident services funds as well as
                                      funds provided in conjunction with services rendered for
                                      resident participation in public housing.

                                      The by-laws adopted by the Tenant Association in July 1995
 Tenant Association                   require the Treasurer to keep financial records for the board
 Requirements                         and submit written itemized reports to the board at least once a
                                      month. The Secretary is to take minutes and keep records of
                                      all Board meetings. All expenditures over $100 must be
                                      authorized in advance by the Board, all Association funds shall

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Finding


                             be deposited in the Board’s bank account, and checks are to be
                             signed by 2 officers. The by-laws provide that recognition shall
                             be withdrawn from board members when it is proven that the
                             by-laws, the Code of Conduct, or the dwelling lease have been
                             violated.

                             The Code of Conduct applicable to the Tenant Board is the
                             Tenant Affairs Board Tenant Management Corporation Tenant
                             Association Code of Conduct revised June 1993. It requires
                             Board members to accurately reflect the sentiments of the
                             residents they represent, and be accountable and responsible to
                             them. The Board members are to conduct monthly meetings
                             and put the meetings’ highlights in report form. The reports
                             are to include agendas, minutes, attendance lists, meeting
                             notification letters, and be submitted to the Board of
                             Commissioners and the Tenant Affairs Board monthly. The
                             Code also requires Board members to report correct income at
                             all times. It says Board members are responsible to make
                             certain that failure to perform in the above manner by any
                             Board member will be reported in writing to the Board of
                             Commissioners and the Tenant Affairs Board. In the event of a
                             violation by any Board Member of the Code of Conduct, the
                             St. Louis Housing Authority and the Tenant Affairs Board shall
                             immediately withdraw recognition of the Board member. The
                             Code of Conduct stipulates that unless a waiver has been
                             granted, it is a conflict of interest for a Board member to be an
                             employee of the St. Louis Housing Authority.

                             The St. Louis Housing Authority dwelling lease provides for a
                             "One Strike You’re Out" policy regarding a tenant’s drug use,
                             and prohibits consumption of alcohol in public areas. The lease
                             also contains a provision that residents must report in writing
                             any change in income within 30 days.

                             Board members did not comply with requirements, or properly
 The Board Did Not Meet      perform their duties.      The members violated HUD’s
 Requirements                regulations, the Association’s by-laws, their dwelling lease
                             agreements, and the Code of Conduct.

                             The Board members did not fully account for the Tenant
                             Association’s funds, and did not produce monthly board
                             meeting minutes, resolutions, or treasurer’s reports. The
                             Board also allowed the Association’s corporate status to lapse,
                             did not maintain a checking account, did not obtain advance


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                                                                             Finding


                    authorization for all expenditures over $100, and did not
                    deposit all funds in the Tenant Association’s bank account.

                    The Association received funds from the St. Louis Housing
Funds Were Not      Authority. It received a $3 allowance per occupied unit
Accounted For       annually, and a one time $1,000 payment for an arts and crafts
                    program. Further, the Authority provided $210 a month to
                    cover operation and maintenance of laundry facilities.

                    The Association also received commission payments directly
                    from a vending machine company and a laundry company. In
                    addition, the tenants paid the Association directly for activities
                    it sponsored for them. The following table shows the total
                    amount collected and expended during the audit period:

                    Date                 Description                        Amount
                    November 1995        Initial Bank Deposit                  $828
                    December 1995-       Add: Income Received                $30,140
                    February 2000
                    February 2000        Less: Ending Bank Balance            $3,089
                                         Total Amount Expended               $27,879

                    The Board provided evidence of expenditures totaling $12,721
                    between November 1995 and February 2000, leaving $15,158
                    unaccounted for. More than half the receipts were for
                    purchases from grocery stores, convenience stores, restaurants
                    and gas stations. The Board said these were purchases of
                    prizes and refreshments for bingo games, tenant parties, holiday
                    meals and gifts, and gas for the vehicle used to do the
                    shopping. The documentation also included evidence that the
                    Board spent $4,450 to take tenants on trips to casinos. The
                    tenants contributed $4,220 toward the trips. The remaining
                    receipts were for pool table supplies, laundry attendant
                    stipends, laundry room insurance, and membership fees. The
                    Board was unable to provide documentation to support the
                    $15,158 that was not accounted for. Their only explanation
                    was that they are poor record keepers.

