AUDIT REPORT
HOUSING AUTHORITY OF THE CITY OF
PITTSBURGH
COMPREHENSIVE AUDIT OF VARIOUS ACTIVITIES
PITTSBURGH, PENNSYLVANIA
2001-PH-1005
MAY 3, 2001
OFFICE OF AUDIT, MID-ATLANTIC
PHILADELPHIA, PENNSYLVANIA
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Issue Date
May 3, 2001
Audit Case Number
2001-PH-1005
TO: James D. Cassidy, Acting Director, Office of Public Housing, Pittsburgh Area
Office, 3EPH
FROM: Daniel G. Temme, District Inspector General for Audit, Mid-Atlantic, 3AGA
SUBJECT: Housing Authority of the City of Pittsburgh
Comprehensive Audit of Various Activities
Pittsburgh, Pennsylvania
We completed an audit of selected aspects of the operations of the Housing Authority of the City
of Pittsburgh (Authority).
We found the Authority is not complying with key provisions of its Consolidated Annual
Contributions Contract with HUD. Specifically, the Authority is not properly procuring goods
and services according to Federal procurement requirements, nor is the Authority adequately
accounting for HUD funds it draws down and disburses according to the applicable program
requirements. This report contains three findings and applicable recommendations to improve
the effectiveness of the Authority’s operations.
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.
Should you or your staff have any questions, please contact Allen Leftwich, Assistant District
Inspector General for Audit, at (215) 656-3401, extension 3485.
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Management Memorandum
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Executive Summary
We completed an audit of various aspects of the operations of the Housing Authority of the City
of Pittsburgh (Authority). The purpose of the audit was to determine if the Authority properly
procured goods and services with HUD funds and made disbursements using HUD funds
according to the applicable program requirements. The audit generally covered the period
January 1, 1998 through December 31, 1999, but was expanded when necessary to include other
periods.
The Authority is not complying with key provisions of its Consolidated Annual Contributions
Contract (ACC) with HUD. Specifically, we found the Authority is not properly procuring goods
and services according to Federal procurement requirements, nor is the Authority adequately
accounting for HUD funds it draws down and disburses according to the applicable program
requirements. These conditions occurred because the Authority’s management does not ensure
staff perform and comply with all applicable provisions of its ACC and applicable statutes and
regulations issued by HUD. As a result of these deficiencies, we identified $8.1 million of
questioned costs ($1,382,874 of ineligible and $6,758,294 unsupported) in our review.
Immediate improvements are needed in the areas of procurement, drawing funds from Line of
Credit Control System (LOCCS), and controls over cash disbursements. These areas are
summarized below and detailed in the Finding section of this report.
We found the Authority is not properly procuring goods
Procurement
and services according to Federal procurement
Requirements Were Not
requirements nor its own procurement policy. We
Followed
identified procurement deficiencies in all 15 procurement
contracts, valued at $8.4 million, that we reviewed.
Specifically, contract files did not detail the history of
procurements as required; contracts were awarded without
independent cost estimates; and without evidence of
competition; and a number of contracts had change order
modifications with significant cost increases and additional
work items not within the original contract. These
deficiencies occurred because the Authority’s management
does not ensure staff perform and comply with all
applicable provisions of its ACC and applicable statutes
and regulations issued by HUD. Further, we found the
Authority’s procurement policies in place during our review
did not have any procedures regarding the use of change
orders or the award of single source procurements. As a
result, the Authority spent $4.5 million on contracts that,
based on the documentation provided, could not be
supported as eligible (Appendix
Appendix B). B Also, there are no
assurances that the best available products and services
were obtained at the most advantageous prices for the
contracts we did not select for review.
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Executive Summary
The Authority could not adequately support LOCCS draws
The Authority Could Not made under its Comprehensive Grant Program (CGP) as
Support LOCCS Draws required. We judgmentally selected six LOCCS draws
(where vendors or contractors were not identified on the
Authority’s LOCCS draws) totaling $13,307,783 and
requested the Authority provide us with documentation that
fully supported each draw. We generally found the
Authority’s book and records were unauditable. The
Authority’s financial management system and its personnel
were not able to provide adequate documentation that fully
supported each draw in a timely manner to permit a
complete review of the records. For records that were
provided, the Authority could not provide adequate
supporting documentation for $3,257,714.
The Authority’s Finance Department did not have controls
The Authority Does Not
in place that were effective in controlling cash
Have Adequate Controls
disbursements. We found a number of disbursements were
Over Cash Disbursements
not processed consistent with normal business practice.
Specifically, the Authority:
• Could not account for all checks;
• Did not properly record disbursements in its books of
account;
• Wrote a significant number of manual checks; and
• Could not provide adequate documentation to support
disbursements.
These deficiencies occurred because the Authority did not
develop and implement a comprehensive policies and
procedures manual for the Finance Department as was
repeatedly recommended by the Authority’s Independent
Public Accountant (IPA). As a result of the internal control
weaknesses, the Authority is placing HUD funds at an
unnecessary risk, as there is no assurance funds have been
used as intended, including $381,807 of unsupported
expenditures we found and detailed in Finding 3 of this
report.
During the course of the audit, the Authority took a number
of actions designed to improve its operations. For example,
the Authority adopted new procurement policies and has
initiated procedures to improve its financial administration.
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Executive Summary
However, as detailed in the Finding section of this report,
those actions will only be effective if they are followed.
