AUDIT REPORT
CITY OF MERIDEN HOUSING AUTHORITY
MERIDEN, CONNECTICUT
2001-BO-1005
MAY 21, 2001
OFFICE OF AUDIT, NEW ENGLAND
BOSTON, MASSACHUSETTS
Issue Date
May 21, 2001
Audit Case Number
2001-BO-1005
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: Housing Authority of the City of Meriden
Meriden, Connecticut
We performed a review of the Low-Income Public Housing and Section 8 Programs of the Housing
Authority of the City of Meriden, Connecticut (PHA). The objective of our review was to determine if
the PHA’s management of its public housing and Section 8 activities is effective and provides decent,
safe and sanitary housing for its tenants.
The report contains two findings: 1) the PHA has not strictly followed procurement requirements and 2)
the PHA has not administered its Section 8 Certificate and Voucher programs in an effective and
efficient manner.
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 with copies of any correspondence or directives issued related to this audit.
If you have any questions, please contact our office at (617) 565-5259.
Management Memorandum
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2001-BO-1005 Page ii
Executive Summary
We performed an audit of the Low-Income Public Housing (LIPH) and Section 8 Programs of the
Housing Authority of the City of Meriden, Connecticut (PHA). The purpose of our review was to
determine if the PHA’s management of its public housing and Section 8 activities is effective and
provides decent, safe and sanitary housing for its tenants. Specifically, to determine whether the PHA
is:
Ø Using its resources and managing its programs and operations efficiently, effectively, and
economically; and
Ø Complying with the terms and conditions of its Annual Contributions Contract (ACC),
applicable laws, HUD regulations, and other applicable directives.
Our review disclosed that the PHA has not strictly followed
Audit Results procurement requirements. Furthermore, the PHA has not
administered its Section 8 Existing Certificate and Voucher
programs in an efficient and effective manner.
The PHA has not maintained a procurement contract
administration system that would readily identify their
contracting activity, contract amounts, or outstanding obligations
on unfinished contracts. Our review disclosed that the PHA
often did not obtain the required verbal or written quotations,
utilized multiple purchase orders instead of formally contracting,
and did not always maintain sufficient records to detail the
history of its procurements. As a result, the PHA cannot assure
itself or HUD that it obtained the most advantageous prices in
its procurement of goods and services.
The PHA also needs to improve its administration of the
Section 8 Programs. The PHA’s Section 8 Certificate and
Voucher programs were under-utilized. The lease-up rates
during fiscal years (FYs) 1998 through 2000 averaged 85
percent, less than the 95 percent desired by HUD. In addition,
the PHA received $23,242 in excess subsidy from HUD in the
form of ongoing administrative fees for which the PHA was not
entitled during FY 1999. The PHA improperly calculated
earned ongoing administrative fees by including incoming
portable units and units not supported by Housing Assistance
Payment contracts.
Page iii 2001-BO-1005
Executive Summary
We are recommending that your office require the PHA to
Recommendations establish adequate procurement management controls to
identify, track, and monitor contract awards and establish
service contracts for its reoccurring service needs through
formal solicitation. Furthermore, the PHA should be required
to establish controls over the calculation of ongoing
administrative fees and return any excess subsidy claimed.
Since the PHA indicated in its response to the draft audit report
that the lease utilization rate has increased, no recommendation
is required.
The findings were discussed with the PHA during the course of
Findings and the audit. On March 16, 2001, we provided the PHA a copy
Recommendations Discussed of the draft audit report for comment. An exit conference was
held at the PHA on April 17, 2001 at which time we received
the PHA’s response. The PHA generally agreed with the
contents of the report but noted improvements. Appropriate
revisions were made where deemed necessary. We have
included pertinent comments of the PHA’s response in the
Findings section of the report and Appendix B.
