oversight

Poughkeepsie Housing Authority, Low-Rent Housing Program, Poughkeepsie, New York

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-09-25.

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                 AUDIT REPORT




         POUGHKEEPSIE HOUSING AUTHORITY
           LOW-RENT HOUSING PROGRAM

              POUGHKEEPSIE, NEW YORK

                       00-NY-202-1005

                   SEPTEMBER 25, 2000



                      OFFICE OF AUDIT
                    NEW YORK/NEW JERSEY
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                                                                       Issue Date
                                                                               September 25, 2000
                                                                       Audit Case Number
                                                                               00-NY-202-1005




    TO:    Mirza Del Rosario, Director, Office of Public Housing, 2APH


    FROM: Alexander C. Malloy, District Inspector General for Audit, 2AGA

    SUBJECT:       Poughkeepsie Housing Authority
                   Low-Rent Housing Program
                   Poughkeepsie, New York

    We completed an audit of the Poughkeepsie Housing Authority, herein referred to as the Public
    Housing Authority (PHA), pertaining to its Federal Low-Rent Housing (LRH) Program. The audit
    followed a survey conducted on the PHA’s operations. The survey and audit work show that the
    PHA needs to improve operating controls to ensure that assets are safeguarded against waste and
    loss, and to increase assurance that its programs are operated in a way that achieves full compliance
    with the terms and conditions of the Annual Contribution Contract (ACC) and other applicable U.S.
    Department of Housing and Urban Development (HUD) regulations and requirements.

    Within 60 days, please provide us a status report on: (1) the 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 this
    audit.

    Should you or your staff have any questions, please contact me or William H. Rooney, Assistant
    District Inspector General for Audit, at (212) 264-8000, extension 3976.




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    Executive Summary
    We performed an audit of the Poughkeepsie Housing Authority, herein referred to as the Public
    Housing Authority (PHA), pertaining to its Federal Low-Rent Housing (LRH) Programs. The
    primary objectives of the audit were to evaluate the PHA’s internal controls for safeguarding cash
    and other assets, and to determine whether the PHA complied with the terms and conditions of the
    Annual Contributions Contract (ACC), as well as other applicable HUD regulations and
    requirements.



                                         The audit disclosed that the PHA is generally providing
     Results
                                         decent, safe and sanitary housing to its tenants. However,
                                         the PHA did not always comply with program requirements
                                         and regulations pertaining to various activities of its LRH
                                         program. The noncompliances were generally caused by
                                         inadequate controls, which led to the ineligible and
                                         unsupported use of funds, as discussed in the findings.

                                         The results of our audit are discussed in the findings of this
                                         report and are summarized below.

                                         1. Ineligible Payment Was Made From the PHA’s
                                            Operating Account

                                             The PHA paid a finance charge to its utility provider as
                                             a penalty for not having paid prior year billings on time.
                                             Federal requirements prohibit the payment of fines and
                                             penalties. The finance charge was paid as a condition
                                             for the utility company to continue to provide electricity
                                             and gas to the housing developments. As a result, the
                                             PHA charged ineligible costs in the amount of $15,000
                                             to its Low-Rent Housing program (See Appendix A).

                                         2. Comprehensive Grant Program Activity not Allocated
                                            to Participating Programs

                                             The PHA’s 1999 Comprehensive Grant Program (CGP)
                                             included costs for an administration building that were
                                             not allocated to the participating programs. CGP
                                             regulations require that costs benefiting other programs
                                             be allocated to those programs. The entire costs are
                                             intended to be included in the CGP because the PHA
                                             believes they represent eligible costs under the program.
                                             We advised PHA officials that when an activity will
                                             benefit programs other than public housing, the costs

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      Executive Summary


                             must be allocated between those programs. Therefore,
                             the cost attributed to the other programs, which was
                             $268,069, is being claimed as a cost efficiency (See
                             Appendix A).

                          3. Questionable Incentive Bonuses        Were    Paid    to
                             Administrative Employees.

                             During the years 1998 and 1999, the PHA paid
                             incentive bonuses to its administrative employees. The
                             bonuses were paid because they were provided for in
                             the Union Agreement applicable to administrative
                             employees. In our opinion, the bonuses may not
                             represent a necessary and reasonable use of funds for
                             program administration.     Accordingly, the amounts
                             charged to the Federal programs for the bonuses
                             totaling $6,314.99 are considered unsupported (See
                             Appendix A).

                          4. Unsupported Costs for Services Provided

                             The PHA made various payments for services provided
                             under three contracts that (1) were contrary to program
                             requirements, and (2) may not meet the necessary and
                             reasonable requirements. The questionable payments
                             occurred because procedures were not in place to ensure
                             that costs were necessary, reasonable and adequately
                             supported prior to payment. As a result, program funds
                             were expended for services that were not determined to
                             be reasonable; therefore, the amount paid totaling
                             $45,874.48 is considered unsupported (See Appendix
                             A).

                          5. Controls Over Legal Services and Costs Need to be
                             Strengthened

                             Contrary to HUD regulations and requirements, the
                             PHA:      (1) did not follow Federal procurement
                             regulations in awarding the legal services contract, and
                             (2) paid for legal services without adequate
                             documentation being provided as evidence that the
                             contracted services were rendered. The deficiencies are
                             attributed to the PHA’s general unfamiliarity with
                             applicable regulations and requirements. As a result,
                             assurance that related contract costs were proper and


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            reasonable has diminished and the PHA has incurred
            cost of $39,300 that are unsupported (See Appendix A).

         6. Ineligible and Unsupported Travel Costs

            The PHA does not have adequate controls over its
            travel activities to ensure that travel costs are necessary,
            reasonable and adequately supported as required. As a
            result, ineligible and unsupported travel costs of
            $449.83 and $14,774.46 respectively have been
            incurred (See Appendix A). The travel deficiencies are
            attributed to the PHA’s general unfamiliarity with
            procedural and documentation requirements.

         7. Discrepancies Exist Between the PHA’s Personnel and
            the Employees’ Union Agreements and Leave Records

            Contrary to its own policies, the PHA: (1) accrued
            vacations leave for employees that was not in
            accordance with the Personnel Policy; (2) paid
            employees bonuses; (3) granted additional leave to
            employees for charitable contributions; (4) did not
            evaluate job performance; and (5) maintained leave
            records that were not in accordance with the Personnel
            Policy and/or the Union Agreements.              These
            weaknesses can be attributed to the PHA’s general
            unfamiliarity with applicable requirements. As a result,
            the PHA could incur personnel costs that may not be
            considered necessary or reasonable.

         8. Need to Improve Administrative and Accounting
            Controls

            Our review disclosed various deficiencies involving
            administrative and accounting controls and procedures
            that have weakened the PHA’s system of internal
            control. The deficiencies occurred because procedures
            were not implemented to ensure that adequate
            administrative and accounting controls were executed
            to meet program requirements. As a result, the PHA
            does not have assurance that funds are properly
            safeguarded against waste and loss and that its housing
            programs are administered in accordance with Federal
            regulations and requirements.

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    Executive Summary




                        As part of each finding, we have recommended certain
     Recommendations    actions which we believe will correct the problems
                        discussed in the findings and strengthen the PHA’s
                        administration of its housing programs.

                        The results of the audit were discussed with PHA officials
     Exit Conference    during the course of the audit and at an exit conference held
                        on August 2, 2000. The exit conference was attended by:

                        PHA Officials

                        Roland Traudt, Executive Director

                        Office of Inspector General

                        Thomas Cosgrove, Senior Auditor
                        Mary Rose Michaud, Senior Auditor

                        The PHA generally agreed with the findings and
                        recommendations. The PHA’s comments are included at
                        the end of each finding.