Recommendations We recommended the Authority repay, from non-Federal
funds, the ineligible and unsupported costs cited unless the
Authority provides documentation that can resolve some of
the deficiencies. We also made recommendations designed
to improve Authority operations. These include developing
and implementing: (1) a contracting administration system
to ensure the Authority can detail the significant history of
its procurements, and its procurement rationale as required
by Federal purchasing regulations; (2) controls to ensure it
maintains source documentation for funds drawn through
LOCCS; and (3) a comprehensive procedures manual for
the Finance Department.
On March 20, 2001, we provided the Authority with a copy
of the draft report and requested the Authority provide us
with written comments by April 4, 2001. However, based
on a request by the Authority’s legal representative, we
extended the date to April 18, 2001. We also discussed the
draft findings with Authority personnel throughout the
audit and at an exit conference at the Authority on April 25,
2001.
Appendix D),
In its written response (Appendix D the Authority
Auditee Comments
generally acknowledged the procurement and financial
administration deficiencies that are cited in the report.
However, the Authority stated the report presentation was
unfair as it contained some factual errors and did not
recognize significant improvements that the Authority has
recently implemented or is in the process of implementing.
Additionally, the Authority commented that many of the
deficiencies cited in the report have been or are being
addressed by initiatives already put in motion by the
Authority and; therefore, the report recommendations are
unwarranted including the recommendation to repay $8
million from non-Federal funds. The Authority also stated
it was not satisfied with the tone of the report nor the four-
week time period it was given to provide the OIG with
written comments.
We are troubled the Authority has directed so much time
Evaluation of Auditee and resources in trying to discredit or deflect the
Comments
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Executive Summary
substantive issues addressed in the report. For example,
rather than directly responding to the key issues addressed
in the report, the Authority elected to hire a prominent legal
firm outside the Pittsburgh area to respond to the draft audit
report. Further, at the exit conference, contrary to the tone
of its written response (Appendix Appendix D), D Authority
representatives stated there was general agreement with the
OIG report and the deficiencies cited. However, the
Authority’s legal representatives expressed concern over
how the report would be perceived by the media and public.
In regard to the length of time committed to the audit,
which was often highlighted in the Authority’s written
response, it should be noted the length of the audit was
clearly a function of the Authority not being able to provide
records to permit a timely and effective audit as required by
the ACC.
We do not agree with the Authority’s assertion that the
recommendations in the report are unwarranted. As
evidenced by the findings in this report, the Authority has
significant procedural deficiencies that need to be fully
addressed and resolved. Although we acknowledge that the
Authority has made some progress in developing and
implementing new procedures to correct the identified
deficiencies, we have no assurance that they will follow
through on completing this process. HUD program staff
will need to monitor the Authority’s progress to ensure the
new procedures are fully implemented. Also, regarding the
$8 million of ineligible and unsupported costs we cite in the
report, the Authority has not yet provided us with adequate
documentation to resolve the issues.
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Table of Contents
Management Memorandum i
MGMT MEMO
Executive Summary
EXE SUM iii
INTRO Introduction 1
Findings
1 The Authority Did Not Follow Its Own Procurement
FIND 1 Policy Or Federal Purchasing Requirements 5
2 The Authority Did Not Properly Support LOCCS
FIND 2
Draws Under Its Comprehensive Grant Program 19
FIND 3 3 The Authority Needs To Improve Its Controls Over
Cash Disbursements 31
MGMT CON
Management Controls 39
FOL-UPFollow Up On Prior Audits 41
Appendices
APP A A Schedule of Questioned Costs 43
B Summary of Ineligible and Unsupported Costs For
APP B
Finding 1 45
APP C C Summary of Procurement Contracts Reviewed 47
APP D D Auditee Comments 63
APP E E Distribution 93
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Table of Contents
Abbreviations
ACC Annual Contributions Contract
CFR Code of Federal Regulations
CFO Chief Financial Officer
CGP Comprehensive Grant Program
HACP Housing Authority of the City of Pittsburgh
HOPE VI Revitalization of Severely Distressed Public Housing
HUD U.S. Department of Housing and Urban Development
LOCCS Line of Credit Control System
OIG Office of Inspector General
PHDEP Public Housing Drug Elimination Program
PHMAP Public Housing Management Assessment Program
PIH Public and Indian Housing
RFP Request for Proposal
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Introduction
The Pittsburgh City Council created the Housing Authority of the City of Pittsburgh on August
26, 1937 to provide a better quality of living in low-rent housing for its residents. The Authority
is governed by a six member Board of Directors who are appointed by the Mayor. The present
Board Chairman is Dr. Morton Coleman. During the audit the Authority’s Executive Director
was Stanley A. Lowe. The Authority’s Administrative Offices are located at 200 Ross Street,
Pittsburgh, PA 15219.
The Authority administers public housing pursuant to its ACC with HUD. Financial assistance
from HUD to the Authority for 1997 through 1999 include:
Total
Program 1997 1998 1999 1997-1999
Operating $28,310,874 $30,003,601 $24,135,078 $ 82,449,553
Subsidy
HOPE VI $ 3,432,000 $ 3,432,000
PHDEP $ 2,346,760 $ 1,958,320 $ 1,780,198 $ 6,085,278
CGP $21,825,922 $22,893,497 $25,778,198 $ 70,497,617
TOP $ 140,000 $ 140,000
Section 8 $12,152,907 $10,754,417 $ 7,002,854 $ 29,910,178
Certificates
Section 8 $ 4,408,015 $ 3,452,507 $12,527,828 $ 20,388,350
Vouchers
Section 8 $ 1,905,960 $ 912,535 $ 621,544 $ 3,440,039
Mod-Rehab
Totals $70,950,438 $73,546,877 $71,845,700 $216,343,015
The following information was provided by the Authority for its low-rent housing program on
the Statement of Operating Receipts and Expenditures (HUD-52599).