2001-BO-1005 Page iv
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1. PHA Did Not Follow Procurement Requirements 5
2. PHA Needs To Improve Administration of Its
Section 8 Programs 15
Management Controls 19
Appendices
A Schedule of Ineligible Costs 21
B Auditee Comments 23
C Distribution 27
Page v 2001-BO-1005
Table of Contents
Abbreviations
ACC Annual Contributions Contract
CEO Chief Executive Officer
CFP Capital Fund Program
CFR Code of Federal Regulations
CGP Comprehensive Grant Program
FY Fiscal Year
HAP Housing Assistance Payments
HOPE Housing Opportunities for People Everywhere
HUD U.S. Department of Housing and Urban Development
IPA Independent Public Accountant
LIPH Low-Income Public Housing
PHA Housing Authority of the City of Meriden
PHAS Public Housing Assessment System
PIH Public and Indian Housing
QHWRA Quality Housing Work Responsibility Act
REAC Real Estate Assessment Center
SEMAP Section 8 Management Assessment Program
2001-BO-1005 Page vi
Introduction
The Housing Authority of the City of Meriden, Connecticut (PHA) was created pursuant to Section 8-
40 of the Connecticut General Statutes. The PHA’s offices are located at 22 Church Street, Meriden,
Connecticut 06451. The PHA provides low rent housing for qualified individuals in accordance with
rules and regulations prescribed by the United States Department of Housing and Urban Development
(HUD) in accordance with the United States Housing Act of 1937, as amended. The PHA is governed
by a five-member Board of Commissioner (appointed by the Mayor of the City of Meriden) which is
chaired by Michael Quinn. The Chief Executive Officer, W. James Rice, is responsible for the
administration of PHA operations.
The PHA operates both federally and non-federally assisted housing programs through the same Board
of Commissioners and staff. As of September 30, 2000, the PHA was administering 1,096 Federal
units, 485 low-income public housing (LIPH) units and 611 Section 8 units. The PHA was also
administering 255 State units, 40 elderly units and 215 moderate rental units.
In November of 1998, the PHA suffered a computer system “crash”. Consequently, the PHA had to
convert to a new computer system. The PHA has experienced persistent problems with the start-up of
its new system and has not been able to produce the necessary reports that HUD requires. The PHA
continues to work with the software provider to improve the functionality of their computerized system
and plans to continue its efforts until such time as all problems are resolved.
Through ineffective management of the Comprehensive Grant Program (CGP), the PHA lost $689,769
in grant funds through recapture by HUD in fiscal year (FY) 2000. This occurred because the PHA did
not obligate CGP funds within the two-year timeframe permitted under HUD regulations. As a result,
the former Director of Modernization resigned on May 12, 2000 and the PHA contracted with a
consulting firm to administer its CGP. The PHA hired a new Director of Modernization during the
month of December 2000 and continues to work with the HUD Connecticut State Office, Office of
Public Housing, to avoid future recapture of CGP funds.
The PHA is considering pursuing demolition of its Mills Memorial Apartments development through a
grant under HUD’s Housing Opportunities for People Everywhere (HOPE) VI Program. The PHA
intended on submitting a HOPE VI grant application during the spring of 2000, but met heavy resistance
from its residents, as well as the Connecticut Civil Liberties Union. The PHA’s HOPE VI Consultant
recommended that the PHA delay the application submission for a year until the spring of 2001 due to
the resident opposition and the possible detrimental impact the recapturing of CGP funds by HUD might
have on the PHA’s chances of receiving a competitive HOPE VI grant. Currently, the PHA has put its
HOPE VI grant application submission plans on hold.
Page 1 2001-BO-1005
Introduction
The overall audit objective was to determine if the PHA’s
Audit Objectives management of its public housing and Section 8 activities is
effective and provides decent, safe and sanitary housing for its
tenants. Specific audit objectives were to determine whether
the PHA is:
Ø Using its resources and managing its programs and
operations efficiently, effectively, and economically; and
Ø Complying with the terms and conditions of its Annual
Contributions Contract, applicable laws, HUD regulations,
and other applicable directives.
The audit was conducted between August 2000 and January
Audit Scope and 2001, and covered the period October 1, 1997 through July
Methodology 31, 2000. The audit period was extended, where necessary, to
meet our objectives.
To accomplish the audit objectives, we reviewed procedures
and tested compliance as follows:
Ø Reviewed Federal requirements including Code of Federal
Regulations, HUD Handbooks, Public and Indian Housing
Notices and Directives.
Ø Reviewed the PHA’s organizational and administrative
structure, administrative plans and personnel policies, the
recorded minutes of the Board of Commissioners meetings,
and procurement and maintenance policies.