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Table of Contents

Management Memorandum                                                      i



Executive Summary                                                        iii



Introduction                                                              1



Findings

1    Ineligible Payment Was Made From the PHA’s Operating
     Account                                                              3


2    Comprehensive Grant Program Activity Not Allocated to
     Participating Programs                                               5


3    Questionable Incentive Bonuses Were Paid to Administrative
     Employees                                                            7


4    Unsupported Costs for Services Provided                             11


5    Controls Over Legal Services and Costs Need to be
     Strengthen                                                          15


6    Ineligible and Unsupported Travel Costs                             19


7    Discrepancies Exist Between the PHA’s Personnel Policy
     and the Employees’ Union Agreements and Leave
     Records                                                             23


8    Need to Improve Administrative and Accounting

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       Controls                                                29



Management Controls                                            35



Appendices
    A Schedule of Ineligible and Unsupported Costs and
      Cost Efficiencies                                        37

    B Schedule of Ineligible and Unsupported Travel
      Expenses                                                 39


    C Distribution                                             41



Abbreviations

ACC              Annual Contributions Contract
CFR              Code of Federal Regulations
HUD              Department of Housing and Urban Development
LRH              Low-Rent Housing
OIG              Office of Inspector General
OMB              Office of Management and Budget
PHA              Poughkeepsie Housing Authority
RFP              Request for Proposal




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    Introduction
    The PHA is governed by a seven member Board of Commissioners. Five members are appointed
    by the Mayor and serve five year terms. The other two members are elected by the tenants and
    serve two year terms. The Board establishes policy and takes official action as required by
    Federal and State law. The Executive Director, who is responsible for managing the overall day-
    to day operations of the PHA, is Roland Traudt. The books and records are maintained at the
    administration office located at 21 Charles Street, Poughkeepsie, New York 12601.

    The PHA’s fiscal year is from April 1, through March 31. The PHA operates five developments
    containing 360 units. Also, the PHA administers 87 units of Section 8 housing along with a
    Comprehensive Grant Program and Drug Elimination Program. In addition, the PHA
    administers 240 units of State housing at two Section 8 housing along with a Comprehensive
    Grant Program and Drug Elimination Program. In addition, the PHA administers 240 units of
    State housing at two developments.



                                        The objectives of the audit were to evaluate internal
     Audit Objectives                   controls for safeguarding cash and other assets and to
                                        determine whether the PHA complied with the terms and
                                        conditions of the ACC and other applicable regulations and
                                        requirements.


                                        We evaluated controls and procedures over the payments
     Audit Scope and                    of bonuses, personnel matters, travel, procurement, and
     Methodology                        costs charged to the Comprehensive Grant and Drug
                                        Elimination programs. We also determined whether costs
                                        charged to the PHA’s housing programs were reasonable
                                        and eligible; and evaluated procedures and practices
                                        relating to general accounting and administrative controls.

                                        Audit procedures included an examination of records and
                                        files, interviews with PHA staff and visits to the housing
                                        developments. In addition, the PHA’s policies, procedures
                                        and practices for managing its operation were reviewed .
                                        Specific audit testing was based primarily on judgmentally
                                        or selected samples representative of the transactions in the
                                        areas reviewed.

                                        The audit covered the period from April 1, 1998 to
                                        September 30, 1999.       However, activity prior and
                                        subsequent to this period was reviewed, as we deemed
                                        necessary. The audit field work was conducted between
                                        November 1999 and July 2000.

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    Introduction



                     A copy of this report has been provided to the Executive
                     Director of the PHA. The audit was conducted in
                     accordance with generally accepted government auditing
                     standards.




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                                                                                            Finding 1


     Ineligible Payment Was Made From the PHA’s
                   Operating Account

    The PHA paid a finance charge to its utility provider as a penalty for not having paid prior year
    billings on time. Federal requirements prohibit the payment of fines and penalties. The finance
    charge was paid as a condition for the utility company to continue to provide electricity and gas
    to the housing developments. As a result, the PHA charged ineligible costs in the amount of
    $15,000 to its Low-Rent Housing program.



                                         Our review of disbursements disclosed that on June 9,
     History
     History ofofdelinquency
                   delinquency           1998, the PHA paid a $15,000 finance charge to its utility
                                         company, Central Hudson Gas and Electric. PHA officials
                                         revealed that the PHA had been delinquent in paying its
                                         utility bills for as far back as the year 1990. During the
                                         period of delinquency, the utility company had threatened
                                         to discontinue electric and gas service to the units. Early in
                                         1997, negotiations were held with Central Hudson for the
                                         PHA to pay all charges in arrears and also keep current on
                                         all future billings. The PHA honored its commitment and
                                         in March 1998 requested that the utility company forgive
                                         the remaining finance charges owed of $50,000. In May
                                         1998, Central Hudson advised the PHA that it would waive
                                         other finance charges of $7,678.92 that had already accrued
                                         and would suspend $20,000 of the $50,000 remaining.
                                         Accordingly, the PHA was requested to pay the balance of
                                         $30,000. On June 9, 1998, the PHA wrote two checks for
                                         $15,000 each, one from the Federal Program Operating
                                         Account and one from the State Program. The payment
                                         from the Federal Program is not an allowable cost and is
                                         therefore ineligible.

                                         Attachment B of Office of Management and Budget (OMB)
     Criteria                            Circular A-87 provides that fines, penalties, damages, and
                                         other settlements resulting from violations of, or failure of
                                         the governmental unit to comply with Federal, State, local,
                                         or Indian tribal laws and regulations are unallowable. In
                                         addition, Section 11D, Part A of the Consolidated Annual
                                         Contributions Contract (ACC) provides that the Housing


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    Finding 1


                        Authority shall not incur any operating expenditures except
                        pursuant to an approved operation budget.

                        We believe that the finance charges, which resulted from
                        the PHA’s failure to pay its utility bills in a timely manner,
                        constitute a penalty and are, therefore, ineligible.




     Auditee Comments   The new PHA administration achieved a monumental
                        milestone in paying off in excess of $800,000.00 dollars due
                        to the local utility company. Finance charges due to the
                        utility company were legitimate because we were severely
                        late on many payments. The Poughkeepsie Housing
                        Authority has implemented procedures that will ensure that
                        all legitimate billings are properly processed and paid in a
                        timely manner.




     Recommendations    We recommend that you require the PHA to:

                        1A.      Reimburse the ineligible costs of $15,000 from non-
                                 Federal funds.

                        1B.      Implement procedures that will ensure that all
                                 legitimate billings are properly processed and paid.




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                                                                                             Finding 2


         Comprehensive Grant Program Activity Not
            Allocated to Participating Programs
    The PHA’s 1999 Comprehensive Grant Program (CGP) included costs for an administration
    building that were not allocated to the participating programs. CGP regulations require that costs
    benefiting other programs be allocated to those programs. The entire costs are intended to be
    included in the CGP because the PHA believes they represent eligible costs under the program. We
    advised PHA officials that when an activity will benefit programs other than public housing, the
    costs must be allocated among those programs. Therefore, the cost attributed to the other programs,
    which was $268,069, is being claimed as a cost efficiency (See Appendix A).



                                          Our review of the PHAs 1999 Comprehensive Grant Annual
     New administration
                                          Statement and Performance and Evaluation Report showed
     building costs improperly
                                          that $520,977 has been budgeted to construct a new
     allocated
                                          administration and maintenance building in the Spring of
                                          2000. An additional $37,500 was budgeted for architectural
                                          services.     According to available information and
                                          documentation, the building is to be designed and
                                          constructed within the amount allocated of $558,477.

                                          HUD advised the PHA that if the new building is to serve
                                          clients other than the public housing residents, a budget
                                          would be necessary providing a proration of costs between
                                          the funding agencies. In a letter to HUD on December 13,
                                          1999, the PHA advised HUD that the building would be used
                                          by public housing residents only. However, at the time of
                                          our review the PHA was administering a State housing and a
                                          Section 8 program. In addition to its Federal Low-Rent
                                          Housing program, those programs would also benefit from
                                          the construction of the administration building.

