oversight

Weymouth Housing Authority, Weymouth, Massachusetts

Published by the Department of Housing and Urban Development, Office of Inspector General on 2001-04-02.

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

    AUDIT REPORT




WEYMOUTH HOUSING AUTHORITY

 WEYMOUTH, MASSACHUSETTS

         2001-BO-1004

         APRIL 2, 2001


  OFFICE OF AUDIT, NEW ENGLAND
     BOSTON, MASSACHUSETTS
                                                                   Issue Date
                                                                           April 2, 2001

                                                                   Audit Case Number
                                                                           2001-BO-1004




TO: Donna J. Ayala, Director, Office of Public Housing,
    Massachusetts State Office, 1APH



FROM: William D. Hartnett, District Inspector General, Office of Audit, 1AGA


SUBJECT:        Weymouth Housing Authority
                Weymouth, Massachusetts


We performed an audit of the Weymouth Housing Authority (WHA) Low-Income Public Housing and
Section 8 programs. The objective of our review was to determine if the Authority has been operating
its programs in an efficient and effective manner.

The report contains three findings.

Within 60 days please give us, for each recommendation in this report, 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 considered unnecessary. Also, please furnish us copies of any correspondence or directives
issued because of the audit.

If you have any questions, please contact our office at (617) 565-5259.
Management Memorandum




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2001-BO-1004              Page ii
Executive Summary
We performed an audit of the Low-Income Public Housing and Section 8 Programs operated by the
Weymouth Housing Authority (WHA). Our objectives were to determine if the WHA was operating its
program in an efficient, effective and economical manner; and was complying with the terms and
conditions of its Annual Contributions Contract, applicable laws, and HUD regulations.




                                    The WHA has not developed an equitable method of allocating
 Audit Results                      costs between Federal and State programs. In addition, the
                                    WHA allocated costs to a vacant Federal project in 1999. The
                                    inequitable allocation of costs resulted in the Federal programs
                                    being overcharged by approximately $78,000.

                                    The WHA needs to improve its administration of the Section 8
                                    Program by strengthening the procedures used for determining
                                    rent reasonableness; documenting the third party verification
                                    process; and conducting annual reexaminations in a timely
                                    manner.       Two of the conditions (determining rent
                                    reasonableness and documenting the third party verification
                                    process) had been previously reported as findings in a 1999
                                    Field Office review. Due to the weaknesses in the WHA’s
                                    administration of the Section 8 Program there is limited
                                    assurances that the contract rents for the units are reasonable
                                    and that HUD and the tenants are paying the proper share of
                                    the rent.

                                    The WHA inappropriately paid a former executive director
                                    $3,382 for unused vacation and sick leave contrary to
                                    personnel policies. The payment to the former executive
                                    director included $1,804 for vacation pay that had not been
                                    earned when he resigned and $1,578 in excess of the maximum
                                    $1,000 the WHA allows for sick leave. The WHA allocated
                                    $1,796 out of the $3,382 to Federal programs.




                                        Page iii                                       2001-BO-1004
Executive Summary


                    We are recommending that the WHA: establish and implement
 Recommendations    an equitable cost allocation plan and reimburse the Federal
                    Programs for any amounts determined to be improperly
                    allocated; provide evidence that they are determining rent
                    reasonableness, performing third party verifications and
                    conducting annual recertifications; and reimburse the Federal
                    programs $1,796 which were charged with ineligible vacation
                    and sick leave payments made to the former executive director.

 Findings and       The findings were discussed with the WHA officials during the
 Recommendations    course of the audit. On February 8, 2001, we provided the
 Discussed          WHA a copy of the draft report for comment. We received the
                    WHA’s response on March 19, 2001.

                    We have included pertinent comments from the WHA’s
                    response in the findings section of the report. The WHA’s full
                    response is included as Appendix E.




2001-BO-1004            Page iv
Table of Contents
Management Memorandum                                                               i




Executive Summary                                                               iii




Introduction                                                                       1




Findings
1.     WHA Needs to Develop An Equitable Method Allocating Costs                3


2.     Section 8 Program Administration Needs Improvement                     11


3.     Ineligible Payments For Vacation and Sick Leave to Former
       Executive Director                                                  17




Management Controls                                                       19




Appendices
     A Schedule of Ineligible and Unsupported Costs                       21


     B Allocation of Salaries - 1998                                     23


     C Allocation of Salaries - 1999                                     25


     D Allocation of Salaries - 2000                                     27


     E Auditee Comments                                                  29


     F Distribution                                                      33




                                 Page v                            2001-BO-1004
Table of Contents


Abbreviations

ACC             Annual Contributions Contract
CFR             Code of Federal Regulations
HQS             Housing Quality Standards
HUD             Department of Housing and Urban Development
IPA             Independent Public Accountant
LHA             Local Housing Authority
MA              Massachusetts
MRVP            Massachusetts Rental Voucher Program
MSO             Massachusetts State Office
OMB             Office of Management and Budget
PHA             Public Housing Authority
WHA             Weymouth Housing Authority




2001-BO-1004                             Page vi
Introduction
A five-member Board of Commissioners, chaired by Ernest Remondini, governs the Weymouth
Housing Authority (WHA). The Executive Director, Roland Moussally, is responsible for the
administration and WHA operations. The WHA office is located at 402 Essex Street, Weymouth, MA
02188.