Ø Reviewed Independent Public Accountant reports for FYs
1997, 1998 and 1999, and PHA financial books and
records for FYs 1998, 1999 and 2000.
Ø Reviewed HUD Public Housing Assessment System
reports for FYs 1999 and 2000 including inspection reports
prepared by HUD’s Real Estate Assessment Center
(REAC).
Ø Reviewed files maintained by the U.S. Department of
Housing and Urban Development relating to the PHA.
2001-BO-1005 Page 2
Introduction
Ø Selected and reviewed 24 of the PHA’s procurements (17
under small purchase procedures (less than $20,000) and 7
under sealed bid or competitive/noncompetitive proposal
procedures (above $20,000)), as well as the procurement
of 2 professional consultants, Secour Associates, LLC
(CGP Consultant) and Cornerstone Housing, LLC (HOPE
VI Consultant).
Ø Examined the PHA’s annual public housing unit inspection
reports and REAC physical inspection reports, work
orders, and other maintenance documentation.
Ø Calculated the PHA’s Section 8 program lease-up rates for
FYs 1998, 1999 and 2000 in accordance with HUD
regulations to determine if the PHA’s Section 8 programs
met the 95 percent lease-up rate threshold.
Ø Examined the PHA’s computation and support for Section
8 earned ongoing administrative fees for FYs 1998 and
1999 to determine if fees claimed by the PHA were
reasonable.
Ø Reviewed various CGP expenditure reports and
Performance and Evaluation Reports to assess the PHA’s
short/long range plans for its three Federal developments
and selected 9 expenditures to ensure CGP eligibility.
Ø Reviewed documentation and correspondence regarding
the PHA’s decision to seek demolition of its Mills Memorial
Apartments development through the pursuit of a HOPE VI
Grant to determine the reasonableness of the PHA’s
decision.
Ø Interviewed the PHA’s Chief Executive Officer and
applicable staff, and staff from the HUD, Connecticut State
Office, Office of Public Housing as necessary.
Our audit was conducted in accordance with generally
accepted government auditing standards.
Page 3 2001-BO-1005
Introduction
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2001-BO-1005 Page 4
Finding 1
PHA Did Not Follow
Procurement Requirements
Although the Housing Authority of the City of Meriden’s (PHA) procurement policy meets HUD
requirements, the PHA does not follow it. Specifically the PHA: cannot readily provide information
regarding whom it has contracted with, for how long or for how much, and whether those contracts are
expiring or have expired; did not obtain the necessary written/verbal quotations; and utilized multiple
purchase orders for the same service instead of formal contracting. Further, the PHA did not properly
identify or use evaluation factors with its competitive procurements or adequately document the
contracting process. Consequently, the PHA cannot assure HUD that it used full and open competition
to obtain the best available prices in its procurement of goods and services.
HUD Regulations on Administrative Requirements for Grants
HUD Procurement and Cooperative Agreements with State, Local and Federally
Requirements Recognized Indian Tribal Governments contain Federal
procurement standards (24 CFR 85.36). These regulations, in
part, require the grantees:
Ø Maintain a contract administration system, which ensures
that contractors perform in accordance with the terms,
conditions, and specifications of their contracts or purchase
orders (24 CFR 85.36(b)(2));
Ø Maintain sufficient records to detail the significant history of
a procurement to show the rationale for the method of
procurement, selection of contract type, contractor
selection or rejection, and the basis for the contract price
(24 CFR 85.36(b)(9));
Ø Conduct all procurement in a manner to provide full and
open competition (24 CFR 85.36 (c)(1));
Ø Be placed on pre-award review when their system fails to
comply with HUD’s required procurement standards (24
CFR 85.36(g)(2)).
As required by HUD Regulations, the PHA adopted its own
Procurement Policy (Policy), which complies with HUD
procurement regulations and HUD Handbook 7460.8 –
Page 5 2001-BO-1005
Finding 1
Procurement Handbook for Public Housing Agencies. The
Policy provides that all procurement transactions be
administered by the Executive Director (currently the Chief
Executive Officer), or official designated by the Executive
Director. The Policy, however, has not been updated since its
creation on July 29, 1991.