                                          Under the CGP, Section 968.112(n)(3) of the CFRs provides
                                          that where the physical or management improvements will
     Criteria
                                          benefit programs other than Public Housing, such as Section
                                          8 and the State program, eligible costs are limited to the
                                          amount directly attributable to the Federal Low-Rent
                                          Housing program.

                                          Based on the PHA’s current method of allocating costs
                                          among programs, CGP funds could be used to pay 52
                                          percent of the $558,477 budgeted for the new administration


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    Finding 2


                        building. Therefore, the remaining 48 percent, or $268,069,
                        is being shown as a cost efficiency (See Appendix A).




                        The Poughkeepsie Housing Authority is constructing the new
     Auditee Comments   administration building because we are in the process of
                        selling our New York State assisted units to a private
                        developer. Currently, our administrative office is located at
                        one of our New York State complexes. This action forces us
                        to relocate to continue to service our Federal program. The
                        PHA understands that all costs will have to be allocated
                        proportionately among the remaining Federal Programs.




     Recommendations    We recommend that you require the PHA to:

                        2A      Adopt controls that will ensure that when an activity
                                identified for CGP funding benefits programs other
                                than public housing, the costs are properly allocated
                                among all of the benefiting programs.




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                                                                                     Finding 3


         Questionable Incentive Bonuses Were Paid to
                  Administrative Employees
    During the years 1998 and 1999, the PHA paid incentive bonuses to its administrative
    employees. The bonuses were paid because they were provided for in the Union Agreement
    applicable to administrative employees. In our opinion, the bonuses may not represent a
    necessary and reasonable use of funds for program administration. Accordingly, the amounts
    charged to the Federal programs for the bonuses totaling $6,314.99 are considered to be
    unsupported.



                                      The PHA’s bonus incentive program was established
     PHA Bonus Incentive              pursuant to the Union Agreement for administrative
     Program                          employees, which was executed on August 15, 1997. The
                                      program is a team effort based on all members within the
                                      bargaining units. The ratings are based on the average of
                                      the individual ratings as follows:

                                      PHMAP         Number of
                                      Rating        IPA Audit Incentive Bonus Based on
                                      Score         Findings  Average of Individual Ratings

                                      60            8 - 10        $150 per employee
                                      75            6 or less     $300 per employee
                                      85            Less than 3   $500 per employee

                                      Attachment B of the Office of Management and Budget
                                      (OMB) Circular A-87 provides the standards for the
     Criteria                         determination of allowable and unallowable costs. Among
                                      other documents, Attachment B, Paragraph C of OMB
                                      Circular A-87 states that costs must be necessary and
                                      reasonable for proper and efficient performance and
                                      administration of Federal awards. In addition, Section 2,
                                      Part A of the ACC provides that operating expenditures
                                      shall be necessary for the operation of the project.

                                      Our review of the bonus incentive program showed the
     Deficiencies found
                                      following:




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    Finding 3


                     •   The bonus incentive program is inconsistent with the
                         PHA’s personnel policy since the personnel policy does
                         not provide for the payment of incentive bonuses.

                     •   Employee performance evaluations are not prepared
                         (See Finding 7 ). Hence, there is no documentation to
                         justify that each employee performed at a level worthy
                         of an incentive bonus.

                     •   The bonus incentive program is only applicable to
                         administrative employees because the PHA’s
                         administrative and maintenance employees have
                         separate Union representation and agreements, and the
                         provision for a bonus incentive program is only
                         included in the administrative employees Union
                         agreement. Since the Public Housing Management
                         Assessment Program (PHMAP) rating includes the
                         maintenance operation and since the Independent Public
                         Accountant (IPA) audit would cover maintenance
                         activities, it does not seem appropriate that incentive
                         payments only be made to administrative employees.

                     •   Under the incentive program, administrative employees
                         become eligible for additional compensation with a
                         PHMAP score of 60 and as many as 8 to 10 audit
                         findings. A score of 60 is the minimum to be
                         designated as a standard performer under PHMAP. In
                         our opinion, employees should not receive additional
                         compensation for mediocre performance.

                     The above deficiencies illustrate that the PHA has not
                     required that employee performance evaluations be
                     prepared; but has not ensured that the procedures and
                     requirements affecting administrative and maintenance
                     employees are consistent and equally applied.      Unless
                     corrective action is implemented, deficiencies similar to
                     those shown above will continue. Thus, the $6.314.99 paid
                     to the administrative employees during 1998 and 1999 is
                     unsupported.




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                                                                      Finding 3


                        As per the CWA 1120 collective bargaining agreement,
     Auditee Comments   employees were given a performance bonus based on an
                        incentive clause in their union contract. The level of bonus
                        was based on PHAMP scores received from HUD and the
                        number of audit findings documented in the Poughkeepsie
                        Housing Authority’s annual independent audit. The
                        Poughkeepsie Housing Authority is currently looking into
                        removing this incentive form the union agreement as we
                        negotiate a new contract with the employees.




     Recommendations    We recommend that you require the PHA to:

                        3A.    Adopt controls that will ensure that the personnel
                               policy is consistent with the provisions contained in
                               the employee union agreements.

                        3B.    Implement procedures that will only reward
                               exceptional   performance    demonstrated    by
                               individual employees based on their performance
                               evaluation.

                        3C.    Provide you with documentation on the payments of
                               the 1998 and 1999 incentive bonuses so that an
                               eligibility determination can be made.




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                                                                                         Finding 4


          Unsupported Costs for Services Provided
    The PHA made various payments for services provided under three contracts that (1) were
    contrary to program requirements, and (2) may not meet the necessary and reasonable
    requirements. The questionable payments occurred because procedures were not in place to
    ensure that costs were necessary, reasonable and adequately supported prior to payment. As a
    result, program funds were expended for services that were not determined to be reasonable;
    therefore, the amount paid totaling $45,874.48 is considered unsupported.




                                       We reviewed two instances where the PHA procured
                                       cleaning services with resident owned companies under it’s
                                       Comprehensive Grant Program (CGP). In addition, we
                                       reviewed a contract for landscaping services. The
                                       deficiencies pertaining to the three contracts are discussed
                                       below.

                                       Office Cleaning

    Discrepancies associated           The contract provides for cleaning the PHA’s
    with cleaning costs                administrative office in accordance with the terms of the
                                       proposal provided by the contractor. However, we found
                                       that the amounts billed were not in accordance with either
                                       the proposal or the contract. More specifically, the
                                       proposal provides for a payment of $200 a week based on
                                       two office cleanings per week. However, the contract
                                       wording provides for biweekly cleaning and a biweekly
                                       payment of $200. Our review of the contractors billings
                                       showed that they did not agree with either the proposal or
                                       the contract. For example, the contractor’s billing for the
                                       period January 23, 1999 through February 15, 1999 shows
                                       that the office was cleaned four times at a cost of $400.
                                       However, the dates of the cleanings as shown on the
                                       billings cover a period of four weeks and two days which is
                                       neither in accordance with the provisions of the proposal
                                       nor the contract. Since none of the amounts billed were in
                                       accordance with either the proposal or the contract, the
                                       entire amount billed of $4,600 is considered unsupported.

                                       Apartment Cleaning


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    Finding 4


                            The contract provides for the cleaning of vacant apartments
                            based on the quotation received from the contractor. The
                            rate charged for cleaning each apartment is based on
                            bedroom size. However, we found that the contractor
                            routinely charged for items that were not provided for in
                            the contract. We found instances where the contractor
                            billed extra for cleaning apartments found to have “extra
                            dirt and grease”. Since there were no provisions in the
                            contract for these charges, the amount paid during the audit
                            period of $2,425 is considered unsupported.