Operating Total HUD
Fiscal Receipts Total Contributions Unexpended Operating
Year Exclusive Of Operating (Net Prior Year Balance/ Reserve
HUD Expenditures Adjustments) (Deficit)
Contributions
1997 $19,116,200 $42,753,905 $28,310,874 $ 4,673,168 $13,160,032
1998 $14,488,410 $46,047,547 $29,915,491 $(1,643,646) $11,516,386
1999 $13,513,979 $41,211,747 $24,135,078 $(3,562,689) $ 7,953,697
As illustrated above, the Authority’s Operating Reserve has decreased significantly over the last
two years.
A recently completed audit of the Authority’s Drug Elimination Program (Report No: 00-PH-
201-1001) disclosed the Authority was having problems following the LOCCS automated
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Introduction
disbursements requirements. In particular, the Authority was not paying for costs as incurred. In
some cases the Authority was drawing funds prior to incurring the cost and in other cases they
were drawing funds months after costs had been incurred and paid for with funds from other
programs. Because the same internal controls implemented by the Authority for the Drug
Elimination Program funding also apply to funds received from HUD for other programs, this
audit was developed to address disbursements made for costs incurred in those other HUD
programs.
Our primary audit objective was to determine whether the
Audit Objectives Authority properly procured goods and services with HUD
provided funds and drew down and disbursed HUD funds
according to applicable program requirements. Another
objective was to obtain information on overall Authority
operations to determine how well the Authority was
accomplishing the core objective of providing decent, safe
and sanitary housing to its residents. This objective was to
be accomplished by reviewing the Authority’s Public
Housing Management Assessment Program (PHMAP)
score.
The objectives were revised during the audit as a result of
several factors. Shifting priorities based on the results of
work done in some areas (Procurement and LOCCS draws)
caused us to not complete work in other areas (PHMAP).
Also, reassessing staff priorities and assignments, and the
time it took for the Authority to provide requested
documentation caused other more minor shifts in audit
objectives. This is pointed out in the Findings section of
the report where applicable.
To accomplish completed objectives, we reviewed books
and records considered necessary under the circumstances;
reviewed applicable regulations, policies, and other
directives; interviewed staff from both HUD and the
Authority; reviewed construction work completed; and
reviewed the audit reports prepared by the Authority’s
Independent Auditors. We reviewed, using judgmental
samples, a total of 15 contracts totaling $8,447,503 and
disbursements from various programs.
The audit generally covered the period January 1, 1998
through December 31, 1999, but was expanded when
necessary to include other periods. The audit work was
conducted between December 1999 and December 2000.
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Introduction
We conducted the audit in accordance with generally
accepted government auditing standards.
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Finding 1
The Authority Did Not Follow Its Own
Procurement Policy Or Federal Purchasing
Requirements
The Authority’s procurement practices did not comply with Federal purchasing requirements nor
its own procurement policy. We identified procurement deficiencies in all 15 procurement
contracts, valued at $8.4 million, that we reviewed. Specifically, contract files did not detail the
history of procurements as required; contracts were awarded without independent cost estimates;
and without evidence of competition; and a number of contracts had change order modifications
with significant cost increases and additional work items not within the original contract. These
deficiencies occurred because the Authority’s management does not ensure staff perform and
comply with all applicable provisions of its ACC and applicable statutes and regulations issued
by HUD. Further, we found the Authority’s procurement policies in place during our review did
not have any procedures regarding the use of change orders or the award of single source
procurements. As a result, the Authority spent $4.5 million on contracts that, based on the
documentation provided, could not be supported as eligible (Appendix
AppendixB).
B Also, there are no
assurances that the Authority obtained the best available products and services at the most
advantageous prices for the contracts we did not select in our review.
Federal procurement regulations must meet purchasing and
Criteria
contracting standards contained in 24 CFR 85.36. To aid in
the procurement process the Authority adopted its own
procurement policies.
Federal procurement regulations require the Authority to:
• Have and use its own procurement policies which
reflect applicable State and local laws and regulations,
provided the standards also conform to applicable
Federal laws and standards [24 CFR 85.36(b)(1)];
• Maintain records sufficient to detail the significant
history of procurement. These records must include 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)];
• Conduct all procurement transactions in a manner
providing full and open competition [24 CFR
85.36(c)(1)]; and
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Finding 1
• Perform a cost or price analysis in connection with
every procurement action including contract
modifications. The method and degree of analysis is
dependent on the facts surrounding the particular
procurement situation, but as a starting point, grantees
must make independent cost estimates before receiving
bids or proposals [24 CFR 85.36(f)(1)].
The Authority’s procurement policies in effect during our
Background
audit period covered the purchase of materials/supplies and
professional services. The procedures detailed the
requirements that were to be followed. As expected, as the
value of the procurement increased, the procurement
requirements became more stringent. The Authority’s
procurement policy requires the Authority to:
• Determine requirements of the procurement,
• Identify the funding source and whether item is in the
budget,
• Prepare specifications,
• Solicit for quote, bid, or Request For Proposal (RFP),
• Secure an independent cost estimate,
• Ensure an estimated cost is within budget,
• Compare quote, bid or RFP to cost estimate, and if
acceptable,
• Issue Notice to Proceed and/or create purchase order
and purchase item.