The PHA did not maintain a contract administrative system that
Contract Administrative would readily identify contracting activity, contract amounts, or
System Not Maintained outstanding obligations on unfinished contracts. Prior to June
2000, the PHA’s former Director of Modernization did
maintain a hand-written purchase order ledger dating back to
mid 1999. However, the purchase order ledger did not always
indicate the goods or services provided, the amount paid or, the
date of the procurement.
Upon the former Director of Modernization’s resignation on
May 12, 2000, the PHA contracted with a Consultant to
administer the PHA’s Comprehensive Grant Program (CGP).
The CGP Consultant created an expenditure report in an effort
to identify all of the PHA’s CGP expenditures from program
inception (Fiscal Year 1993). From the expenditure report, we
identified a total of $1,035,991 expended during the audit
period of October 1, 1997 though July 31, 2000.
We selected seventeen procurements under small purchase
Quotations Not Obtained procedures between $25 and $20,000 (total obligation of
$36,413 per purchase orders/contracts). With the exception of
just two procurements, the PHA did not adhere to its own
Policy or HUD procurement regulations. The PHA did not
obtain the required verbal or written quotes for 12 of the
purchases and no documentation could be located for the other
3. Verbal and written quotations serve to ensure that there is
free and open competition and also to avoid the notion that
there may be selective favoritism. Without sufficient records to
detail the history of a procurement, including the necessary
verbal or written quotations, the PHA cannot assure itself or
HUD that goods and services were obtained at the most
advantageous prices.
Services aggregating greater than the PHA’s established
Multiple Purchase Orders threshold shall not be broken down into several purchases that
Used for Same Service are less than the limit merely to permit a contract under the small
2001-BO-1005 Page 6
Finding 1
purchase procedures. If there is a recurring need for services
or supplies, that is estimated to go over the threshold applicable
to the PHA, sealed bidding or competitive proposal procedures
shall be used rather than small purchase procedures (HUD
Handbook 7460.8, REV-1, Section 4-3(A)).
The PHA’s Purchasing and Procurement Agent advised that
because procurement of small purchases had not been
adequately documented in the past, the PHA did not know
when formal contracting procedures were applicable. A system
is currently being developed which would allow the PHA to
determine when formal contracting procedures should be
utilized.
Our review disclosed two instances where formal contracting
procedures should have been used, where only the purchase
order procedure was used. The aggregate amount of payments
to each vendor were over $20,000, the established PHA dollar
threshold separating small purchases from sealed bid and
competitive proposal requirements:
- The PHA expended $39,503 (representing seven
disbursements between $425 and $22,065) during a
fourteen-month period from August 1999 through
September 2000 for tree services.
- The PHA expended $24,225 (representing seven
disbursements between $1,000 and $7,000) during the
eleven-month period from December 1999 through
October 2000 for painting services.
The PHAs Purchasing and Procurement Agent advised no
formal contracts were executed for these venders.
Typically, a PHA can get lower prices when a larger volume is
required or larger quantities are purchased. By procuring
reoccurring goods and services on an as-needed basis
throughout the year, the PHA has no assurance it is obtaining
the most advantageous prices available. Whenever possible,
the PHA should solicit competitive price or rate quotes from an
adequate number of qualified sources.
Page 7 2001-BO-1005
Finding 1
When procuring Professional Services, PHAs must follow HUD
Professional Services Not regulations and use the competitive proposals method, in which
Documented price is evaluated together with other criteria to choose the
proposal offering the best value to the PHA (HUD Handbook
7460.8, REV-1, Section 4-27(B)(1)). HUD regulations further
require that “Requests for Proposals” be publicized and identify
all evaluation factors and their relative importance, and that
proposals be solicited from an adequate number of sources (24
CFR 85.36 (d)(3)(i) and (ii)). The PHA did not adhere to
these procurement regulations for two consultants (the CGP
Consultant previously referred to and a Housing Opportunities
for People Everywhere (HOPE) VI Consultant). As a result,
there is no assurance that the PHA obtained the best possible
service available.