                    The Authority required the Association to prepare a budget for
                    the laundry costs; however, there was no budget in the
                    Association’s files.

                    The receipts are not sufficient evidence that all items purchased
                    were used for the purposes described by the Board. For
                    example, we observed that in a five day period, the Board

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Finding


                            made six trips to the grocery store to make purchases totaling
                            $289. Included in the receipts were purchases of medicine,
                            cigarettes, and alcohol. When we asked the Board about these
                            purchases, the Board indicated the purchases were included by
                            mistake. However, this statement contradicts the statement the
                            Board made when they provided us the receipts. They said the
                            receipts were all purchases for the Paul Simon tenants, and no
                            personal purchases were made with the Tenant Association’s
                            funds. We did not include the clearly unacceptable purchases
                            when we totaled the receipts to arrive at the $12,721 figure
                            that was supported. The Board is required to be accountable
                            to the tenants it represents; however, the tenants have no
                            assurance that $15,158 in funds was expended in furtherance of
                            the Association’s objectives.

                            The Board also did not have required documentation in
 Meetings Were Not          support of monthly meetings. The Board’s own by-laws
 Documented                 require it to maintain documentation such as minutes, agendas,
                            attendance lists, and meeting notifications. In the 52 month
                            period reviewed, the Board only had 2 sets of minutes, 14 sign-
                            in sheets, 1 treasurer’s report, and 3 agenda sheets. The Board
                            could not adequately explain why the required documentation
                            was not maintained.

                            The Board also failed to maintain a checking account, deposit
 Basic Business             all its funds in a bank, and obtain advance authorization for all
 Requirements Were Not      purchases over $100. The Board said they were unable to
 Followed                   open a checking account because the bank required corporate
                            papers. We found the corporation had been administratively
                            dissolved by the Secretary of State for failure to file required
                            reports. The Association had a savings account; however, the
                            Board did not deposit all funds in the bank. Instead, funds
                            were held in anticipation of upcoming purchases. The Board
                            said it was not aware advanced approval was required for all
                            purchases over $100. Good internal controls require an
                            organization to have a checking account so purchases can be
                            made using checks in lieu of cash. In addition, good controls
                            require all cash receipts and disbursements to flow through a
                            bank account to maintain accountability. If proper controls had
                            been in place, the Association would not have lost $280 when
                            its office was burglarized in July 1998.

                            The Board did not establish: internal controls for effective
 The Authority Did Not      control and accountability of funds; a checking account; or an
 Detect The Problem         accounting system to track income and expenses and reconcile

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                                                                                         Finding


                               its sources and applications of funds. This situation was not
                               detected by the Authority because it did not have a process to
                               oversee or review the Association. The Authority’s Resident
                               Initiatives office’s role was to facilitate and assist the Board as
                               requested. The Board submitted a budget to the Authority in
                               1999, but did not expend the Association’s funds in accordance
                               with the budget. It budgeted for a copy machine and office
                               supplies, but did not buy the copy machine because it was
                               unable to purchase one at the allocated price. Instead, the
                               Board reported that it used the funds allocated for a copy
                               machine for office supplies. However, none of the receipts
                               were for office supplies. The Authority did not audit the
                               expenditures to ensure they were for budgeted items and did
                               not have a written agreement that should have required the
                               Tenant Association to account for its expenditures of funds.
                               The Authority’s Finance Director said she was not aware of the
                               requirement to have a written agreement with the Association.
                               Because a written agreement was not developed, the
                               Authority’s and Association’s responsibilities were not defined.