The WHA is administering 159 units under the Section 8 Program and one project containing 40 Low
Income Public Housing units. A second project is currently undergoing partial demolition and
rehabilitation. The WHA is also administering 3 state projects containing 216 units and 111 units under
the State’s rental voucher program.




                                       The purpose of our audit was to determine whether the WHA is
 Audit Objectives                      operating in an efficient and effective manner. The specific
                                       objectives were to determine whether:

                                       1. WHA’s procedures established to administer the Section 8
                                          Programs and Low Income Public Housing were adequate;

                                       2. WHA’s tenant eligibility and subsidies were in compliance
                                          with HUD’s directives; and

                                       3. Complying with the terms and conditions of its Annual
                                          Contributions Contract (ACC), applicable laws, HUD
                                          regulations, and other applicable directives.

 Audit Scope and                       To accomplish the audit objectives we:
 Methodology
                                       Ø Reviewed Federal requirements including the Code of
                                         Federal Regulations, HUD Handbooks, Public and Indian
                                         Housing Notices and Directives, OMB Circular, and the
                                         WHA’s organizational and administrative structure,
                                         administrative plans and personnel policies, and recorded
                                         minutes of the Board of Commissioners meetings.

                                       Ø Reviewed Independent Public Accountant (IPA) audit
                                         reports, as well as monitoring reviews conducted by the
                                         HUD Field Office.

                                       Ø Examined the WHA’s accounting books and records.



                                            Page 1                                        2001-BO-1004
Introduction



               Ø Examined the WHA’s procedures and supporting
                 documentation for procurement.

               Ø Reviewed the WHA’s rent reasonableness testing
                 procedures to determine if rents were reasonable and in
                 accordance with regulations.

               Ø Examined tenant files to verify that tenants qualified as a
                 family; that tenants’ income was within income guidelines;
                 that Housing Assistance Payments (HAP) contracts were
                 calculated correctly; and to determine that recertifications
                 were performed on an annual basis.

               Ø Interviewed staff at WHA concerning HUD policies and
                 procedures on Housing Quality Standards (HQS)
                 Inspections; rent reasonableness requirements, and third
                 party verification process.

               Ø Examined Low Income Housing transfer list, waiting list,
                 and tenants account receivable.

               Ø Conducted physical inspection on 10 units to ensure
                 compliance with HQS.

               Ø Reviewed the Office of Public and Indian Housings files
                 maintained by the Massachusetts State Office (MSO)
                 pertaining to the WHA.

               The audit was conducted between September 2000 and
               November 2000, and covered the period January 1, 1999
               through August 31, 2000. When appropriate the review was
               extended to include other periods.

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




2001-BO-1004        Page 2
                                                                                              Finding 1


               WHA Needs To Develop An
           Equitable Method Of Allocating Costs
The Weymouth Housing Authority (WHA) has not developed an equitable method of allocating costs
between its Federal and Massachusetts State Programs. The WHA’s method of allocation shifts costs
that are not fully funded by the State for its Programs to the Federal Programs. In addition, the WHA
allocated costs to a vacant Federal Project in 1999. As a result, the Federal Programs were charged in
excess of its fair share of the costs for payroll, payroll related, and some administrative costs.




                                       24 CFR Part 85.22(b) requires State, local and Indian tribal
 Equitable Allocation                  governments to follow the Office of Management and Budget
 Method Required                       (OMB) Circular A-87, “Cost Principles for State, Local and
                                       Indian Tribal Governments.” According to 24 CFR 85.3, a
                                       local government includes any public housing agency.

                                       OMB Circular A-87 establishes principles for determining the
                                       allowable costs incurred by State and local governments. “The
                                       principles are designed to provide that Federal awards bear
                                       their fair share of cost recognized under these principles except
                                       where restricted or prohibited by law.” (Attachment A,
                                       paragraph A.1.)

                                       Attachment A, paragraph C. “Basic Guidelines” of OMB
                                       Circular A-87 provides in part:

                                       Ø A cost is allocable to a particular cost objective if the goods
                                         or services are chargeable or assignable to such cost
                                         objective in accordance with relative benefits received.

                                       Ø All activities that benefit from the governmental unit’s
                                         indirect cost will receive an appropriate allocation of
                                         indirect costs.

                                       Attachment A, paragraph F. “Indirect Costs” of OMB Circular
                                       A-87 provides in part:

                                       Ø Indirect costs are those: (a) incurred for a common or joint
                                         purpose benefiting more than one cost objective, and (b)
                                         not readily assignable to the cost objectives specifically

                                            Page 3                                         2001-BO-1004
Finding 1


                                benefited, without effort disproportionate to the results
                                achieved. To facilitate equitable distribution of indirect
                                expenses to the cost objectives served, it may be necessary
                                to establish a number of pools of indirect costs. Indirect
                                cost pools should be distributed to benefited cost objectives
                                on bases that will produce an equitable result in
                                consideration of relative benefits derived.