The PHA procured the services of a CGP Consultant based on
a recommendation by the Deputy Director of the Housing
Authority of the City of Stamford, Connecticut without the
benefit of formal advertising. An Agreement for Consulting
Services was executed on June 6, 2000 at an hourly rate of
$75/hour. The PHA’s Chief Executive Officer advised that he
considered one additional firm but he could not provide the
evaluation factors utilized in selecting one firm over the other.
We were further advised by the Chief Executive Officer that the
firm not selected was never interviewed for the position, but a
resume was submitted for the PHA’s evaluation. The PHA’s
Chief Executive Officer advised that he had no prior working
relationship with the CGP Consultant and did not know him
personally.
Nonetheless, the absence of a formal solicitation and the lack of
documentation evaluating the firms may raise the perception,
whether warranted or not, that the PHA either pre-selected or
favored the firm to whom the contract was awarded. More
importantly, the PHA cannot assure HUD that it obtained the
best possible service from the most qualified source because it
can offer no documentation with regard to how the firms were
evaluated, the factors evaluated, and how they reached their
conclusion.
To assist in a HOPE VI Program application process, the PHA
issued a Request for Qualifications publication during February
and March 2000. The PHA received two responses; one from
2001-BO-1005 Page 8
Finding 1
Cornerstone Housing, LLC and the other from Secour
Associates, LLC, the same firm awarded the CGP Consulting
contract with the PHA. In response to our draft audit report,
we were advised that another firm, Holland and Knight, LLP,
submitted a letter of interest but was not evaluated. The PHA’s
Chief Executive Officer stated that the PHA’s former Director
of Modernization was responsible for the procurement and
recommended Cornerstone Housing, LLC. However, the
PHA’s Chief Executive Officer advised that he was never
presented with a formal memorandum or other type of report or
evaluation from his former Director of Modernization on how he
came to his conclusion. We were unable to locate any
documentation regarding the evaluation factors considered and
how the PHA reached their conclusion.
HUD regulations require grantees and sub-grantees to maintain
records sufficient to detail the significant history of a
procurement (24 CFR 85.36 (b)(9)). In both instances above,
the PHA did not maintain sufficient records and there is no
assurance that the PHA followed proper HUD Procurement
regulations.
On March 10, 2000, Cornerstone Housing, LLC submitted
HOPE VI Contract Should their proposal to the MHA to “plan, prepare, and submit a
be Re-negotiated comprehensive redevelopment plan (HOPE VI Application)
to secure HOPE VI funding by May 18, 2000.” In its cost
proposal, Cornerstone Housing, LLC proposed a fixed fee
price of $166,400 due to the intense deadline pressure (less
than 70 days) to meet the requirements specified and submit a
HOPE VI application by May 18, 2000. On March 22, 2000,
the PHA awarded a contract to Cornerstone Housing, LLC for
the proposed amount of $166,400. According to the contract,
“if performance of this contract is terminated by either
party, prior to the completion of the application for the
HOPE VI grant, by consultant/developer, the MHA will
negotiate in good faith the contract costs to agreed date
in time, which will be less than the fixed price of
$166,400.”
The PHA never submitted a HOPE VI application during May
2000 due, in part, to the tenant opposition expressed and the
concerns of Cornerstone Housing, LLC itself over the effects
Page 9 2001-BO-1005
Finding 1
the $689,769 in CGP funds recaptured by HUD would have on
the PHA’s HOPE VI application. The PHA’s Chief Executive
Officer advised that the PHA has put its submission plans on
hold. As the “intense deadline” cited in Cornerstone Housing
LLC’s fee proposal no longer exists, the $166,400 fixed fee
should be re-negotiated by the PHA. The Chief Executive
Officer advised that he spoke with the principals at Cornerstone
Housing, LLC regarding the need to re-negotiate the contract
terms and they were receptive to the idea, but at the time of our
review no formal meeting had been scheduled.
As noted above, the PHA has not adhered to its own
Procurement Procedures procurement policy or HUD procurement regulations. Proper
Need Improvement procurement is vital to ensuring PHAs receive the most
advantageous prices for goods and services they obtain and to
help reduce the negative perception of favoritism that comes
with insufficient evaluation documentation.
Auditee Comments Overall, the PHA did not disagree with our assessment.