                               Our review of the Paul Simon Tenant Association brought
                               these weaknesses to the attention of the St. Louis Housing
                               Authority. In April 2000, the Authority began taking steps to
                               require all tenant associations to submit financial documents for
                               the prior year, and a current year budget. The Authority said it
                               plans to review the documents on a sample basis.

                               In addition to the Board’s overall failure to perform its duties,
Officers Are Not Eligible      several Board members violated requirements that should have
To Serve On The Board          been grounds for, at a minimum, removal from the Board. One
                               Board member admitted to smoking drugs in her unit, and
                               though this statement was witnessed by other Board members
                               and put in writing, she remained on the Board and was not
                               evicted. The Board members who witnessed the statement said
                               they reported the problem to the St. Louis Housing Authority
                               and expected the Authority to initiate a hearing. However, the
                               Authority’s Building Manager who should have acted on the
                               problem left her job, and her replacement was not aware of the
                               situation until we brought it to her attention.

                               Several of the Board members held positions for which they
                               were compensated by the Housing Authority while serving on
                               the Board. One Board member was a full-time employee of
                               the Housing Authority while also on the Board. These


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Finding


                        positions were conflicts of interest according to the Tenant
                        Association’s own Code of Conduct.

                        Further, one Board member did not timely report an increase in
                        income. Proper reporting of income is required by the dwelling
                        lease. The Association’s Code of Conduct and by-laws require
                        Board members to be removed if they do not fulfill the terms of
                        their lease agreement.

                        In summary, the Paul Simon Tenant Association Board failed
                        to properly account for the funds entrusted to it, and did not
                        follow its own or HUD’s requirements. As a result, HUD
                        lacks assurance the Association met its objectives and benefited
                        the tenants it was created to help.



 Auditee Comments       Excerpts from the Paul Simon Tenant Association Board’s
                        comments on our draft finding follow. Appendix B, page 23,
                        contains the complete text of the comments.

                        The Paul Simon Tenant Association Board prepared a list of
                        expenditures from 1995 through 2000 totaling $25,233. The
                        Board said they have never used any money for their own
                        personal use and although they do not have receipts and
                        records, all funds were used for the residents of Paul Simon.


 OIG Evaluation of      The list that the Tenant Association submitted was not
 Auditee Comments       accompanied by supporting documentation.           When we
                        performed our audit, we examined all documentation in the
                        Tenant Association’s files and found support for expenses that
                        totaled $12,721.        HUD regulations require source
                        documentation be maintained to support all expenditures.



                        The Tenant Association Board said no money from the Tenant
 Auditee Comments       Association was used to provide trips to gambling casinos, and
                        records were kept of who paid.


 OIG Evaluation of      We did not question the expenses for the gambling trips since
                        the difference between the amount collected from tenants and
 Auditee Comments
                        the amount spent was not significant. We included the

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                                                                              Finding


                       expenses in our analysis because we also included the
                       associated income collected from the tenants for the trips.


                       The Paul Simon Board said the residents played bingo once a
Auditee Comments       week until mid 1999 when they began playing twice a week.
                       Residents were charged 25 cents per board only at the second
                       session of bingo each week. The Tenant Association
                       purchased all prizes for bingo and paid a caller $5 per session.


OIG Evaluation of      The 25 cent charge per board at the second session of bingo
                       each week and the caller fees were not disclosed to us during
Auditee Comments
                       our audit. The Tenant Association did not have records to
                       support these payments and receipts and they did not provide
                       any with their comments. Our analysis only included
                       information that was supported by documentation. HUD
                       requires Tenant Associations to maintain documentation to
                       support their income and expenses.


Auditee Comments       The Paul Simon Tenant Association Board said attendance
                       sheets, notices of tenant meetings, and agendas were kept in a
                       folder in a file cabinet in the office. When the office was
                       burglarized, the folder came up missing. Also, during their
                       tenure the Board had 3 secretaries: Two moved and one is
                       deceased. Some of the records kept by the secretaries were
                       not retrieved.