                             The WHA operates four programs: Federal Public Housing
 Allocations Weighted More   Program; State Public Housing Program; Federal Leased
 Toward Federal Programs     Housing Program (Section 8 Certificate and Vouchers); and
                             State Leased Housing Program (Massachusetts Rental Voucher
                             Program-MRVP).

                             The WHA inappropriately increased the allocations to the
                             Federal programs in three ways:

                             1. The State of Massachusetts established a maximum salary
                                amount that would be paid for certain positions. For
                                employees earning above the amount allowed by the State
                                the difference was charged to the Federal programs.

                             2. The State reduced the reimbursement for their MRVP
                                Program from $45 per unit per month to $25 per unit per
                                month. To absorb the reduction in funding from the State,
                                the WHA did not allocate all appropriate staff to the State’s
                                MRVP Program, increasing the costs allocated to the
                                Federal programs.

                             3. In 1999, the WHA allocated costs of five of its employees
                                on a unit basis. Included in the unit allocation for 1999
                                were 70 units from Cadman Towers even though that
                                project had been vacant since May 1998.




2001-BO-1004                      Page 4
                                                                                     Finding 1


Maximum Salaries Allowed     There were four WHA employees who were paid substantially
by the State                 more than the maximum allowed by the State. The maximum
                             salaries allowed by the State and the salaries actually paid for
                             the four employees in 1999 were:

                                                    Allowed By State    Actual
                             Position                                   Salary    Difference *
                             Executive Director         $44,224        $52,000      $7,776
                             Asst. Exec. Dir.           $31,194        $37,539      $6,345
                             Receptionist – 1           $11,140        $14,777      $3,637
                             Receptionist – 2           $12,176        $20,683      $8,507
                                                    * Fully funded by the Federal Programs

                             The WHA’s Fee Accountant advised that to compensate for
                             the cap placed on salaries 3 separate allocations were
                             performed. The result of these allocations was to allocate
                             amounts to the State Programs based on the maximum salaries
                             allowed and to allocate the amount in excess to the Federal
                             Programs. This results in excessive amounts being charged to
                             the Federal Programs.

                             As noted above, OMB Circular A-87, Attachment A,
                             paragraph C.3.a. provides that, “A cost is allocable to a
                             particular cost objective if the goods or services involved are
                             chargeable or assignable to such cost objective in accordance
                             with relative benefits received.” Since the Federal Programs
                             did not receive any benefit from the additional salaries charged,
                             the additional salaries should not have been allocated to the
                             Federal Programs.

                             WHA’s Fee Accountant advised that the State reduced the
All Staff Not Allocated to   reimbursement for the MRVP Program from $45 per unit per
State’s MRVP Program         month to $25 per unit per month. In order to absorb this
                             reduction in funding the WHA had to reduce the allocation to
                             the MRVP Program and increase the allocation to the Federal
                             Programs. For the 3-year period 1998 to 2000, the salaries of
                             the Assistant Executive Director and one of the Receptionists
                             were not allocated to the MRVP Program. In addition, the
                             salary of the Staff Accountant was allocated on a much lower
                             amount than would be allocated on a unit basis for 1998 and
                             1999. In 2000, none of the Staff Accountants’ salary was
                             allocated to the MRVP Program.
                                  Page 5                                          2001-BO-1004
Finding 1



                             As noted above, OMB Circular A-87, Attachment A,
                             paragraph C.3.b. provides that, “All activities which benefit
                             from the governmental unit’s indirect cost …will receive an
                             appropriate allocation of indirect costs.” The Federal Programs
                             should not be subsidizing the State Programs that are not
                             properly funded.

                             Cadman Towers, a 70-unit Federal Low Income Project, has
 Cost Allocated to Cadman    been vacant since May of 1998 pending partial demolition and
 Towers in FY 99             rehabilitation. The Fee Accountant advised that they deducted
                             the units from the WHA’s allocation schedules for Fiscal Year
                             2000 because the project was vacant for such a long period.
                             The Fee Accountant agreed that the allocations could have
                             been reduced earlier by subtracting Cadman’s units from the
                             total units administered by the WHA.

                             During 1999, the WHA allocated the salaries of 5 employees to
                             Cadman Towers. OMB Circular A-87 provides that, “A cost
                             is allocable to a particular cost objective if the goods or services
                             are chargeable or assignable to such cost objective in
                             accordance with relative benefits received.” Since Cadman
                             Towers was vacant since May of 1998, we believe that very
                             little benefit was provided for Cadman Towers and therefore,
                             costs should not have been allocated to the project.

                             WHA’s allocation method for salaries for the 3-year period
 Effect on Federal Program   1998 to 2000 inappropriately increased the allocation of costs
                             to the Federal Programs by approximately $78,000 not
                             including payroll related and other miscellaneous administrative
                             costs. See Appendices A, B, and C for details by year.

                             The WHA’s Fee Accountant advised us that the payroll related
                             costs, such as, retirement, payroll taxes, health, and
                             workmen’s’ compensation were allocated based on the same
                             allocation basis as were the staffs salaries. Therefore, to the
                             extent (percentage) that the Federal Programs were
                             overcharged for salaries, they would also be overcharged for
                             payroll related costs.