However, the PHA stated that significant changes have
occurred in the Modernization department. The PHA believes
that they have taken the necessary steps to ensure that proper
procurement requirements are adhered to, and a contract
administrative system is in place allowing the PHA to document,
track and monitor contract awards and establish a service
contract file for its recurring service needs. The PHA disagreed
with our conclusion that HUD regulations were not followed in
the procurement of their HOPE VI Consultant.
The PHA expressed that its former Director of Modernization
left the PHA in May 2000. The PHA stated that, at that point,
they were faced with an emergency situation and were
attempting to locate, identify and reconstruct all present and
past (CGP) purchases. The PHA stated that, at times, the
records were either non-existent or unable to be located.
The PHA felt a consultant with considerable modernization and
fiscal expertise was an essential, immediate need. The PHA
stated that although Secour Associates, LLC was subsequently
hired, another firm, Eagle Consulting Services, submitted a letter
of interest, but had limited housing experience. The PHA
advised that Secour Associates, LLC has located or
2001-BO-1005 Page 10
Finding 1
reconstructed all necessary records and documentation thereby
allowing the PHA to close out four CGPs with the formal
approval from HUD.
The PHA stated that Secour Associates, LLC also introduced a
computer program that internally monitors all past, present and
future expenditure requirements in the Modernization Program
and believes the probability of not obligating funds in a timely
manner is somewhat negated. Per the PHA, the computer
program includes a contract log, which tracks all expenditures
and contract payments to the contractor as well as any change
orders.
To address our concern that the PHA did not utilize formal
bidding procedures for its recurring services, the PHA stated
that it obtained formal written proposals from various painting
contractors from January 13, 1997 to October 27, 1999. The
PHA stated that the painting contractor was hired on an “as
needed” basis for painting vacant unit turnovers, when the
volume was more than could be handled through the “in house
– maintenance staff.”
With regard to the PHA’s hiring of a HOPE VI Consultant, the
PHA stated that they located a document in which the former
Director of Modernization outlines criteria for selection of a
consultant. Included in the criteria, a scoring procedure is
described which the PHA believes is the criteria utilized by the
former Director of Modernization in making his decision to
recommend Cornerstone Housing, LLC. The PHA, however,
stated that the actual scoring sheet could not be located. The
PHA also advised that a number of firms requested information
on HOPE VI and one firm sent a letter of interest, but was not
evaluated by the previous Director of Modernization. Lastly,
the PHA advised that the present Director of Modernization
and Procurement contacted a representative of Cornerstone
Housing, LLC, requesting that negotiations be reopened and
received verbal assurance from the representative that
negotiations could be reopened.
Page 11 2001-BO-1005
Finding 1
OIG Evaluation of We recognize the PHA’s efforts to ensure that proper
Auditee Comments procurement requirements are adhered to, and a contract
administration system is in place allowing the PHA to document,
track and monitor contract awards. We believe the PHA is
taking positive steps to address our concerns. Nonetheless, our
concerns remain.
At the time of our review, the computer program introduced by
Secour Associates, LLC to track all past, present and future
expenditure requirements in the Modernization Program,
including the addition of a contract log, was a work in progress.
Additionally, the PHA recently hired a new Director of
Modernization and Secour Associates, LLC is no longer
intimately involved in the PHA’s operations. Given this
transition, we are concerned with the full implementation of the
computerized tracking system and the PHA’s ability to readily
provide information regarding whom it has contracted with, for
how long or for how much, and whether the contracts are near
expiration or have expired.
Additionally, although the PHA received written proposals for
painting services from January 1997 through October 1999, the
PHA did not provide any documentation that they ever formally
solicited for painting services, whereas responses were
received, evaluated, scored, and a decision was made. The
written proposals received by the PHA were over the course of
almost three years. The PHA, during the course of the audit,
advised that because procurement of small purchases had not
been adequately documented in the past, the PHA did not
know when formal contracting procedures were applicable.
The PHA did not address the other recurring service need
referred to in the report.