                            Landscaping Contract
                            During the audit period, the PHA made payments of
    Landscaping costs may   $11,149.62 from its CGP for services provided under a
    not be eligible         landscaping contract. Our review of the contract showed
                            that the services represent items of routine maintenance of
                            the PHA, such as lawn mowing, debris removal, and tree
                            and shrubbery pruning. Title 24, Part 968.112 (d)(2) of the
                            Federal regulations provides that routine maintenance is not
                            an eligible cost for inclusion in the CGP. Furthermore,
                            HUD stipulates in the Comprehensive Grant Program
                            Guidebook that routine maintenance is not an eligible use
                            of funds. Since the PHA was unable to demonstrate that
                            the services provided represented other than routine
                            maintenance, the costs incurred are shown as unsupported.

                            In addition, other payments of $27,699.86 were made from
                            operating funds for groundskeeping services. However,
                            during the period, the PHA employed three individuals as
                            Groundskeepers. An examination of the job description
                            for Groundskeeper showed that the duties              include
                            performing routine lawn maintenance for the PHA. Since
                            the scope of services provided for in the landscaping
                            contract closely resemble or duplicate the duties of the three
                            PHA employees, the cost incurred may not represent
                            necessary or reasonable operating expenditures.

                            Section 4, Part A of the ACC provides that the PHA shall
    Criteria
                            operate each project in a manner that promotes
                            serviceability, economy, efficiency and stability of the
                            project. In addition, Section 2, Part A of the ACC provides
                            that operating expenditures shall be necessary for the
                            operation of the project.


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                                                                         Finding 4


                        Since payments were made for cleaning and landscaping
                        costs that were contrary to program requirements and may
                        not represent necessary or reasonable expenditures, the
                        amounts paid, totaling $45,874.48, are considered to be
                        unsupported.



                        Additional work above and beyond the scope of the contracts
     Auditee Comments   sometimes arises. It is more cost effective to have the
                        existing contractor take care of extraordinary work. The
                        PHA employs three groundskeepers. However these three
                        employees cannot be stretched to perform landscaping
                        services at all seven sites on top of their normal workload.
                        Traditionally we would hire summer temporary help, but
                        wanted to try a different approach considering the overall
                        cost savings and job quality. The PHA will establish
                        controls to ensure that all activities funded are necessary and
                        eligible prior to their inclusion in any program.




     Recommendations    We recommend that you require the PHA to:


                        4A.    Provide documentation on the unsupported costs so
                               that an eligibility determination can be made.

                        4B.    Reimburse from non-Federal funds, the amount of
                               any unsupported costs determined to be ineligible.

                        4C.    Adopt controls to ensure that costs are necessary
                               and reasonable and in compliance with the ACC.


                        4D.    Establish controls to ensure that all activities funded
                               by the Comprehensive Grant Program are eligible
                               prior to their inclusion in the program.




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         Controls Over Legal Services and Costs Need
                     to be Strengthened
    Contrary to HUD regulations and requirements, the PHA (1) did not follow Federal procurement
    regulations in awarding the legal services contract, and (2) paid for legal services without
    adequate documentation being provided as evidence that the contracted services were rendered.
    The deficiencies are attributed to the PHA’s general unfamiliarity with applicable regulations and
    requirements. As a result, assurance that the related contract costs were proper and reasonable
    has diminished and the PHA has incurred costs of $39,300 that are unsupported.



                                         A review of the PHA’s process for awarding the contract
     Improper method for
                                         for legal services showed that it bypassed the Federal
     awarding legal services
                                         procurement regulations. Rather than prepare Request For
     contract
                                         Proposals (RFPs) for the services and solicit responses in
                                         order to achieve open and free competition, the PHA
                                         entered into a contract with the City’s Corporation Counsel.
                                         The PHA did not follow the procurement regulations in
                                         awarding the contract because they believed that by
                                         utilizing the City Corporation Counsel it would be exempt
                                         from following applicable procurement requirements.
                                         Accordingly, the PHA failed to promote full and open
                                         competition when conducting the transaction for the
                                         services and has inadequate assurance that either the costs
                                         or the services represent those that could be best attained.

                                         Since the services involved represent legal services, the
     Criteria                            procurement requirements pertaining to competitive
                                         proposals would apply. Regarding competitive proposals,
                                         Section 85.36 (d)(3) of the CFRs stipulates that: The
                                         technique of competitive proposals is conducted with more
                                         than one source submitting an offer, and either a fixed price
                                         or cost reimbursement type contract is awarded.

                                                 RFPs will be solicited from an adequate number of
                                                 qualified sources. Grantees and subgrantees will
                                                 have a method for conducting technical evaluations
                                                 of the proposals received and for selecting
                                                 awardees.




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                                 Awards will be made to the responsible firm whose
                                 proposal is most advantageous to the program, with
                                 price and other factors considered.


                                 Section 85.36 (c)(3) of the CFRs provides that
                                 procedures for procurement transactions incorporate
                                 a clear and accurate description of the technical
                                 requirements for the material, product, or service to
                                 be procured. The intent of the regulation is to
                                 promote full and open competition when conducting
                                 procurement transactions.

                          Certain deficiencies were noted in connection with the
       Documentation      invoice submitted for legal services. The invoice did not
       deficiencies       identify what services were provided. The contract for
                          legal services identifies seven types of services to be
                          provided; yet the invoice submitted for payment merely
                          states: “Legal Services”. Moreover, the contract provides
                          for payments to be made monthly, however, only one
                          invoice was submitted, representing legal services rendered
                          for the entire year.

                          Chapter II of the Public and Indian Housing Low-Rent
                          Technical Accounting Guide, 7510.1, stipulates that the
                          PHA must maintain source documentation and files that
                          support the financial transactions recorded in the books of
                          account, and that provide an adequate audit trail. In
                          addition, Section 2, Part A of the ACC provides that
                          operating expenditures shall mean all costs incurred by the
                          PHA for administration, maintenance, and other costs and
                          charges that are necessary for the operation of the project.

                          Since payment was made for legal services costs without
                          the PHA following the Federal procurement regulations and
                          since the payment contained documentation deficiencies,
                          the cost incurred may not represent necessary or reasonable
                          operating expenditures. Therefore, the amount paid for
                          calendar year 1999, in the amount of $39,300 is considered
                          unsupported.



                          The Poughkeepsie Housing Authority Board of
       Auditee Comments   Commissioners unanimously voted to enter into a contract

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                         with the City of Poughkeepsie Corporation Council for
                         legal services to be provided to the Authority. Based on
                         Section 32, paragraph 1, of New York State Public Housing
                         Law, “an authority may call upon the corporation counsel or
                         chief law officer of the municipality for such legal services as
                         it may require and it shall reimburse the municipality for the
                         cost of such services”. The PHA has received increased
                         coverage in legal representation at a rate significantly lower
                         than previously paid in the past.



                         The auditee comments are not responsive to the basis of the
     OIG Evaluation of   finding that shows noncompliance with Section 85.36 (d)(3)
     Auditee Comments    of the CFRs.




     Recommendations     We recommend that you require the PHA to:

                         5A     Adopt necessary controls to ensure compliance with
                                Federal procurement regulations.

                         5B.    Establish procedures that will ensure that adequate
                                documentation for services rendered is obtained
                                prior to payment.

                         5C.    Provide justification for the unsupported costs so
                                that an eligibility determination can be made.

                         5D.    Reimburse, from non-Federal funds, the amount of
                                any unsupported costs determined to be ineligible.




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                                                                                              Finding 6


            Ineligible and Unsupported Travel Costs
    The PHA does not have adequate control over its travel activities to ensure that travel costs are
    necessary, reasonable and adequately supported as required. As a result, ineligible and unsupported
    travel costs of $449.83 and $14,774.46 respectively have been incurred. The travel deficiencies are
    attributed to the PHA’s general unfamiliarity with procedural and documentation requirements.