OIG Evaluation of      The police report filed subsequent to the break-in reported a
Auditee Comments       theft of cash. The report quotes the President as saying,
                       “There was nothing else inside the office or the filing cabinet
                       disturbed.” When we discussed the lack of records with the
                       Board during the audit, they said the current Secretary does not
                       prepare minutes, and they did not think the prior Secretary
                       prepared them either. The Code of Conduct requires the
                       Board to submit records to the Board of Commissioners and
                       the city-wide Tenant Board monthly. We determined the
                       records were not being submitted.


Auditee Comments       The Tenant Association said they were unable to open a
                       checking account without their corporate papers, so they
                       opened a savings account to which they deposited funds and

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Finding


                          then made withdrawals. They attempted to obtain their
                          corporate papers, but were unable to despite contacts with the
                          Secretary of State, the Housing Authority, and an attorney.


   OIG Evaluation of      Our review of records disclosed that the Board had corporate
   Auditee Comments       status from 1995 until 1998 when its corporate status lapsed
                          for failure to file an annual report. Their attempts to contact
                          the Secretary of State’s office did not take place until 1998.
                          The Board opened a savings account in 1995 but did not
                          always deposit all funds to its account as required by its by-
                          laws. The Board did not open a checking account; therefore,
                          its requirement that checks be signed by 2 officers was not
                          followed.



 Auditee Comments         The Tenant Association Board said the Secretary’s drug usage
                          was reported to the Building Manager and her successor, the
                          city-wide Tenant Board President, and the Housing Authority.
                          Action was not taken because concerned parties did not believe
                          there was adequate proof.

                          The President also said she was told by the then city-wide
                          Tenant Board President and the Housing Authority Executive
                          Director that there was no conflict of interest between her
                          employment at the Housing Authority and her position on the
                          Board. Also, the next Executive Director told her it was a
                          conflict for her to work in the building where she lived, but did
                          not say there was a problem with her being a member of the
                          Board. She further said she took advantage of payroll
                          deduction for her rent while employed by the Housing
                          Authority, and was never delinquent on her rent. She reported
                          changes in her pay to the Manager by providing a Personnel
                          Transaction form.


 OIG Evaluation of        We agree that the President was under a payroll deduction plan
                          for her rent. We determined the late payments were not her
 Auditee Comments
                          fault and have deleted the reference to late payments from our
                          finding. The tenant files contained documentation supporting
                          the other statements in our report. The Secretary’s file
                          contained an oral admission of drug usage that was witnessed
                          by three individuals who signed a document stating such. Drug
                          usage is a violation of a tenant’s lease. We determined action
                          was not taken by the Authority due to an oversight resulting

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                       from a change in the Building Manager position. The
                       President’s file contained documentation of some reported
                       income changes. However, all pay raises given by the Housing
                       Authority were not reported in the interim between annual
                       recertifications. The Tenant Association’s by-laws provide that
                       recognition shall be withdrawn from the Board members when
                       it has been proven that the by-laws, Code of Conduct, or
                       dwelling lease have been violated.


                       The Tenant Association Board said the Housing Authority and
Auditee Comments       the city-wide Tenant Board made arrangements for all tenant
                       elections and also verified eligibility. The Board also said they
                       realized their mistakes and will open a checking account and
                       keep proper records given proper guidance.


OIG Evaluation of      Although the Board members’ eligibility to serve was verified
                       prior to their election, the Board members acted contrary to
Auditee Comments       their by-laws, Code of Conduct, and dwelling lease while in
                       office. HUD regulations require Board members to meet the
                       requirements described in the by-laws and comply with their
                       leases. Since the Board members acted contrary to these
                       requirements, they are not eligible to continue to serve on the
                       Board.


Auditee Comments       Excerpts from the St. Louis Housing Authority’s comments on
                       our draft finding follow. Appendix B, page 21, contains the
                       complete text of the comments.