We disagree with the PHA that the HOPE VI Consultant was
procured in accordance with HUD regulations and with the
benefit of the competitive proposals method. One of the main
components of the competitive proposals method is the
evaluation of the responses received. The PHA received two
formal responses, one from Cornerstone Housing, LLC and
one from Secour Associates, LLC. The PHA advised that they
also received a letter of intent from a third firm, Holland and
2001-BO-1005 Page 12
Finding 1
Knight, LLP, but to the best of their knowledge, this firm was
not evaluated. The PHA readily admits that they were unable
to locate the actual scoring sheet used to evaluate the
respondents by the former Director of Modernization and no
other evaluation documentation was provided. The PHA
cannot document its rationale for selecting one firm over the
other and cannot assure HUD that the most advantageous price
was obtained. Finally, we commend the PHA for pursuing
contract renegotiations with Cornerstone Housing, LLC. As
Cornerstone Housing, LLC has not formally responded to the
PHA’s request, our recommendation remains.
Recommendations We recommend that your office require and assure that the
PHA:
1A. Establishes adequate procurement management controls
to identify, track, and monitor contract awards and
payment activity;
1B. Establishes service contracts for its reoccurring service
needs by formally soliciting for such contracts; and
1C. Pursues contract re-negotiation with Cornerstone
Housing, LLC.
Page 13 2001-BO-1005
Finding 1
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2001-BO-1005 Page 14
Finding 2
PHA Needs To Improve
Administration Of Its Section 8 Programs
The Housing Authority of the City of Meriden (PHA) has not administered its Section 8 Certificate and
Voucher programs in an effective and efficient manner. Lease-up rates were under the 95 percent
threshold desired by HUD. The lease-up rates for fiscal years (FYs) 1998, 1999, and 2000 averaged
only 85 percent. The PHA also received excess Section 8 subsidies of $23,242 due to the improper
calculation of ongoing administrative fees.
HUD requires that the Field Office monitor the leasing progress
Utilization Must Be Greater of a PHA if there is a substantial discrepancy between the
Than 95% authorized units under Annual Contributions Contract (ACC)
and the actual units under lease. HUD desires that at least 95
percent occupancy be achieved. HUD may reduce the number
of units authorized if there is a substantial discrepancy in the
leasing performance or HUD may prohibit use of all or part of
the operating reserve for other housing purposes until HUD
determines that administration is adequate (HUD Handbook
7420.3, REV-2, CHG-14, “Section 8 Housing Assistance
Payments Program,” Chapter 5).
The PHA’s Section 8 Certificate and Voucher programs were
Lease-up Rates Below 95% underutilized. The lease-up rates for FYs 1998, 1999, and
2000 were less than the desired 95 percent. The lease-up rates
were as follows:
FISCAL YEAR ENDED LEASE-UP RATE
September 30, 1998 84.81%
September 30, 1999. 84.18%
September 30, 2000 86.34%
The Section 8 Certificate and Voucher programs provide rental
assistance to help very low-income families afford decent, safe,
and sanitary rental housing. The PHA’s failure to maintain an
acceptable level of utilization limited affordable housing
opportunities for low-income families.
Page 15 2001-BO-1005
Finding 2
The PHA was aware of the low lease-up rates. The
Depleted Waiting Lists underutilization of the Section 8 programs was caused by
depleted Section 8 waiting lists. The waiting lists for 2, 3, and
4-bedroom units were closed to new applicants in March 1993,
and the waiting list for 1-bedroom units was closed to new
applicants in August 1996. The depleted waiting lists did not
provide an adequate applicant pool to select from.
The PHA opened the Section 8 waiting list twice during FY
2000. The PHA also dropped some of the federal preferences
in accordance with Sections 514 and 545 of the Quality
Housing and Work Responsibility Act (QHWRA) of 1998. The
QHWRA repealed the mandatory Federal preferences which
included applicants involuntarily displaced, living in substandard
housing, or paying more than 50 percent of family income for
rent and authorized PHAs to develop locally-based admission
preferences based upon local housing needs and priorities. The
PHA has since admitted several former public and state housing
residents into the Section 8 Program. PHA records indicated
that the lease-up rate increased to 91.98 percent as of
November 1, 2000. However, in response to our draft audit
report, the PHA advised the lease-up rate, as of April 1, 2001,
was 95 percent.
HUD pays a PHA an ongoing administrative fee for each
Excess Subsidy Received for authorized program unit under a Housing Assistance Payments
Administrative Fees (HAP) contract (24 CFR 982.152(b)). Section 8 portability
provisions require a PHA to bill the initial PHA for
administrative fees for incoming portable units or absorb those
units into its own program (24 CFR 982.355 (d) and (e).