We judgmentally selected a sample of 20 contracts for
review to determine if the Authority procured goods and
services according to procurement requirements. Using
computer assisted audit tools and techniques we obtained
and analyzed the Authority’s automated contract register to
facilitate our selection process. Specifically, we selected a
representative sample of small and large awards for both
material and supplies and professional services. We also
selected several contracts that appeared to have excessive
change orders. We subsequently excluded five of these
contracts as they were funded through the HOPE VI
Program, which was excluded from this review.
For the remaining 15 contracts we compared the
documentation provided with each procurement selected for
review with the applicable procurement policy.
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Finding 1
Authority
Sample Management Contract Change Total
Number Number Work Performed Amount Orders Amount
Concrete
1 3874 replacement $291,200 $1,251,007 $1,542,207
2 3406 Financial 44,800 161,300 206,100
statement
3 4092 Site improvements 328,592 0 328,592
4 4090 Gas line relocation 70,870 0 70,870
Landscaping/
5 4160 construction 632,150 3,070 635,220
Replacement of
6 4153 furnaces 829,000 133,908 962,908
7 4342 Site improvements 1,589,000 (69,457) 1,519,543
Hydronic boiler
8 4113 replacement 494,000 13,580 507,580
9 2541 Legal services 9,999 432,375 442,374
10 2516 Resident training 9,999 20,001 30,000
Emergency site
11 3485 work 9,975 23,984 33,959
12 2551 Legal services 40,000 723,454 763,454
13 3928 Concrete repair 24,825 0 24,825
Concrete
14 3875 replacement 178,190 189,050 367,240
Site hazard
15 3506 reduction 553,000 459,631 1,012,631
Total $5,105,600 $3,341,903 $8,447,503
We found the Authority’s contract administration did not
provide assurance that Federal purchasing requirements nor
its own procurement policies were followed (Appendix
AppendixC).C
Specifically, the Authority did not provide us
documentation indicating it detailed the history of its
procurements, which is a fundamental requirement of all
procurement systems. Additionally the Authority:
• Awarded contracts without evidencing it performed
independent cost estimates;
• Awarded contracts without evidence of competition;
• Improperly executed contract modifications; and
• Did not follow other applicable procurement
procedures.
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Finding 1
These deficiencies are detailed below.
The Authority did not perform the required cost or price
Required Cost Estimates analysis for 10 of 15 contracts selected for review. Title 24
Were Not Performed CFR 85.36(f)(1) requires the Authority to perform a cost or
price analysis in connection with every procurement action,
including contract modifications. Without the required cost
estimates, the Authority has no assurance it obtained the
best available services at the most advantageous prices for
its procurements. Initially, all 15 procurements selected for
review did not have cost or price analysis documented in
the procurement files. After repeated requests the
Authority was eventually able to provide cost analysis for
five of the selected procurements. It should be noted these
cost estimates, which are required to be maintained in
Authority files, were not provided until six months after our
initial request. Authority officials indicated they provided
us with all available procurement documentation and could
not explain why cost estimates were not included, as many
of the responsible employees no longer worked at the
Authority.
We found there was no evidence of competition for 5 of 15
Procurements Without procurement actions valued at $1,294,612. As discussed
Evidence Of Competition above, and detailed in Appendix C, none of these five
procurement actions had cost estimates prepared prior to
the procurement of the goods and services. Specifically,
we found the Authority did not receive the required number
of quotes (Management #’s 2516, 2541, 2551, and 3485)
and did not solicit bids as required (Management #3928).
Several examples of these procurements follow and are
detailed in Appendix C.
Authority Management #’s 2516, 2541, and 2551 – Legal
Services
Until 1998 the Authority routinely awarded legal service
contracts primarily to one law firm, by establishing a
contract for $9,999, just below the Authority’s $10,000
procurement threshold, without regard to the anticipated
costs for the services. The Authority did not prepare
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Finding 1
independent cost estimates and added costs to the awards
through non-competitive modifications. For example,
among the contracts listed above were two legal services
contracts (#’s 2541 and 2516) awarded at $9,999 each. The
contracts were selected for review because they were
initially executed for an amount under $10,000 and/or they
had large change orders. We also determined the Authority
followed this same non-competitive practice for a $40,000
award (#2551) selected for review. The three contracts
selected, all awarded to the same law firm follow:
Management Original Revised
Number Price Changes Price
2541 $ 9,999 $432,375 $442,374
2516 $ 9,999 $ 20,001 $ 30,000
2551 $40,000 $723,454 $763,454
The Authority did not develop an independent cost estimate
for these services. The Authority’s interim legal counsel,
who is employed by the law firm that received the awards
above, agreed legal services were not procured properly in
the past. The Authority’s interim legal counsel stated the
Authority was erroneously instructed that no purchasing
requirement applied for awards under $10,000 and
professional services over $10,000 only required three phone
quotations. The interim legal counsel stated that the
Authority took prompt action on this matter when it was
brought to their attention during the delivery of 1996
financial statement audit in the first quarter of 1998.
Specifically, he indicated the Authority procured its contract
for legal services competitively. Although, Authority
representatives agreed it was procuring legal services
improperly in 1998, and it took prompt action, the Authority
did not enter into its competitive legal services award until
the first quarter of 1999. Ironically, the law firm that
received the improper awards was awarded an $8,500 award
in January 1997 specifically for work relating to the
Authority’s procurement policies.
Due to the significant procurement issues we identified
above for this legal firm, we analyzed the Authority’s
contract register from 1997 through 1999 for this firm to
more accurately determine the magnitude of the problem.
As the table and graph below illustrate, we found the
Authority made 81 awards valued at more than $3.7 million
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Finding 1
to the firm with $2.4 million being the result of change
orders made to the initial contracts.