                             In addition, the WHA’s Fee Accountant also advised that
                             depending on the availability of funds from the MRVP Program
                             that some miscellaneous administrative costs would not be

2001-BO-1004                      Page 6
                                                                         Finding 1


                   allocated to that program even if they shared the benefit (items
                   such as office supplies).


Auditee Comments       The WHA addressed their comments to the three ways
                       cited in the finding that they inappropriately increased
                       allocations to the Federal programs.

                       1. The State established a maximum salary for certain
                          positions. The WHA charged the difference to the
                          Federal programs.

                           The WHA generally agreed that the Federal programs
                           were charged the difference between the salaries
                           allowed by the State and the actual salary. However,
                           the WHA argued that this is a common practice
                           throughout the State and, therefore, the WHA cannot
                           be charged for improper allocations.

                           The WHA also stated that,

                           OMB Circular No. A-87 states “that each
                           governmental unit, in recognition of its own unique
                           combination of staff, facilities, and experience, will
                           have the primary responsibility for employing
                           whatever form of organization and management
                           techniques that may be necessary to assure proper
                           and efficient administration of Federal awards.”

                       2. The State reduced the reimbursement for their MRVP
                          Program from $45 per unit per month to $25 per unit
                          per month. The WHA increased the cost allocated to
                          the Federal programs to absorb the reduced State
                          funding.

                           The WHA agreed that additional costs were allocated
                           to the Federal programs to cover costs of the MRVP
                           Program. The WHA also noted that it is less costly to
                           administer the MRVP Program than it is to administer
                           HUD’s Section 8 Program, since the State has less
                           requirements. The WHA further stated that all housing
                           authorities in the State are having similar problems and
                           have had to make similar allocation decisions.

                        Page 7                                        2001-BO-1004
Finding 1



                    3. The WHA allocated costs of five of its employees on a
                       unit basis. Included in the allocations for 1999 were 70
                       units for Cadman Towers, which had been vacant since
                       May 1998.

                       The WHA disagreed with our conclusion that very little
                       benefit was provided for Cadman Towers considering it
                       was vacant since May 1998. The WHA stated that the
                       Executive Director spent numerous hours contacting
                       various officials, funding agencies, banks, community
                       builders; and HUD attempting to raise funds for
                       Cadman Towers. The WHA indicated that the
                       Assistant Executive Director and the receptionists made
                       calls and typed letters and reports to forward to various
                       agencies. The WHA also stated that, “The time
                       allocated to this project was inordinate; however,
                       the benefit to our constituency was restoring the
                       building to its useful purpose.”



OIG Evaluation of   1. We disagree with the WHA’s argument that, since it is
Auditee Comments       a common practice by Housing Authorities to charge
                       Federal programs the difference in the actual salaries
                       paid, it is allowable. OMB Circular A-87 cannot be
                       interpreted to allow costs not allowed by the State to
                       be allocated only to the Federal programs. The
                       principles of OMB Circular A-87 were designed to
                       provide that Federal awards bear their fair share of
                       costs, not their fair share plus the fair share of costs
                       properly allocable to other programs.

                    2. Arbitrarily increasing the allocation to Federal programs
                       for shortfalls in other programs is not allowable under
                       OMB circular A-87.

                    3. While we agree staff time (particularly the Executive
                       Director) was expended on this project, we do not
                       believe that the unit basis is the proper method of
                       allocating costs, since the project was vacant for all of
                       1999. The WHA needs to develop an alternate
                       allocation method for 1999.


2001-BO-1004         Page 8
                                                                        Finding 1




Recommendations   We recommend that you require the Weymouth Housing
                  Authority to:

                  1A.         Establish and implement an equitable cost allocation
                          plan.

                  1B.     Reimburse the Federal Programs for any amounts
                          determined to be improperly allocated based on the
                          equitable cost allocation plan.




                        Page 9                                       2001-BO-1004
Finding 1




2001-BO-1004   Page 10
                                                                                                Finding 2


                     Section 8 Program
              Administration Needs Improvement
The Weymouth Housing Authority (WHA) needs to improve its procedures in: 1) determining rent
reasonableness; 2) documenting third party verification of family income; and 3) conducting timely
annual recertifications. Conditions 1 and 2 were cited in a Field Office review conducted in May of
1999, but have not been corrected. The Executive Director was not aware that the corrective actions
for the previous findings were not being followed. He was aware that recertifications were not being
performed timely, however, there were no corrective actions taking place at the time of our review. As
a result, HUD has limited assurance that the contract rents for the units are reasonable and that HUD
and the tenants are paying their proper share of the rent.




                                       Rent Reasonableness

                                       Federal Regulations state that Public Housing Authority’s
 Knowledge of Current                  (PHA) may not give approval for the family of the assisted
 Rental Market Required                tenancy, or execute a HAP contract, until the PHA has
                                       determined the rent to owner is reasonable (24 CFR 982.305).
                                       The PHA must take into consideration the location, type,
                                       quality, amenities, facilities, and maintenance service of the unit
                                       (24 CFR 982.503).

                                       Furthermore, HUD requires that the PHA must have an overall
                                       current knowledge of the rental market within its jurisdiction
                                       and data on the rents being charged for specific units. The
                                       PHA will have to conduct either telephone surveys, site visits,
                                       or more extensive market surveys of available rental units. The
                                       PHA will also have to determine the rents to unassisted units in
                                       the same building or other comparable units owned by the
                                       Section 8 Owner in order to certify that the contract rents are
                                       reasonable (HUD Handbook 7420.7, Chapter 6-5 (b)
                                       &(d)(1).