                       The Housing Authority expressed its concern about the
                       apparent irregularities in the Tenant Association’s conduct.
                       The Authority said it could withdraw recognition of the entire
                       current board, forcing the residents of the Paul Simon
                       Development to elect a new tenant board. The Authority is
                       currently in the process of developing Memorandums of
                       Agreement with each tenant board/association, requiring the
                       tenant groups to submit to the Authority detailed budgets and
                       documentation regarding expenditures. The Authority will also
                       require the tenant groups to publish periodic reports to their
                       respective resident communities regarding budgets and
                       expenditures.




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Finding


                        The Authority indicated that the by-laws for the Tenant Affairs
                        Board of St. Louis, Missouri provide that the resident manager
                        or management agent from each development serve as a non-
                        voting member for their respective subordinate local board.
                        The Authority said it should insist on enforcement of this
                        provision in the future. This will serve to dismantle the wall
                        which exists between the tenant associations and the Authority,
                        as the City Wide Board would serve as a vehicle for
                        management agents to work with the representatives from the
                        various tenant associations.

                        The Housing Authority believed our references to the Code of
                        Conduct were unclear in some instances. The Authority said
                        the draft finding inferred it was responsible for enforcement of
                        the Tenant Association’s Code of Conduct.


 OIG Evaluation of      The Housing Authority’s planned actions described in its’
                        response, when implemented, should help correct most of the
 Auditee Comments
                        problems we identified. However, the Authority needs to
                        replace the Paul Simon Board with individuals who meet
                        eligibility requirements and are trained to serve in the respective
                        positions. The Authority needs to perform monitoring to verify
                        that expenditures are appropriate and supported by the budget.
                        In addition, the Housing Authority should require the Tenant
                        Association to implement an accounting system and effective
                        controls that include the use of a checking account. Further,
                        we recommend the Housing Authority assess the feasibility to
                        recoup lost funds in a civil action.

                        We adjusted our finding to clarify our reference to the Code of
                        Conduct. We agree it is the Board members’ responsibility to
                        adhere to their Code of Conduct, including the conflict of
                        interest clause. However, we believe the written agreement
                        between the Housing Authority and the Tenant Association
                        should integrate all the significant requirements for Tenant
                        Associations, including the Association’s own policies and
                        procedures. It is the Housing Authority’s responsibility to
                        enforce the terms of the written agreement.




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                                                                             Finding




Recommendations      We recommend the Director, Troubled Agency Recovery
                     Center:

                     1A.      Takes appropriate administrative action against the
                              Association’s Board members.

                     1B.      Ensures the St. Louis Housing Authority takes steps to
                              replace the Board.

                     1C.      Ensures the Housing Authority executes a written
                              agreement with the Tenant Association that clearly
                              outlines the Association’s and its Board’s
                              responsibilities.

                     ID.      Ensures the Housing Authority requires the Tenant
                              Association to implement an accounting system with
                              effective controls. The controls should include the use
                              of a checking account and maintenance of sufficient
                              source documentation for all transactions.

                     1E.      Ensures the Housing Authority develops and
                              implements procedures to monitor the Tenant
                              Association.

                     1F.      Ensures the Housing Authority assesses the feasibility
                              to recoup lost funds in a civil action.




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Management Controls
In planning and performing our audit, we considered the management controls of the Paul Simon
Tenant Association in order to determine our auditing procedures, not to provide assurance on the
controls. Management controls include the plan of organization, methods and procedures adopted by
management to ensure that its goals are met. Management controls include the processes for planning,
organizing, directing, and controlling program operations. They include the systems for measuring,
reporting, and monitoring program performance.



                                      We determined the following management control was relevant
 Relevant Management
                                      to our audit objectives:
 Controls

                                      ·   Assuring effective financial management.

                                      We assessed the relevant control identified above.

                                      It is a significant weakness if management controls do not
                                      provide reasonable assurance that the process for planning,
                                      organizing, directing, and controlling program operations will
                                      meet an organization’s objectives.

                                      Based on our review, we believe the following item is a
 Significant Weaknesses               significant weakness:

                                      ·   The Tenant Association did not implement financial
                                          management controls (see Finding).