                                          We reviewed travel costs associated with the PHA’s
                                          attendance at two national housing conferences and various
                                          other costs that were selected at random during the audit
                                          period. Deficiencies were found pertaining to all costs
                                          reviewed. The deficiencies involve both ineligible and
                                          unsupported costs.

                                          The types of ineligible and unsupported travel costs include:
     Ineligible and
     unsupported Travel costs
                                          Ineligible travel costs represent meal costs that were paid in
                                          connection with training held in the City of Poughkeepsie,
                                          and the costs for car rentals the day preceding the actual
                                          travel.

                                          Unsupported costs include payments for costs incurred
                                          without adequate documentation; costs for various personnel
                                          attending the same conference; payments for costs where
                                          departure and arrival times were not documented; costs
                                          incurred for the Saturday preceding a course that started on
                                          Monday, and reimbursement for mileage that was not
                                          adequately supported.

                                          The ineligible and unsupported costs are further described in
                                          Appendix B of this report.

                                          Part A, Section 2 of the ACC defines operating expenditures
     Criteria
                                          as those necessary for the operation of the project. In
                                          addition, Chapter II of the Public and Indian Housing Low-
                                          Rent Technical Accounting Guide 7510.1 stipulates that the
                                          PHA must maintain source documents and files that support
                                          the financial transactions recorded in the books of account,
                                          and that provide an adequate audit trail.



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                                 A review of the PHA’s travel policy showed that several
       Travel policy deficient
                                 aspects of the policy are deficient. For example, the policy
                                 provides for actual subsistence expense not to exceed $55 per
                                 day or fraction thereof while in travel status. The policy
                                 further provides that reimbursement is to be proportional to
                                 travel time spent. Each meal time spent traveling may be
                                 reimbursed as follows:

                                    Breakfast 8:00 a.m. to 11:30 a.m. - $15
                                    Lunch     11:30 a.m. to 3:00 p.m. - $15
                                    Dinner    3:00 p.m. to midnight - $25

                                 We found that even though the policy stipulates actual
                                 subsistence expense not to exceed $55 per day, the $55 is
                                 being paid to travelers in the form of per diem. Hence, the
                                 travel policy needs to be amended to clarify whether meal
                                 costs are to be reimbursed on an actual subsistence or per
                                 diem basis.

                                 Moreover, as currently written, it is possible that a traveler
                                 could claim the entire $55 of meal costs while only being in a
                                 travel status for as little as four hours (11:15 a.m. to 3:15
                                 p.m.). If its is the PHA’s intention to allow travelers per
                                 diem, the per diem amount should be proportionate to an
                                 entire day based on six hour intervals as follows:

                                    12:01 a.m. to 6:00 a.m.    -       $13.75
                                     6:01 a.m. to 12 noon      -        13.75
                                    12:01 p.m. to 6:00 p.m.    -        13.75
                                     6:01 p.m. to midnight     -        13.75

                                 Finally, regardless of whether an actual subsistence or per
                                 diem form of reimbursement is adopted, the PHA travel
                                 policy should be amended to require travelers to show
                                 departure and arrival times for all travel.




       Auditee Comments          The Poughkeepsie Housing Authority will research and
                                 amend its travel policy to stipulate that travel costs will be
                                 reimbursed on a per diem basis. The amended policy will
                                 require travelers to document departure and arrival times.




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     Recommendations   We recommend that you require the PHA to:

                       6A.    Reimburse, from non-Federal funds, the amount of
                              the ineligible costs.

                       6B.    Provide additional documentation and justification
                              for the unsupported costs so that an eligibility
                              determination can be made.

                       6C.    Reimburse from non-Federal funds, the amount of
                              any unsupported costs determined to be ineligible.

                       6D.    Amend its travel policy to stipulate whether travel
                              costs will be reimbursed on a per diem or actual cost
                              basis. The amendment should also require travelers
                              to show departure and arrival times.




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                                                                                           Finding 7


           Discrepancies Exist Between the PHA’s
         Personnel Policy and the Employees’ Union
               Agreements and Leave Records
    Contrary to its own policies, the PHA: (l) accrued vacation leave for employees that was not in
    accordance with the Personnel Policy; (2) paid employees bonuses; (3) granted additional leave
    to employees for charitable contributions; (4) did not evaluate job performance; and (5)
    maintained leave records that were not in accordance with the Personnel Polity and/or the Union
    Agreements. These weaknesses can be attributed to the PHA’s general unfamiliarity with
    applicable requirements. As a result, the PHA could incur personnel costs that may not be
    considered necessary or reasonable. These matters are further discussed in the paragraphs below.



                                        The Personnel Policy applies to all PHA employees
                                        whereas separate Union Agreements have been negotiated
                                        for the administrative and maintenance employees.
                                        However, in some instances the Union Agreements contain
                                        provisions that are different from those contained in the
                                        Personnel Policy as follows:

                                        Accumulation of Vacation Time per Personnel Policy

                                        Length of Service             Vacation Time Earned
     Types of personnel
     discrepancies
                                        1st day through 2 years              10 days
                                        3 years through 5 years              15 days
                                        6 years through 10 years             18 days
                                        11 years through 15 years            21 days
                                        16 plus years                        24 days

                                        Union Agreement for Administration Employees

                                        1st day through 1 year               .4165 days per month
                                        1 year through 5 years               10 days
                                        6 years through 10 years             15 days
                                        11 years through 15 years            20 days
                                        after 15 years                       25 days




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                     Union Agreement for Maintenance Employees

                     after 1 year                        10 days
                     after 5 years                       15 days
                     after 14 years                      20 days
                     after 18 years                      25 days

                     Payment of Bonuses

                     The Personnel Policy contains no provision for the payment
                     of bonuses whereas only the Union Agreement for
                     administrative employees contains an incentive payment
                     provision (see Finding 3) . Similarly, the Personnel Policy
                     provides that only full-time employees are eligible for
                     health insurance coverage whereas both Union Agreements
                     provide for health insurance for all employees.

                     Additional Leave Granted for Charitable Contributions

                     The PHA provides additional leave to both administrative
                     and maintenance employees for charitable contributions.
                     An employee who continues to contribute the same amount
                     to the United Way Campaign as they had in the previous
                     year receives an additional one and one-half days of leave.
                     However, an employee who increases their contribution
                     receives an additional two days of leave. On the contrary,
                     an employee who does not contribute to the campaign
                     receives no additional leave. Neither the Personnel Policy
                     nor the Union Agreements contain provisions for additional
                     leave based on employee charitable contributions. The only
                     support the PHA could provide was a letter, on the PHA
                     letterhead, from the Campaign Manager for United Way
                     which granted the additional leave. In this regard, we
                     reminded the PHA that the Campaign Manager for the
                     United Way does not have the authority to grant additional
                     leave to PHA employees. We also believe that the amount
                     that employees contribute to charitable organizations is a
                     personal matter and the PHA should neither reward nor
                     penalize employees based on their level of contributions.
                     Thus, the practice should be discontinued.