                                           Page 11                                           2001-BO-1004
Finding 2


                           The Massachusetts State Office (MSO) of Public Housing
 Rent Reasonableness Not   conducted a review in March of 1999. The first finding
 Documented                contained in the report indicated, “The WHA does not
                           consistently apply rent reasonableness determinations. This
                           office found that the WHA utilizes a form, completed by
                           landlords, indicating that the rent for the proposed unit is
                           reasonable in relation to rents currently being charged by owner
                           for comparable unassisted units.”              The Field Office
                           recommended, “In order to assess rent reasonableness, the HA
                           must conduct market surveys of available rental units and collect
                           data on ten (10) informational factors: (1) location, (2) size, (3)
                           type, (4) quality, (5) handicap accessibility, (6) amenities, (7)
                           facilities, (8) management and maintenance services, (9) data
                           available for occupancy, after construction or rehabilitation, and
                           (10) gross rent.         …Once the requirements in the above
                           paragraph have been met, there are three (3) things that the
                           WHA must ensure for compliance with rent reasonableness:
                           First, that there is always documentation regarding a rent
                           reasonableness determination in every participant’s file both at
                           initial lease up as well as each annual recertification…”

                           In May of 1999, WHA responded to the Field Office review
                           stating, “The Weymouth Housing Authority is in the process of
                           conducting a market survey of available rental units and is
                           collecting data on the 10 informational factors. A copy of that
                           letter forwarded to local landlords is included for your review.
                           Once the data is collected the WHA certifies that it will ensure
                           compliance with rent reasonableness; the WHA certifies that: 1)
                           every participant file will have a rent reasonableness
                           determination in it…”

                           Our review of the ten Section 8 tenant files disclosed that seven
                           of them did not have the rent reasonableness determinations in
                           them. The other files did not require the rent reasonableness
                           procedures, because rent increases were not requested.

                           The Assistant Executive Director advised that the WHA tried to
                           obtain information on the current rents from Section 8 owners
                           and from other unassisted property owners. However, this
                           attempt was unsuccessful. The Assistant Executive Director
                           and the Leased Housing Coordinator advised that they believed
                           that they had a sound knowledge of the surrounding area and
                           could determine the reasonableness of proposed rents. The

2001-BO 1004                   Page 12
                                                                                          Finding 2


                               Executive Director stated that the staff should be following the
                               procedures as stated in their response to the MSO review. The
                               Executive Director advised that he was under the impression
                               that his staff was following those procedures.

                               Third Party Verification

                               Federal Regulations require that PHA’s must obtain a third
Knowledge of Third Party
                               party verification of family income or must document in the
Verification Procedures
                               tenant files why third party verification was not available (24
Required
                               CFR 982.516).

                               The Field Office conducted a review in March of 1999. The
                               report cited a finding of the third party verification process. The
Third Party Verification Not
                               report indicated, “Some files did not have current third party
Documented
                               verification. In one case, the reviewer found that the participant
                               verified their own income.” The Field Office recommended,
                               “The WHA shall be more diligent in requiring third party
                               verification of familial status and income. It is of utmost
                               importance that the WHA obtain complete verification from all
                               applicants/participants and thoroughly document the methods
                               by which it has verified all pertinent information in the
                               applicant’s/participant’s files.     Inaccurate information and
                               inadequate verification may result in incorrect levels of housing
                               assistance on behalf of the participant. The WHA must assure
                               this Office in writing that procedures have been implemented to
                               obtain and document third party verification in all tenants’ files.”

                               In May of 1999, WHA responded to the Field Office review
                               stating, “The WHA certifies that whenever possible current third
                               party verification will be in all participating files and that it will
                               thoroughly document the method by which it has verified all
                               pertinent information in the file.” A memo was forwarded to the
                               Assistant Director and Leasing Coordinator detailing the action
                               that will be taken to insure compliance.

                               Our review of ten (10) Section 8 tenant files disclosed that third
                               party verification had not been obtained for five tenants and the
                               tenant files did not document why third party verifications were
                               not obtained.

                               The Leased Housing Coordinator advised that the verification
                               of income requests are forwarded to employers. The Leased

                                    Page 13                                            2001-BO-1004
Finding 2


                              Housing Coordinator stated that several of the verification
                              requests were not returned. She also stated that some tenants
                              do not want their employers to know they receive housing
                              assistance. In these cases, the Leased Housing Coordinator
                              used tenants pay stubs to verify family income. As noted, our
                              review disclosed that there was no documentation in the tenant
                              file to show why third party verification was not obtained. The
                              Executive Director advised that he was unaware that
                              procedures documented in the corrective action were not being
                              followed.