Award No. of Cumulative Change Revised
Amount Awards Amount as Orders Award
Awarded Amounts
$0 - $10,000 66 $ 612,776 $ 801,708 $1,414,484
$ 10,000 - 12 440,000 1,469,277 1,909,277
$50,000
Over 3 240,000 160,000 400,000
$50,000
Total 81 $1,292,776 $2,430,985 $3,723,761
$4,000,000
$3,000,000
$2,000,000 Revised Amount
$1,000,000 Change Orders
Award Amount
$0
$0 - $10,000 $10,000 - Over Total
$50,000 $50,000
As we illustrate below, 10 of the 15 contracts that were
Contract Modifications originally awarded at $2,460,163 had $3,408,290 in change
Were Improperly orders that increased the value of the contracts to
Executed $5,868,453 (138 percent).
Authority Contract Change Total
Management Work Performed Amount Orders Amount
Number
3874 Concrete replacement $ 291,200 $1,251,007 $1,542,207
3406 Financial statement 44,800 161,300 206,100
4153 Replacement of furnaces 829,000 133,908 962,908
4113 Hydronic boiler replacement 494,000 13,580 507,580
2541 Legal services 9,999 432,375 442,374
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Finding 1
2516 Resident training 9,999 20,001 30,000
3485 Emergency site work 9,975 23,984 33,959
2551 Legal services 40,000 723,454 763,454
3875 Concrete replacement 178,190 189,050 367,240
3506 Site hazard reduction 553,000 459,631 1,012,631
Total $2,460,163 $3,408,290 $5,868,453
The Authority’s procurement policies did not provide any
procedures regarding the use of change orders. Contrary to
HUD guidelines we noted change orders were issued to
increase the number of items purchased or for work clearly
not within the original contract scope.
HUD Handbook 7460.8 Paragraph 6-10 C. provides
specific guidance on the use of change orders. The
changes’ clause prescribes the specific circumstances in
which a change order may be issued. Changes such as
increasing the number of items being purchased or other
types of new work are not considered within the scope of
the contract or within the authority of the changes’ clause.
Appendix C provides a summary of the Authority’s
procurement actions for the awards noted above. The
following are more egregious examples of the Authority’s
improper use of change orders.
Authority Management #3874 - Concrete Replacement
The contract as awarded was valued at $291,200 for
concrete replacement. The Authority subsequently awarded
72 change orders valued at $1,251,007. We asked
Authority officials to explain how these change orders
could be eligible. The Authority initially provided a legal
opinion, dated January 2000 after the award and all change
orders were completed, that opined because it entered into a
fixed price contract with the lowest responsible bidder, and
the contract specified unit prices; the Authority could award
additional work based on the unit pricing submitted with
the bid proposal. More recently in response to media
inquiries and City Council hearings, the Authority’s former
Executive Director has acknowledged procurement
regulations were not followed, indicating it was a mistake
to award so many change orders. However, the former
Executive Director said the Authority still received value
for the work that was done.
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Finding 1
We disagree with the Authority’s original position that the
change orders were allowable and also with the former
Executive Director’s recent statement that the Authority
received value for the work that was completed.
Specifically, as noted above, HUD guidelines preclude the
use of change orders for quantity increases and for work
items not within the scope of the contract. Further, a
detailed analysis of all 72 change orders determined
$305,785 of the $1,251,007 in change order work was for
items not included in the unit pricing schedules and,
therefore, not covered in the Authority’s legal opinion.
Additionally, since the legal determination was not made
until after the completion of the work, it is unclear how the
Authority would have justified its position without the
opinion.
We also determined that the Authority significantly
overpaid for the remaining change order work valued at
$945,222. Although the change order work was for items
within unit pricing provided by the contractor, the
contractor’s unit prices were significantly higher than unit
pricing provided by competing bidders. Specifically, our
analysis showed the four responsive contractors would have
performed the work items for as much as $426,083 less
than the selected contractor as illustrated below:
COMPETING CONTRACTORS
Description Contractor 1 Contractor 2 Contractor 3 Contractor 4
Change $885,311 $574,237 $519,139 $788,965
orders
supported by
unit pricing
Amount $ 59,911 $370,985 $426,083 $156,257
Authority
Could Have
Saved 1/
1/ Amount Authority Paid ($945,222) less Competing Contractor Price
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Finding 1
Authority Management #3506 - Site Hazard Reductions
The contract as awarded was valued at $553,000 for site
hazard reductions. The Authority subsequently awarded
change orders totaling another $459,631 to increase the total
value of the contract to $1,012,631 (83 percent increase).
Based on the Authority’s own cost estimates for the site
work, the contractor was significantly overpaid for grading
and seeding change orders. Specifically, work items in the
original contract indicated the contractor was paid to grade
and seed a 40,000 square foot area. Additionally, the
contractor was awarded change orders to grade and seed
another 54,000 square feet at a cost of $3.00 per square foot.
As illustrated below, the Authority’s own cost estimates
valued the work at no more than $1.85 per square foot,
indicating the Authority overpaid $62,100 for these work
items.
Description Change Order
Per Physical Estimates $3.00/ sq. ft.
Per Authority Cost Estimate $1.85/sq. ft.
Difference $1.15 /sq. ft.
Seeding Area 54,000 sq. ft.
Total Overpaid $62,100
We asked Authority personnel to provide us with the
contractor’s unit pricing for the contract award. The
Authority’s Modernization and Development Supervisor
indicated the contractor was not required to provide unit
pricing data for the contract. However, according to the
Authority’s policies the schedule was required. Further, the
Authority’s own cost estimates, which were eventually
provided, indicate the work was significantly overpriced and
that the Authority did not consider its own estimates.