                     Job Performance not Evaluated

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                                         Contrary to the provisions of the Personnel Policy, the PHA
                                         did not conduct employee performance evaluations.
                                         Section 113.4 of the Personnel Policy provides that the
                                         PHA shall conduct reviews and evaluations of the
                                         performance of each employee on an annual basis.
                                         Officials advised that the PHA has not been conducting any
                                         of the required performances evaluations. We reminded the
                                         PHA that the failure to conduct performance evaluations
                                         precludes a written determination from being made as to
                                         whether an employee is performing satisfactorily and in
                                         accordance with his/her job position description

                                         Leave Records not Maintained in Accordance With
                                         Personnel Policy and/or Union Agreements

                                         The leave records examined for eight employee showed
                                         that they were not maintained in accordance with the
                                         provisions of the Personnel Policy and/or the Union
                                         Agreements.    The records examined and instances of
                                         noncompliance are as follows:


    TITLE                                  NON-COMPLIANCES
    Groundskeeper                          • Employee credited with extra personal time for
                                             charitable contributions.
                                           • Vacation time carried over from previous year without
                                             approval of Executive Director as per Article VIII of
                                             the Union contract.
                                           • Employee took 8 days vacation in August 1999; but
                                             was only charged 6 days.
    Tenant Relations Assistant             • Employee credited with extra personal time for
                                             charitable contributions.
                                           • Employee credited with 5 weeks vacation before
                                             completing 15 years as required by Union Contract.
    Maintenance Mechanic                   • Employee was advanced 12 hours personal leave.
                                             Neither the Personnel Policy nor the Union Contract
                                             provides for advancing leave to employees.
                                           • Employee credited with 3 weeks vacation before
                                             completing 5 years as required by the Union Contract.
    Building and Grounds Administrator     • Employee credited with 20 hours vacation leave the
                                             week following employment without explanation.
    Receptionist/Typist                    • Employee was credited twice in the same year with
                                             extra personal time for charitable contributions.
                                           • Employee charged with 3.95 hours of sick leave


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                                            during March 1999 without the leave record indicating
                                            the date of the leave.

      Modernization Coordinator       •      Employee credited with extra personal time for
                                             charitable contributions.
                                      •      Personal leave was carried over from 1998 to 1999
                                             contrary to the Personal Policy and the Union
                                             Agreement.
      Senior Maintenance Mechanic     •     Vacation time carried over from previous year without
                                            approval of Executive Director as per Article VIII of
                                            the Union Contract.
      Groundskeeper                   •     Vacation time carried over from previous year without
                                            approval of Executive Director as per Article VIII of
                                            the Union Contract.

                                    We believe that greater emphasis is needed by the PHA
                                    over its personnel matters. The emphasis should assure that
                                    vacation leave and bonus/incentive payments are in
                                    accordance with adopted policies; that employees not be
                                    granted additional leave for charitable contributions; that
                                    employee job performance is evaluated as required, and that
                                    leave records are maintained in accordance with the
                                    adopted policies and agreements. Unless an effort is made
                                    to enforce the established requirements, deficiencies similar
                                    to those already described will continue and the PHA could
                                    incur personnel costs that may not be considered necessary
                                    or reasonable.



                                    The Poughkeepsie Housing Authority will implement
       Auditee Comments             controls and establish procedures that ensure vacation time is
                                    in accordance with Personnel Policies, show consistency
                                    between union agreements and the Personnel Policy,
                                    discontinue charitable contribution leave incentives, perform
                                    annual performance evaluations, assure that leave records are
                                    maintained properly.




       Recommendations              We recommend that you require the PHA to:

                                    7A.      Implement controls that will ensure that the vacation
                                             time accrued for employees is in accordance with the
                                             Personnel Policy.
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         7B.   Establish procedures that will assure that the
               provisions contained in the negotiated Union
               Agreements are consistent with those contained in
               the Personnel Policy.

         7C.   Discontinue the practice of granting additional leave
               to employees based on their level of charitable
               contributions.

         7D.   Institute procedures that will ensure that annual
               performance evaluations are conducted for all
               employees.

         7E.   Implement controls that will assure that leave records
               are maintained in accordance with provisions of the
               Personnel Policy and the Union Agreements.




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                                                                                           Finding 8


               Need to Improve Administrative and
                      Accounting Controls
    Our review showed various deficiencies involving administrative and accounting controls and
    procedures that have weakened the PHA’s system of internal control. The deficiencies occurred
    because procedures were not implemented to ensure that adequate administrative and accounting
    controls were executed to meet program requirements. As a result, the PHA does not have
    adequate assurance that funds are properly safeguarded against waste and loss and that its
    housing programs are administered in accordance with Federal regulations and requirements.



                                       The following items should not be considered all inclusive;
     Administrative and
                                       rather, they represent only those deficiencies that were
     accounting control
                                       identified as a result of our review.
     deficiencies
                                       a.      Sales tax was paid on some of the vouchers
                                               reviewed even though the PHA is a tax-exempt
                                               organization. An example of a voucher on which
                                               sales tax was paid is:

                                                Voucher                   Amount of
                                                No.         Date          Sales Tax Paid
                                                6910        11/12/99      $l0.19

                                       b.      Various instances were noted when the PHA failed
                                               to make prompt payment for the items or services
                                               purchased. Instances were found where payment
                                               was made over 30 days after the billing date. For
                                               example:

                                                Voucher     Billing
                                                No.         Date          Payment Date
                                                4860        4/8/98        6/12/98

                                               Other instances were noted where cash discounts
                                               could have been realized had the payments been
                                               made on a timely basis such as:

                                                                       Discount Lost by
                                        Voucher No.    Date            Untimely Payment
                                        5605           12/11/98        $26.95


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                     In still other situations, cash discounts were taken but were
                     not earned due to late payment. An example is:

                                                        Discount Taken
                      Voucher No.          Date         But Not Earned
                      5975                 3/12/99      $54.93

                     Finally, one was noted where a penalty was assessed for
                     late payment. The particulars are:

                                                     Penalty for
                      Voucher No.    Date            Late Payment
                      5617           12/11/98        $70.80


                     c.      An instance of a duplicate payment was noted that
                             has not been detected by the PHA. Voucher No.
                             4679, dated April 24, 1998, included two payments
                             in the amount of $12.65 for invoice No. 004150.

                     d.      Various types of deficiencies associated with
                             purchasing and the payment for goods and services
                             were found. They include:

                             1. In some instances, there was no purchase order.

                             2. Some purchase orders were prepared after the
                                date on the invoice.

                             3. Some payment vouchers did not contain an
                                adequate description or explanation of the items
                                purchased.

                             4. Some payment vouchers did not show who
                                requested or authorized the purchase or who
                                approved the payment.

                             5. In some cases, the person to whom the payment
                                was made also requested and approved the
                                payment and signed the check.

                     e.      Various checks were found to be signed by the
                             Executive Director and the Director of Finance
                             without the existence of an emergency. The lack of

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              a Commissioner’s signature on checks is contrary to
              the PHA’s check signing authorization policy.

         f.   Several instances were noted where checks were
              voided but the corresponding payment vouchers
              were not voided. Examples include:

              Voucher No.           Date           Amount
              5267                  9/11/98        $275.00
              5467                  10/30/98        460.72
              5535                  11/20/98         75.00

         g.   The tenant recertification list for 1999 showed that
              25 of the 360 units had not been recertified. The
              overdue recertifications ranged from one to five
              months.,

         h.   Contrary to the PHA’s Admission and Continued
              Occupancy policy, an annual unit inspection was
              not performed for four or 14 files reviewed.

         i.   The Modernization Coordinator signed several
              documents as the PHA’s Contracting Officer
              whereas the Procurement Policy identifies the
              Executive Director as the Contracting Officer.

         j.   Various bid documents pertaining to responses to
              Requests for Proposals (RFPs) were not time
              stamped as required by the PHA’s Procurement
              Policy.

         k.   Many instances were noted where Section 8 training
              costs were charged to the Comprehensive Grant
              Program contrary to Section 968. 112 (n)(3) of the
              Federal regulations.

         l.   Several deficiencies were found pertaining to Board
              Meetings minutes. They include:

              1. The Commissioner who signed the minutes as
                 true and correct for board Meetings held on
                 April 25, 1998 and April 14, 1999, was absent
                 from the meetings.