                              Annual Recertifications

                              Federal Regulations require that PHAs perform reexamination
 Annual Recertification       of family income and composition at least annually (24 CFR
 Requirements                 982.516)

                              Our review of the ten Section 8 tenant files revealed that seven
 Annual Recertification Not   of the tenant’s annual reexamination were not performed timely.
 Performed Timely             The recertifications were from one to over twelve months
                              overdue. The results are as follows:

                                                   Number of
                              Months Overdue       Tenants       Status of Recertifications
                              1 – 2 months             3         1 completed – 2 still in process
                              3 – 6 months             1         1 comp leted
                              6 – 12 months            1         1 completed
                              Over 12 months           2         1 completed – 1 still in process


                              The Leased Housing Coordinator stated that the two main
                              reasons for the untimely recertifications were: (1) the workload
                              of the Section 8 Program which included transferring tenants
                              from the certificate and voucher programs into the Housing
                              Choice Program; and (2) some recertification dates were
                              entered into the computer incorrectly and therefore the
                              computer could not identify those as being scheduled for
                              recertification. The Executive Director advised that he was
                              aware that recertifications were not timely and was in the
                              process of working with the Leased Housing staff to correct it.




2001-BO 1004                      Page 14
                                                                          Finding 2




                    The WHA recognized that it needed to improve its procedures
Auditee Comments
                    in: 1) determining rent reasonableness; 2) documenting third
                    party verification of family income; and 3) conducting timely
                    recertifications. The WHA stated that they would provide an
                    Action Plan that will insure all procedures are followed.



OIG Evaluation of   HUD should review the Action Plan to assure that it adequately
Auditee Comments    addresses all of the recommendations.



Recommendations     We recommend that you require the Weymouth Housing
                    Authority to:

                    2A.          Provide evidence that a current market survey of
                             private unassisted units in the area, including those
                             owned by Section 8 owners has been performed and is
                             adequate.

                    2B.      Provide evidence that the third party verification
                             process is being properly obtained and documented in
                             all tenants’ files.

                    2C.      Provide evidence that annual recertifications are being
                             performed timely.




                          Page 15                                      2001-BO-1004
Finding 2




2001-BO 1004   Page 16
                                                                                                   Finding 3


         Ineligible Payments For Vacation and
       Sick Leave to Former Executive Director
Contrary to its own personnel policies the WHA paid $3,382 of excess vacation and unused sick leave
to a former executive director. As a result, those funds were not available for necessary and
appropriate housing expenditures.




                                      The WHA’s Personnel Policy prescribes various personnel
 WHA’s Personnel Policy               procedures. The former executive director’s December 3,
 Identifies Benefits Allowed          1996 employment contract stated that he should be entitled to
                                      all benefits and conditions outlined in the personnel policies.
                                      The WHA’s Personnel Policy states that an employee shall be
                                      paid an amount equal to the vacation allowance earned in the
                                      vacation year during which termination occurs.

                                      The Board of Commissioners accepted the former executive
  Vacation Pay                        director’s resignation with an effective date of January 13,
                                      1999. Effective January 1, 1999 the WHA accrued 70 hours
                                      of vacation pay on the executive director’s leave records. The
                                      70 hours represented the total hours the executive director
                                      would earn for 1999. Upon his resignation, the WHA paid the
                                      executive director for a total of 105 hours, which included 35
                                      hours carried over from 1998 and the entire 70 hours accrued
                                      for 1999. However, since the executive director resigned
                                      effective January 13, 1999, he only earned 3 hours of annual
                                      leave for 1999 and therefore should have only been paid for 38
                                      hours. The overpayment was calculated as follows:

                                      Amount paid for vacation pay (105 hrs. @ $26.92)              $2,827
                                      Less Proper Payment for Vacation Pay (38 hrs. @ $26.92)       $1,023
                                                                                     Overpayment    $1,804


                                      The WHA’s Personnel Policy provides that upon resignation
  Sick Leave Pay                      the employee may receive cash reimbursement for 20 percent
                                      of their accrued sick leave to a maximum of $1,000. The
                                      former executive director had a balance of 191.56 hours and
                                      was paid for 50 percent or the accrued hours or 95.78 hours.
                                      The overpayment is calculated as follows:



                                          Page 17                                            2001-BO-1004
Finding 3



                                   Amount paid for unused Sick Leave (95.78 @ $26.92)          $2,578
                                   Less Proper Payment for unused Sick Leave (CAP @ 1,000)     $1,000
                                                                                 Overpayment   $1,578


                                   The overpayment of $3,382 was allocated to all of the
 Amount Allocated to Federal       programs administered by the WHA. The WHA allocated
 Programs                          $1,796 to the Federal programs and $1,586 to the State
                                   programs. Details of the allocation by program are as follows:

                                Section 8
Programs       Federal Owned   Certification         Section 8 Voucher   State Owned    State Leased
Percentage          21.9%         22.0%                     9.2%            29.8%          17.1%
Amount             $740.66       $744.04                   $311.14         $1,007.84       $578.32


                                   The WHA Staff Accountant advised that she was instructed by
                                   the former executive director as to the hours he should be
                                   reimbursed for annual and sick leave at his termination. There
                                   was no other party at the WHA who approved the payment
                                   other than the former executive director.



Auditee Comments                   The WHA advised that prior Executive Director believes that
                                   he was entitled to the termination payment and asked how the
                                   WHA should proceed.