Authority Management #3406 - Financial Statement Audit
On July 13, 1998, the Authority entered into a professional
services contract with an independent accounting firm. The
scope of services in the contract as well as the scope of
services in the RFP that was initially prepared to solicit for
the work was specifically for the audit of the financial
statements. The RFP was for a financial statement audit for
the fiscal year ending December 31, 1997 with an option to
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audit the financial statements for the year ending December
31, 1998. The contract to audit the 1997 financial
statements was awarded for $44,800.
Without competition, the Authority awarded the
independent accountant an additional $131,867 of work
items under the financial statement contract that was not
part of preparing the financial statements. The scope of the
additional work consisted of financial consulting work
related to its HUD programs. The Authority also did not
perform any independent cost estimates relating to the
additional work items and paid the independent accountant
based on unit pricing provided with the RFP for the
financial audit award.
The Authority did not document any of its decisions
regarding the contract modifications. When asked for an
explanation, Authority officials and representatives provided
a variety of reasons why the award was made. According to
the Authority’s interim legal counsel, management made the
decision that the accounting firm was the “ideal party to
assist the Authority since the contractor would be most
familiar with their system because they were involved with
auditing the financial records”. The Authority also stated
that the process of expanding the scope of work and
performance of the additional work by the contractor would
be efficient and less expensive. According to the current
Chief Financial Officer (CFO), who was not employed at the
Authority when the addendums were executed, the Authority
believed that the work was eligible because due to staff
turnover, particularly in the Finance Department, it was
considered an emergency and, therefore, eligible.
We believe the above awards illustrate the problems in the
Authority’s contract administration. Executive
management approved the additional work without any
determination of what the work would cost and whether
procurement regulations were followed. Its procurement
decisions and rationale were not evident prior to the award.
In addition, although it was not part of the judgmental
sample of 15 procurement actions selected for review, we
analyzed the Authority’s contract register and noted 86
awards for $5.1 million had increased $8.9 million to a total
of $14 million.
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The Authority generally did not follow its own procurement
Other Procurement Issues procedures for many of the other required elements of
procurement. The Authority’s procurement policies clearly
identify the procedures that are to be followed when
making its purchasing decisions based on the type of
contract and the anticipated costs. However, as we pointed
out throughout this finding, the Authority generally did not
evaluate the anticipated cost and, therefore, could not
determine the appropriate procurement procedure to follow.
Also, the Authority disregarded its own policies and
procedures in the areas of: required number of quotations;
timely notice to proceed; issuing a notice of intent to award
to all bidders; provide evidence of solicitation and approval
of minority and women business enterprises; evidence of
Board of Director’s review and approval; and evidencing
identification of the funding source. The specific
procurement deficiencies are listed in Appendix C for each
contract we selected and reviewed. As the results in
Appendix C clearly show, many of the procurement steps
required by the procurement policy were simply not
completed by the Authority, and as such, the Authority
cannot provide assurance that it obtained the best available
services at the most advantageous prices.
At the time of our review, the Authority’s written
procurement policies generally complied with Federal
purchasing requirements.
The Authority’s Director of Grant and Contract
Compliance believes the Authority’s recently adopted
procurement procedures will correct many of the issues
cited in this finding. We agree the Authority’s revised
procedures are a move in the right direction. However, it
should be noted the revised procurement procedures will
only be effective to the extent they are followed. The
procurement deficiencies described throughout this finding
were primarily due to the Authority’s failure to follow its
policies, and not because these policies weren’t adequate.
* * * * * *
In summary, the Authority’s procurement practices did not
comply with Federal purchasing requirements nor its own
procurement policy. Specifically, contract files did not
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detail the history of procurements as required. We also
found contracts were awarded without independent cost
estimates, and without evidence of competition. Because
Authority officials did not ensure staff performed and
complied with all applicable provisions of its ACC and
applicable statutes and regulations issued by HUD, the
Authority spent $4.5 million on contracts that, based on the
documentation provided, could not be supported as eligible.
Also, there is no assurance the Authority obtained the best
available products and services at the most advantageous
prices for the contracts we did not select for review.
The Authority acknowledged it had fundamental deficiencies
Auditee Comments
in its procurement of goods and services. Specifically, the
Authority agreed that it either did not perform or misplaced
independent cost estimates and it procured legal services
improperly. Although, the Authority acknowledged there
were some deficiencies in certain contracting activity, they
disagreed with many of the cited deficiencies and stated the
problems were not as severe as depicted in the draft report.
For example, the Authority stated the OIG incorrectly
considered a purchase for summer youth programs as a
procurement instead of a sub grant to a non-profit as
intended. Additionally, the Authority stated that it was
evaluated on certain procurement policies that were not in
effect at the time of our review and that certain contract
modifications cited in the report were allowable since they
were based on unit pricing established in competitive
negotiations. The Authority also provided additional
documentation to address some procurement deficiencies
noted in Appendix C. Finally, the Authority stated the report
did not fairly recognize corrective actions the Authority has
implemented to include the adoption of new procurement
policies.
We do not agree the Authority’s procurement deficiencies
OIG Evaluation of were unfairly depicted in the report. Specifically, the
Auditee Comments Authority did not: (1) perform independent cost estimates;
(2) properly award change orders; and (3) document the
history of its procurements. These are fundamental
purchasing requirements established in Federal procurement
regulations, which the Authority agrees to comply with
according to the terms and conditions of its ACC with HUD.