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                                 2. For a Board Meeting held on December 9, 1998,
                                    a Commissioner signed the minutes on behalf of
                                    another Commissioner as true and correct but
                                    the Commissioner who signed was absent from
                                    the meetings.

                                 3. The minutes of meetings held on May 26, 1999,
                                    and June 9, 1999, were unanimously accepted
                                    by the Board on July 14, 1999, even though the
                                    minutes were not signed by either the Executive
                                    Director or the Secretary of the Board of
                                    Commissioners.

                          m. The PHA’s procurement policy provides that for small
                             purchases in excess of $1,000 but not exceeding
                             $10,000 no less than three offerors shall be solicited to
                             submit price quotations which shall be obtained orally,
                             by telephone, or in writing. Our review of five small
                             purchase payment vouchers, selected at random,
                             showed no evidence that the PHA had solicited price
                             quotations from at least three offerors, as required.

                          Title 24 CFR, Part 85.20, Standards for Financial
         Criteria         Management Systems, requires that effective controls and
                          accountability must be maintained for all assets and that the
                          assets must be safeguarded. In addition, Part A, Section 15
                          of the ACC provides that, the PHA must maintain complete
                          and accurate books of account to permit a timely and
                          effective audit.

                          The above deficiencies have precluded the PHA from
                          complying with the requirements cited. Unless corrected
                          actions are implemented, deficiencies similar to those
                          described above will recur.



                          The Poughkeepsie Housing Authority will continue to
       Auditee Comments   implement controls and establish procedures that address all
                          of the concerns of this finding that will result in improved
                          administrative and accounting controls.


       Recommendations    We recommend that you require the PHA to:


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         8A.   Implement controls to ensure that invoices
               containing ineligible sales tax are not processed for
               payment.

         8B.   Adopt procedures that will ensure that:

               1. prompt payment is made for goods or services
                  purchased.
               2. Invoices are promptly processed for payment so
                  that all cash discounts offered are realized.
               3. Cash discounts taken have been earned.
               4. Penalties for late payment are avoided.

         8C.   Establish controls to prevent duplicate payments.
               The controls should ensure that invoices are
               thoroughly reviewed and amounts determined
               proper prior to payment.

         8D.   Institute procedures that will ensure that:

               1. Purchase orders are prepared.
               2. Purchase orders are prepared at the time of
                  purchase.
               3. Payment vouchers contain an adequate
                  description or explanation of the items
                  purchased.
               4. Payment vouchers show who requested and
                  authorized the purchase and who approved the
                  payment.
               5. The person receiving the payment is not the
                  person who requests and approves the payment
                  and signs the checks.

         8E.   Implement controls to ensure that all checks are
               signed by a Commissioner, except in an emergency.

         8F.   Adopt procedures that will assure that payment
               vouchers are voided at the time checks are voided.

         8G.   Establish controls that will ensure that all tenant
               recertifications are completed timely.

         8H.   Institute procedures that will ensure compliance
               with the Admission and Continued Occupancy
               Policy.

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                     8I.      Implement controls to ensure that the Executive
                              Director fulfills the responsibility of Contracting
                              officer as prescribed in the Procurement Policy.

                     8J.      Establish procedures that will assure that all bid
                              documents area time stamped.

                     8K.      Adopt controls that will prohibit costs of one
                              program being charged to another program.

                     8L.      Implement procedures that will assure that:
                              1. Officials who sign the minutes are present at the
                                 meetings.
                              2. Board minutes are signed by officials prior to
                                 their unanimous acceptance.

                     8M.      Establish controls to ensure that price quotations are
                              obtained from an adequate number of qualified
                              sources when procurement by small purchase
                              procedures is used.




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    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 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
     Relevant Management
                                         relevant to our audit objectives:
     Controls

                                         ∙   Program Operations - Policies and procedures that
                                             management has implemented to reasonably ensure that a
                                             program meets its objectives.

                                         ∙   Validity and Reliability of Data - Policies and procedures
                                             that management has implemented to reasonably ensure
                                             that valid and reliable data are obtained, maintained, and
                                             fairly disclosed in reports.

                                         ∙   Compliance with Laws and Regulations - Policies and
                                             procedures that management has implemented to
                                             reasonably ensure that resource use is consistent with
                                             laws and regulations.

                                         ∙   Safeguarding Resources - Policies and procedures that
                                             management has implemented to reasonably ensure that
                                             resources are safeguarded against waste, loss, and
                                             misuse.

                                         We assessed all of the relevant controls 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 that significant weaknesses
     Significant Weaknesses
                                         exist in the following areas:



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    Management Controls



                          ∙   Compliance with Laws and Regulations

                              The PHA did not allocate the cost of a Comprehensive
                              Grant Program activity to participating programs as
                              required (Finding 2).

                              Federal regulations were not followed by the PHA in
                              awarding a contract for legal services (Finding 5).

                          ∙   Safeguarding Resources

                              Ineligible and unsupported costs were incurred because
                              the PHA did not maintain adequate control over costs
                              charged the Federal Program (Findings 1 and 4).

                              The PHA paid incentive bonuses to its administrative
                              employees that may not represent a necessary and
                              reasonable use of funds for program administration
                              (Finding 3).

                              The PHA did not have adequate controls over its travel
                              activities to ensure that travel costs were necessary,
                              reasonable and adequately supported (Finding 6).

                              The PHA needs to strengthen the controls over
                              personnel procedures (Finding 7).

                              The PHA needs to strengthen the controls over its
                              administrative and accounting procedures (Finding 8).




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                                                                                          Appendix A

    Schedule Of Ineligible and Unsupported Costs
    and Cost Efficiencies


                                                                                        Cost
    Finding                               Ineligible 1/          Unsupported 2/        Efficiency 3/

         1                                $15,000.00
         2                                                                             $268,069.00
         3                                                         $   6,314.99
         4                                                            45,874.48
         5                                                            39,300.00
         6                                     449.83                 14,774.46         _________
                                           $15,449.83              $ 106,263.93        $268,069.00



    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.

    3/       A cost efficiency is an action by management in response to the Inspector General’s
             recommendations to prevent improper obligation or expenditures of funds or to avoid
             further unnecessary expenditures.




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                                                                                                  Appendix B