OIG Evaluation of                  The WHA should be addressing the allowability of the
                                   termination payment not the former Executive Director who
Auditee Comments
                                   received the payments. Our recommendation remains for the
                                   WHA to reimburse the Federal programs $1,796 from non-
                                   federal funds.


Recommendations                    We recommend that you require Weymouth Housing Authority
                                   to:

                                   3A.             Reimburse the federal programs $1,796 from non-
                                               federal funds.




2001-BO 1004                             Page 18
Management Controls
In planning and performing our audit, we considered the management controls used by the Weymouth
Housing Authority (WHA) that were relevant to our audit objectives. We considered the WHA’s
management control systems to determine our auditing procedures and not to provide assurance on
management controls.

Management Controls consist of a plan of organization and methods and procedures adopted by
management to ensure that resource use is consistent with laws, regulations, and policies; that resources
are safeguarded against waste, loss and misuse; and that reliable data is obtained maintained, and fairly
disclosed in reports.




                                        We determined the following management controls were
  Relevant Management                   relevant to our audit objectives:
  Controls
                                        Ø Financial Controls Over Program Funds

                                        Ø Management Controls Over Program Expenditures

                                        Ø Management Controls Over Procurement and Contract
                                          Administration

                                        Ø Management Controls Over the Leasing of Units

                                        Ø Management Controls Over the Cost Allocation System

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

                                        Our review identified significant weaknesses in the management
  Significant Weaknesses                controls over the cost allocation system and the management
                                        controls over the leasing of units under the Section 8 Program.
                                        These weaknesses are described in the Findings and
                                        Recommendations section of this report.




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                                Management Controls




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2001-BO-1004     Page 20
                                                                                              Appendix A

Schedule of Ineligible and Unsupported Costs


     FINDING                                             INELIGIBLE 1/           UNSUPPORTED 2/
     1. Inequitable Allocation of Costs                                              $77,638
     3. Ineligible Vacation and Sick Leave Pay               $1,796




1/        Ineligible amounts obviously violate law, contract, HUD or local agency policies, or regulations,
          such as buying unneeded services or not depositing receipts..

2/        Unsupported amounts do not obviously violate law, contract policy, or regulation, but warrant
          being contested for various reasons, such as lack of satisfactory documentation to support
          eligibility and HUD approval.




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2001-BO 1004     Page 22
                                                                                   Appendix B

Allocation of Salaries - 1998



                                PHA
                               Owned       PHA Owned      Leased      Leased
        Position     Salary     State       Federal        State      Federal     Total
Units                            216          111           124         159        610

Exec. Director       $50,472
WHA Allocation                   $15,053        $11,005      $8,632     $15,782       $50,472
Unit Allocation                  $17,872         $9,184     $10,260     $13,156       $50,472
Difference                      ($2,819)         $1,821    ($1,628)      $2,626            $0

Assitant Executive   $36,053
Director.
WHA Allocation                  $12,148         $10,164          $0     $13,741       $36,053
Unit Allocation                 $12,766          $6,561      $7,329      $9,397       $36,053
Difference                       ($618)          $3,603    ($7,329)      $4,344            $0



Staff Accountant     $27,321
WHA Allocation                   $9,481          $9,465     $1,152       $7,223       $27,321
Unit Allocation                  $9,674          $4,972      $5,554      $7,121       $27,321
Difference                       ($193)          $4,493    ($4,402)       $102             $0



Receptionist-1       $14,205
WHA Allocation                    $3,792         $6,206          $0      $4,207       $14,205
Unit Allocation                   $5,030         $2,585      $2,887      $3,703       $14,205
Difference                      ($1,238)         $3,621    ($2,887)       $504             $0



Receptionist-2       $11,368
WHA Allocation                        $0         $4,123     $1,337       $5,908       $11,368
Unit Allocation                   $4,025         $2,069     $2,311       $2,963       $11,368
Difference                      ($4,025)         $2,054     ($974)       $2,945            $0



Total Difference                ($8,893)        $15,592   ($17,220)     $10,521           $0




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2001-BO-1004     Page 24
                                                                                   Appendix C

Allocation of Salaries - 1999



                                 PHA        PHA Owned
                                Owned        Federal      Leased       Leased
Position              Salary     State                     State       Federal     Total
Units                             216           41          124          159        540
Exec. Dir.            $52,000
WHA Allocation                    $15,655       $11,244       $8,977     $16,124           $52,000
Unit Allocation                   $20,800        $3,948      $11,941     $15,311           $52,000
Difference                       ($5,145)        $7,296     ($2,964)       $813                 $0

Assistant Executive
Director.             $37,539
WHA Allocation                    $12,509       $10,822           $0     $14,208           $37,539
Unit Allocation                   $15,016        $2,850       $8,620     $11,053           $37,539
Difference                       ($2,507)        $7,972     ($8,620)      $3,155                $0



Staff Accountant.     $28,410
WHA Allocation                     $9,860        $9,841       $1,198      $7,511           $28,410
Unit Allocation                   $11,364        $2,157       $6,524      $8,365           $28,410
Difference                       ($1,504)        $7,684     ($5,326)      ($854)                $0



Receptionist-1        $14,777
WHA Allocation                     $3,944        $6,456            0      $4,377           $14,777
Unit Allocation                    $5,911        $1,122       $3,393      $4,351           $14,777
Difference                       ($1,967)        $5,334     ($3,393)         $26                $0