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It should also be noted that the OIG’s basis for calculating
unsupported costs was the Authority’s failure to perform
independent cost estimates, which are not at issue. Further,
contract modifications outside the scope of an award or for
quantity increases are clearly ineligible pursuant to Federal
regulations. Regarding the applicability of certain
procurement policies, we evaluated the Authority’s
procurements pursuant to policies provided by the Authority,
which they have indicated were effective for all contracts
reviewed during our audit.
It should also be noted, where appropriate, we have cited
areas of improvement to include the Authority’s competitive
procurement of legal services and its recently developed
procurement policies. We have also made revisions to the
draft report to account for additional documentation provided
with the Authority’s written response. Additionally, based
on the Authority’s written response and discussions with
HUD program officials and OIG Counsel, we have modified
the report and no longer consider the summer youth program
award as a procurement. As a result, it was removed from
the listing of contracts reviewed and the finding.
Recommendations We recommend you:
1A. Require the Authority to repay HUD, from non-
Federal funds, $1,382,874 and $3,118,773 of
ineligible and unsupported costs, respectively,
unless the Authority can provide additional
documentation to resolve the cited deficiencies.
1B. Require the Authority to develop and implement a
contracting administration system to ensure the
Authority can detail the significant history of its
procurements and procurement rationale as required
by Federal purchasing regulations. At a minimum,
this system should provide for the creation of a file
checklist to be maintained in the procurement file
that identifies the procurement type, and the
required procurement procedures that need to be
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followed. The checklist should be completed and
identify the responsible party.
1C. Ensure, through appropriate monitoring, the
Authority adheres to its established procurement
policy.
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Finding 2
The Authority Did Not Properly Support
LOCCS Draws Under Its Comprehensive Grant
Program
The Authority could not support LOCCS draws made under its CGP as required. We
judgmentally selected six LOCCS draws totaling $13,307,783 and requested the Authority to
provide documentation to fully support each of the draws as was required by the regulations.
However, we generally found the Authority’s books and records were unauditable, as the
Authority’s financial management system and its personnel were not able to provide
documentation that fully supported each draw, and in a timely manner to permit full review of
the records. For records that were provided, the Authority could not provide adequate supporting
documentation for $3,257,714 as follows:
• Authority drew down $872,772 which included contractor retention that was not paid;
• Authority drew down $599,000, representing funds improperly allocated to the CGP; and
• Authority could not provide adequate source documentation for $1,882,942. (Amount
includes $97,000 from the $599,000 that was also not supported with adequate source
documentation.)
The Authority’s new CFO acknowledged the Authority did not maintain its books and records
satisfactorily in the past. However, the CFO suggested it was unfair to draw conclusions
regarding the adequacy of supporting documentation provided for specific LOCCS draws without
reviewing all of the Authority’s draw downs. The CFO stated that the LOCCS draws cited
created a special problem because the draws included many “transferred transactions” among
multiple CGP journal entries. Further, the CFO believed the documentation that was
subsequently compiled by her staff adequately supported the draws reviewed. As we detail in
the finding below, the CFO’s position that individual draws cannot be reviewed is incorrect as
the Authority is required to maintain accounting records and source documentation to support
any individual draw. Further, documentation subsequently compiled and provided by the
Authority did not adequately support the disbursements that were selected for review. Due to the
Authority’s lack of financial accountability over its LOCCS draws, there is no assurance $3.2
million of HUD funds were used appropriately and/or in accordance with HUD Regulations and
requirements.
The ACC between the Authority and HUD part A Section
Criteria 15(A) states the Authority must maintain complete and
accurate books of account to permit timely and effective
audit.
Federal regulations for grantee financial management
systems require: accounting records that adequately identify
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the source and application of funds; effective internal
controls and accountability over funds; source
documentation that supports accounting records to include
cancelled checks, paid bills, payrolls, time and attendance
records, contract and award documents, etc. {24 CFR
85.20(b)}.
LOCCS is a computerized cash management and
Background disbursement system for public housing agencies developed
to assist HUD’s Office of Finance and Accounting in
planning, accounting, and evaluating HUD disbursements
within specific program areas including the CGP. There is
no minimum draw down requirement in LOCCS. An
authority shall draw down the amount of funds necessary to
meet its immediate cash needs -- no more, no less. LOCCS
is HUD’s primary vehicle for achieving cash management
savings through the use of electronic wire transfer of
payments to grant recipients of HUD program funds.
The original scope of our review was to determine if the
sampled draws were made for eligible expenditures and
paid timely. However, because we were unable to timely
obtain supporting documentation, the scope was changed to
determine if the documentation provided by the Authority
was sufficient to permit a review of the records. For
example, if the Authority provided payroll documentation,
did the documentation include pay period, employee name,
amounts for gross pay, taxes, insurance, etc. and other
information that would enable the amounts to be audited?
If the documentation was for invoices paid, was there a
sufficient amount of documentation to enable an individual
invoice to be identified so it could be potentially selected
for review? Amounts that were not supported by source
documentation as described were considered unauditable.
Since the LOCCS disbursement system is designed to
provide an Authority with program funds quickly to
facilitate its cash needs, journal entries should be minimal,
and the Authority should be able to specifically identify the
source and application of its program draws. This is
detailed in the section on costs incurred that were not
supported by adequate source documentation.