Section 8 portability allows families to move and receive
assistance outside of the jurisdiction of the administering PHA
(24 CFR 982.353(b)).
The PHA received $23,242 in excess subsidy from HUD in the
form of ongoing administrative fees for which the PHA was not
entitled to during FY 1999. The PHA improperly calculated
earned ongoing administrative fees by including incoming
portable units and units not supported by HAP contracts. The
PHA’s fee accountant prepared the financial statements and
calculated the ongoing administrative fees based on hand written
information provided by the PHA. However, there was no
evidence that the PHA verified the units under HAP contract.
2001-BO-1005 Page 16
Finding 2
Auditee Comments
The PHA agreed with our assessment of its lease utilization rate.
However, the PHA reported that their utilization rates have
steadily increased since our departure, and as of April 1, 2001
the utilization rate was 95 percent. The PHA also stated that as
the number of Section 8 applicants dwindled, the waiting list
would be re-opened. The PHA did not respond to our
concerns regarding administrative fees.
The PHA further pointed out a couple of inaccuracies for our
consideration regarding the number of authorized Section 8
units and how Section 8 certificates were issued.
OIG Evaluation of We commend the PHA for its continued efforts to increase its
Auditee Comments lease utilization rate. Based on the PHA’s response and the
supporting documentation provided, we consider our concern
with the PHA’s utilization rate resolved and no recommendation
is required. As the PHA did not respond to our concerns
regarding administrative fees, the report remains unchanged.
We considered the PHA’s comments and made the necessary
corrections to the number of authorized Section 8 units and how
Section 8 certificates were issued.
Recommendations We recommend that your office require and assure that the
PHA:
2A. Establishes controls over the calculation of ongoing
administrative fees and provide assurance to HUD that
no excess subsidy was claimed for FY 2000; and
2B. Returns the excess subsidy in the amount of $23,242.
Page 17 2001-BO-1005
Finding 2
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2001-BO-1005 Page 18
Management Controls
In planning and performing our audit, we obtained an understanding of the management controls that
were relevant to our audit objectives. We considered the management control systems of the Housing
Authority of the City of Meriden (PHA), specifically as related to its Low-Income Public Housing and
Section 8 Programs, in order to determine our auditing procedures and not to provide assurance on
management controls.
Management controls consist of a plan or 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 General administration accounting
Ø Management controls over program expenditures
Ø Management controls over procurement and contracting
Ø Management controls over the leasing of Section 8 units
Ø Administration of the Comprehensive Grant Program
Ø Maintenance operational policies
Ø Fiscal reporting and management
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 financial statements
and reports.
Our review identified significant weaknesses over the PHA’s
Significant Weaknesses overall procurement procedures and its ability to properly
administer certain aspects of its Section 8 Programs. These
weaknesses are described in the Findings section of this report.
Page 19 2001-BO-1005
Management Controls
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2001-BO-1005 Page 20
Appendix A
Ineligible Costs
Ineligible Section 8 Subsidy
(Administrative Fees) 1/
Finding 1
o Excess Section 8 subsidy received in the $23,242
form of ongoing administrative fees for
which the PHA was not entitled during
FY 1999
Total $23,242
1/ Ineligible amounts violated law, contract, HUD or local agency policies or regulations.
Page 21 2001-BO-1005
Appendix A
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2001-BO-1005 Page 22
Appendix B
Auditee Comments
Page 23 2001-BO-1005
Appendix B
2001-BO-1005 Page 24
Appendix B
Page 25 2001-BO-1005
Appendix B
2001-BO-1005 Page 26
Appendix C
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-Carge, 1AGI
Primary Field Audit Liaison Officer, 3AFI
Management Analyst, PF
Departmental Audit Liaison Officer, FM
Auditee (2)
Page 27 2001-BO-1005
Appendix C
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-1005 Page 28
City of Meriden Housing Authority, Meriden, Connecticut
Published by the Department of Housing and Urban Development, Office of Inspector General on 2001-05-21.
Below is a raw (and likely hideous) rendition of the original report. (PDF)