Receptionist-2        $20,683
WHA Allocation                     $4,310        $5,713       $2,472      $8,188           $20,683
Unit Allocation                    $8,273        $1,571       $4,749      $6,090           $20,683
Difference                       ($3,963)        $4,142     ($2,277)      $2,098                $0



Total Difference                ($15,086)       $32,428    ($22,580)      $5,238               $0




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2001-BO-1004     Page 26
                                                                                       Appendix D

Allocation of Salaries - 2000



                                  PHA
                                 Owned       PHA Owned                    Leased
 Position              Salary     State        Federal     Leased State   Federal     Total
 Units                            216            41            111         159         527

 Executive Director    $52,000
 WHA Allocation                    $18,857       $4,820          $9,659     $18,664      $52,000
 Unit Allocation                   $21,313       $4,045         $10,953     $15,689      $52,000
 Difference                       ($2,456)         $775        ($1,294)      $2,975           $0


 Assistant Executive
 Director.             $37,494
 WHA Allocation                    $13,009      $10,587              $0     $13,898      $37,494
 Unit Allocation                   $15,368       $2,917          $7,897     $11,312      $37,494
 Difference                       ($2,359)       $7,670        ($7,897)      $2,586           $0



 Staff Accountant      $28,429
 WHA Allocation                   $17,960        $2,149              $0      $8,320      $28,429
 Unit Allocation                  $11,652        $2,212          $5,988      $8,577      $28,429
 Difference                        $6,308         ($63)        ($5,988)      ($257)           $0



 Receptionist-1        $14,786
 WHA Allocation                    $8,921        $1,989              $0      $3,876      $14,786
 Unit Allocation                   $6,060        $1,151          $3,114      $4,461      $14,786
 Difference                        $2,861          $838        ($3,114)      ($585)         ($0)


 Administrative.       $20,700
 Assistant
 WHA Allocation                     $4,308            $0         $8,616      $7,776      $20,700
 Unit Allocation                    $8,484        $1,611         $4,360      $6,245      $20,700
 Difference                       ($4,176)      ($1,611)         $4,256      $1,531           $0



 Total Difference                    $178        $7,609       ($14,037)      $6,250           $0




                                             Page 27                                    2001-BO-1004
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2001-BO-1004     Page 28
                             Appendix E

Auditee Comments




                   Page 29   2001-BO-1004
Appendix E




2001-BO 1004   Page 30
          Appendix E




Page 31   2001-BO-1004
Appendix E




2001-BO 1004   Page 32
                                                                                  Appendix F

Distribution
Secretary, S
Office of Administration, S
Chief of Staff, S
Senior Advisor to the Secretary, S
Senior Staff Member, S
Deputy General Counsel for Housing Finance and Operations, S
Deputy Chief of Staff for Policy and Program, S
Executive Office for Administrative Operations and Management, S
Office of Government National Mortgage Association, T
Director, Office of Departmental Equal Employment Opportunity, U
Chief Procurement Officer, N
Director, Office of Departmental Operations and Coordination, I
Department of Enforcement Center, DEC
Office of the Chief Financial Officer, F
Deputy Chief of Staff for Intergovernmental Affairs, S
Chief Information Officer, Q
Director, Real Estate Assessment center, X, 1280 Maryland Avenue, SW, Suite 800
Director, Office of Multifamily Assistance Restructuring, Y
General Deputy Assistant Secretary for Housing, H
Inspector General, G
Deputy Assistant Inspector General for Audit, GA
Assistant Inspector General for Audit, GA
Assistant Inspector General for Investigation, GI
Acting Director, Program Research and Planning Division, GAP
Acting Director, Financial Audits Division, GAF
Director, Information Systems Audit Division, GAA
Counsel to the Inspector General, GC
Central Records, GF
Semi-Annual Report Coordinator, GF
Office of Inspector General Webmaster - Electronic format
Public Affairs Office, G
Acquisitions Librarian, Library, AS
District Inspector General (2-11)
Acting Secretary’s Representative, 1AS
Special Agent-In-Charge, 1AGI
Primary field Audit Liaison Officer, 3AFI
Management Analyst, PF
Departmental Audit Liaison Officer, FM

Auditee (2)



                                         Page 33                                  2001-BO-1004
Appendix F


Armando Falcon, Director, Office of Federal Housing Enterprise Oversight, 1700G Street, NW, Room
4011, Washington, DC 20552

Sharon Pinkerton, Staff Director, Subcommittee on Criminal Justice, Drug Policy & Human Resources,
B373 Rayburn House Office Bldg., Washington DC 20515.

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

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

The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn Bldg.,
House of Representatives, Washington, DC 20515

The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform, 2204
Rayburn Bldg., House of Representatives, Washington, DC 20515

Ms. Cindy Fogleman, Subcommittee on Oversight and Investigations, Room 212, O’Neill House Office
Building, Washington, DC 20515

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

Stanley Czerwinski, Associate Director, Resources, Community, and Economic Development Division,
United States General Accounting Office, 441 G Street, NW, Room 2T23, Washington, DC 20548




2001-BO 1004                              Page 34