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Follow Up On Prior Audits
This is the first audit of the Paul Simon Tenant Association performed by the Office of Inspector
General.




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                                                                                     Appendix A

Schedule Of Questioned Costs


                                                            Type of Questioned costs
Issue                                               Ineligible 1/         Unsupported 2/


Funds unaccounted for                                                        $15,158.47




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.




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Auditee Comments




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                                                                                        Appendix C

Distribution
Deputy Secretary, SD (Room 10100)
Chief of Staff, S (Room 10000)
Special Assistant to the Deputy Secretary for Project Management, SD (Room 10100)
Acting Assistant Secretary for Administration, S (Room 10110)
Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120)
Senior Advisor to the Secretary, Office of Public Affairs, S (Room 10132)
Director of Scheduling and Advance, AL (Room 10158)
Counselor to the Secretary, S (Room 10234)
Deputy Chief of Staff, S (Room 10226)
Deputy Chief of Staff for Operations, S (Room 10226)
Deputy Chief of Staff for Programs and Policy, S (Room 10226)
Deputy Assistant Secretary for Public Affairs, W (Room 10222)
Special Assistant for Inter-Faith Community Outreach, S (Room 10222)
Executive Officer for Administrative Operations and Management, S (Room 10220)
General Counsel, C (Room 10214)
Director, Office of Federal Housing Enterprise Oversight, O
Assistant Secretary for Housing/Federal Housing Commissioner, H (Room 9100)
Office of Policy Development and Research, R (Room 8100)
Assistant Secretary for Community Planning and Development, D (Room 7100)
Government National Mortgage Association, T (Room 6100)
Assistant Secretary for Fair Housing and Equal Opportunity, E ( Room 5100)
Chief Procurement Officer, N (Room 3152)
Assistant Secretary for Public and Indian Housing, P (Room 4100)
Chief Information Officer, Q (Room 3152)
Director, Office of Departmental Operations and Coordination, I (Room 2124)
Chief Financial Officer, F (Room 2202)
Director, Enforcement Center, V (200 Portals Building)
Director, Real Estate Assessment Center, X (1280 Maryland Avenue, SW, Suite 800)
Director, Office of Multifamily Assistance Restructuring, Y (4000 Portals Building)
Secretary’s Representative, Great Plains, 7AS
Senior Community Builder, Iowa State Office
Senior Community Builder, Omaha Area Office
Senior Community Builder, St. Louis
Director, Office of Public Housing, 7APH
Section 8 Financial Management Center, PCFD
St. Louis Public Housing Program Center, Coordinator, 7EPH
Deputy Chief Financial Officer for Finance, FF (Room 2202)
Director, Office of Budget, FO (Room 3270)
Headquarters Audit Liaison Officer, HQC
Deputy Secretary, Special Assistant, SD (Room 10126)
Public and Indian Housing, PF (Room 5156)
Primary Field Audit Liaison Officer, 6AF
Acquisitions Librarian, Library, AS, (Room 8141)
Chairman, Committee on Governmental Affairs, 340 Dirksen Senate Office Building,

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   United States Senate, Washington, DC, 20510

Ranking Member, Committee on Governmental Affairs, 706 Hart Senate Office Building,
    United States Senate, Washington, DC 20510
Chairman, Committee on Government Reform, 2185 Rayburn Building, House of
    Representatives, Washington, DC 20515
Ranking Member, Committee on Government Reform, 2204 Rayburn Building,
    House of Representatives, Washington, DC 20515
Subcommittee on Oversight and Investigations, Room 212, O’Neil House Office Building,
    Washington, DC 20515
Director, Housing and Community Development Issue Area, United States General Accounting
    Office, 441 G Street, NW, Room 2474, Washington, DC 20548
Deputy Staff Director, Counsel, Subcommittee on Criminal Justice, Drug Policy & Human
    Resources, B373 Rayburn House Office Building, Washington, DC 20515
Chief, Housing Branch, Office of Management & Budget, 725 17th Street, NW, Room 9226,
    New Executive Office Building, Washington, DC 20503




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