    Schedule of Ineligible and Unsupported Travel
    Expenses
   Date       Voucher                                                        Amount           Amount             Notes
   Paid       Number                   Description                          Ineligible      Unsupported
   05/01/98     4697    Meal expenses - OSHA compliance update training
                        in Poughkeepsie, NY                                        $55.00                         1
   05/01/98     4718    Registration for Commissioner at NYSPHADA
                        Convention in Syracuse, NY                                                  $192.00       2
   06/17/98     4870    Expense money for trip to HUD in New York                                     75.00       2
   06/05/98     4836    Airfare NAHRO National Conferences in San
                        Antonio, TX                                                                  257.92       3
   06/05/98     4837    Airfare NAHRO National Conference in San Antonio,
                        TX                                                                           429.87       3
   08/28/98     5220    4 Airfares NAHRO National Conferences in San
                        Antonio, TX                                                                1,621.60       3
   05/01/98     4708    Registration for NAHRO National Conference in San
                        Antonio, TX                                                                  365.00       3
   09/04/98     5238    4 Registrations for NAHRO National Conference in
                        San Antonio, TX                                                            1,290.00       3
   06/12/98     4858    Registration for NAHRO National Conference in San
                        Antonio, TX                                                                  395.00       3
   06/12/98     4855    Hotel accommodations for NAHRO National
                        Conference in San Antonio, TX                                                726.80       3
   10/02/98     5359    5 Hotel accommodations for NAHRO National
                        Conference in San Antonio, TX                                              3,599.50       3
   10/06/98     5407    Meal expense for NAHRO National Conference in
                        San Antonio, TX                                                              330.00      3,4
   10/16/98     5415    Meal expenses for NAHRO National Conference in
                        San Antonio, TX                                                              330.00      3 ,4
   10/16/98     5420    Meal expense for NAHRO National Conference in
                        San Antonio, TX                                                              330.00      3 ,4
   10/16/98     5421    Meal expense for NAHRO National Conference in
                        San Antonio, TX                                                              330.00      3 ,4
   10/16/98     5422    Meal expense and advance parking costs for
                        NAHRO National Conference                                                    378.00      3,4,5
   10/16/98     5429    Meal expense for NAHRO National Conference in
                        San Antonio, TX                                                              330.00      3,4
   06/12/98     4858    3 Registrations for Summer NAHRO conference in
                        Boston, MA                                                                 1,215.00       3
   07/31/98     5056    Registration for Summer NAHRO conference in
                        Boston, MA                                                                   430.00       3
   07/24/98     5025    Meal expense for Summer NAHRO conference in
                        Boston, MA                                                                   220.00      3 ,4
   07/24/98     5029    Meal expense for Summer NAHRO conference in
                        Boston, MA                                                                   220.00      3 ,4
   07/24/98     5039    Meal expense for Summer NAHRO conference in
                        Boston, MA                                                                   220.00      3 ,4
   07/31/98     5067    Meal expense for Summer NAHRO conference in
                        Boston, MA                                                                   220.00      3 ,4
   07/31/98     5062    Hotel accommodations for Summer NAHRO
                        conference in Boston, MA                                                      32.91       3
   08/14/98     5132    Sundry expense for Summer NAHRO conference in
                        Boston, MA                                                                    26.35       3
   08/14/98     5153    Sundry expense for Summer NAHRO conference in
                        Boston, MA                                                                    81.13       3
   08/20/98     5158    Sundry expense for Summer NAHRO conference in
                        Boston, MA                                                                   116.35       3




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     Appendix B



   Date         Voucher                                                                    Amount              Amount             Notes
   Paid         Number                           Description                              Ineligible         Unsupported
   09/11/98         5255        Car rentals for Summer NAHRO conference in
                                Boston, MA                                                           89.83            359.32      3 ,6
   08/28/98         5216        Hotel cost for 9/26/98 while attending Section 8
                                training in Fort Worth, TX                                                            159.85       7
   09/18/98         5309        Meal expense for 9/26/98 while attending Section 8
                                training in Fort Worth, TX                                                             55.00       7
   09/18/98         5306        Local mileage reimbursement for August 1998                                            81.84       8
   12/04/98         5590        Local mileage reimbursement for November 1998                                         168.02       8
   04/09/99         6092        Meal expense for Communication Skills for Women
                                seminar in Poughkeepsie, NY                                          30.00                         1
   06/11/99         6296        Meal expense for Red Cross seminar in
                                Poughkeepsie, NY                                                     55.00                         1
   06/11/99         6309        Meal expense for Red Cross seminar in
                                Poughkeepsie, NY                                                     55.00                         1
   06/18/99         6333        Meal expense for Red Cross seminar in
                                Poughkeepsie, NY                                                    165.00                         1
   08/06/99         6516        Hotel costs for 9/11/99 while attending Section 8
                                training in Universal City, CA                                                        133.00       7
   08/27/99         6600        Meal expenses for 9/11/99 while attending Section
                                8 training in Universal City, CA                                                       55.00       7

                                                                                                   $449.83         $14,774.46
                                                    TOTALS



   Notes


    1         Costs were incurred within the local area of the PHA and are therefore ineligible.
    2         The only documentation available is a PHA check request.
    3         Travel policy limits attendance to number necessary to cover the meeting.
    4         Departure and arrival times not documented.
    5         Amount includes $48 for advance parking costs at airport.
    6         Amount includes $89.83 for two car rentals the day before the trip began.
     7        Represents cost for Saturday preceding the course start on Monday.
    8         The mileage chart does not show any destinations for the mileage claimed.




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                                                                                        Appendix C

    Distribution
    Executive Director, Poughkeepsie Housing Authority, Poughkeepsie, New York (2)
    Deputy Secretary, SD, Room 10100
    Chief of Staff, S, Room 10000
    Special Assistant to the Deputy Secretary for Project Management, SD, Room 10100
    Assistant Secretary for Administration, S, Room 10110
    Assistant Secretary for Congressional & 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 10266
    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
    Senior Advisor to the Secretary for Pine Ridge Project, W, Room 10216
    General Counsel, C, Room 10214
    Director, Office of Federal Housing Enterprise Oversight, O, 9th Floor Mailroom
    Assistant Secretary for Housing/Federal Housing Commissioner, H Room 9100
    Office of Policy Development and Research, R, Room 8100
    Assistant Secretary for Community Planning and Development, D, Room 7100
    Assistant Deputy Secretary for Field Policy and Management, SDF, Room 7108
    Government National Mortgage Association, T, Room 6100
    Assistant Secretary for Fair Housing & Equal Opportunity, E, Room 5100
    Chief Procurement Officer, N, Room 5184
    Deputy Secretary, SD, Room 10100
    Assistant Secretary for Public and Indian Housing, P, Room 4100
    Chief Information Officer, Q, Room 3152
    (Acting) Office of Departmental Operations and Coordination, I, Room 2124
    Chief Financial Officer, F, Room 2202
    Office of Deputy General Counsel, CB, Room 10220
    Director, Enforcement Center, V, 200 Portals Building, 1250 Maryland Avenue SW, Washington,
    DC 20024
    (Acting) Real Estate Assessment Center, X, 1280 Maryland Avenue, SW, Suite 800, Washington,
    DC 20024
    Director, Office of Multifamily Assistance Restructuring, Y, 4000 Portals Building, 1280 Maryland
    Avenue SW, Washington, DC 20024




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    Appendix C



    Secretary’s Representative, New York/New Jersey, 2AS (2)
    Director, Office of Public Housing, 2APH, (2)
    Assistant General Counsel, New York/New Jersey, 2AC
    Assistant Deputy Secretary for Field Policy and Management, SDF, Room 7108 (2)
    Deputy Chief Financial Officer for Finance, FF, Room 2202
    CFO, Mid-Atlantic Field Office, 3AFI (2)
    Director, Office of Budget, FO, Room 3270
    Director, Office of Public & Indian Housing, PF, (Attention: Management Analyst,
       Room 5156)
    Departmental Audit Liaison Officer, FM, Room 2206 (2)
    Acquisitions Librarian, Library, AS, Room 8141


    Steve Redburn, Chief
    Office of Management and Budget
    725 17th Street, NW Room 9226
    New Executive Office Building
    Washington, DC 20503


    Deputy Staff Director
    Counsel Subcommittee on Criminal Justice
    Drug Policy & Human Resources
    B373 Rayburn House Office Building
    Washington, DC 20515


    The Honorable Henry A. Waxman
    Ranking Member
    Committee on Governmental Reform
    2204 Rayburn Building
    House of Representatives
    Washington, DC 20515-4305


    The Honorable Joseph Lieberman
    Ranking Member
    Committee on Governmental Affairs
    706 Hart Senate Office Building
    United States Senate
    Washington, DC 20510


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                                                            Appendix C




    The Honorable Dan Burton
    Chairman
    Committee on Government Reform
    2185 Rayburn Building
    House of Representatives
    Washington, DC 20515-6143


    The Honorable Fred Thompson
    Chairman
    Committee on Governmental Affairs
    340 Dirksen Senate Office Building
    United States Senate
    Washington, DC 20510-6250


    Director, Housing & Community Development Issue Area,
      United States General Accounting Office
    441 G Street, NW, Room 2474
    Washington, DC
    (Attention: Judy England-Joseph)


    Ms. Cindy Fogleman
    Subcommittee on General Oversight & Investigations
    O'Neill House Office Building, Room 212
    Washington, DC 20515




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