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On June 9, 2000 we provided the Authority a request for
documentation. The following LOCCS draws were
judgmentally selected for review:
CGP Year Unauditable
Date / Draw No. Amount Amount
1 01/02/98 1994 / 101 $ 2,567,646
2 01/02/98 1995 / 69 $ 2,569,016
3 11/16/98 1996 / 74 $ 3,827,156 $2,007,505
4 03/03/99 1996 / 93 $ 2,091,849 $ 436,135
5 05/24/99 1997 / 38 $ 1,434,785
6 11/29/99 1998 / 34 $ 817,331 $ 814,074
Totals $13,307,783 $3,257,714
The Authority provided support for draw numbers 1, 2, 5,
and 6 in less than two months. The support for draws 1 and
2 amounted to only providing criteria that explained why
those amounts did not have to be supported by source
documentation. Specifically, the Omnibus Consolidated
Rescissions and Appropriations Act of 1996 permitted the
Authority to transfer up to 10 percent of its modernization
funds in any fiscal year for any authorized operating
subsidy purpose. Draws 1 and 2 above were draws for that
reason and, as a result, did not have to be supported further.
The Authority was also able to provide documentation to
support draw 5 that consisted of mostly payroll.
The Authority did not provide any documentation for draws
3 and 4 until October 17, 2000, months after it was initially
requested. Further, when the information was finally
provided, it was not adequate. Much of the documentation
provided by the Authority for draw 6 above was also not
acceptable as the Authority erroneously drew down funds
for contractor retention that was not paid to the contractors.
As explained in the sections that follow, source
documentation was either not provided or the entries did
not support draw amounts.
Contrary to Federal regulations, the Authority drew funds
The Authority Drew
for contractor retention even though the funds were not
Down Contractor
paid to the contractors. Because the Authority’s practice
Retention That Was Not
was to draw funds based on expenses posted to general
Paid
ledger accounts, without ensuring there was an actual cash
outlay associated with the expense, the Authority
erroneously drew funds from LOCCS that were not paid to
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the contractor. Authority personnel indicated that when
they became aware of the error, they offset the amounts
drawn in error with future expenditures. However, HUD
guidelines clearly state that funds drawn over the
immediate needs of the Authority should be promptly
returned. Further, the Authority was unable to provide
clear documentation evidencing how and when the offset
against future expenses occurred. As a result, $872,772 of
HUD funds were used for unknown reasons and maintained
by the Authority for an unknown period of time before they
were disbursed.
According to 24 CFR 85.21(g)(3): “A Federal agency shall
not make payment to grantees for amounts that are withheld
by grantees or subgrantees from payment to contractors to
assure satisfactory completion of work. Payments shall be
made by the Federal agency when the grantees or
subgrantees actually disburse the withheld funds to the
contractors or to escrow accounts established to assure
satisfactory completion of work.”
According to the LOCCS CGP request voucher, the
preparer certifies that the funds requested are not in excess
of immediate disbursement needs for the program and any
funds provided that become more than necessary will be
promptly returned.
HUD PIH Notice 96-90, Section 4, Paragraph 4-2.B.
Expenditures states the housing authority shall requisition
funds only when payment is due and after inspection and
acceptance of the work, and shall distribute the funds
within three working days of receipt of the funds.
The Authority provided documentation indicating funds
were drawn for retainage for two of the six LOCCS draws
we reviewed. When asked why funds were drawn for
expenditures that were not paid, the Authority’s Manager of
Accounting Operations explained the amounts were
erroneously drawn from LOCCS. These draws took place
on March 3, 1999 and November 29, 1999, indicating the
problem went undetected for many months. Further, when
supporting documentation was eventually provided for our
review in October 2000, we would have expected the
documentation to note the error and document the
resolution.
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Finding 2
The Authority drew down funds based on a reconciliation
of its general ledger accounts, without carefully analyzing
the detailed general ledger activity. The Authority termed
this practice “Analysis of money draw downs”. These were
LOCCS draws that were not made for a specific
disbursement (invoice, contract, etc.) The draws were
made to cover a specific period of time for selected general
ledger account numbers and in many instances covered
amounts after the invoice or contract was posted to the
general ledger. The result of executing LOCCS draws this
way was the draw was generally made so that the Authority
could be reimbursed for expenses it had already paid.
In preparing the schedule for the reconciliation draws, the
preparer was supposed to list the value of the general ledger
account expended net of retention. In other words, the
amount of the account on the draw analysis was to reflect
the amount paid to the contractor after the retainage amount
was withheld. When a former Authority accountant
prepared the “Analysis of money draw downs” they put into
the column titled “Expended net of retention” the amount
of the periodic estimates before retention was deducted. As
a result of this error, the Authority drew down $872,772
more than what was paid to the various contractors.
The Manager of Accounting Operations stated that at year-
end, the Authority offset all funds drawn in error and,
therefore, had not drawn down more funds than was
necessary. The CFO reiterated the Authority’s claims that
it made subsequent adjustments to LOCCS draws that
negated the effect of the excessive funds that were drawn,
and acknowledged that although the Authority violated the
three day rule (not disbursing funds within three working
days of receipt) it did nothing else improper.
We disagree with the CFO’s statement that the Authority
handled the transactions properly. Clearly, the Authority
did not return funds to HUD as required. Also, the problem
illustrated above is one example of the problems that
occurred because of the Authority’s practice of preparing its
LOCCS draws based on general ledger activity without
implementing a review process or maintaining sufficient
documentation. There were several breakdowns in the
process used by the Authority to draw funds from LOCCS.
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Finding 2
First, a lack of controls permitted the Authority to request
funds for an amount more than was needed without being
detected. Second, once the funds were drawn, it went
unnoticed that they were not disbursed for the purpose for
which they were drawn. Even though the Authority has
indicated it has offset the funds drawn in error, it has not
provided adequate documentation showing what expenses
were ultimately paid with the funds. Finally, while the
Authority acknowledges the three day rule was violated, it
did not notify HUD of the violation, nor did it quantify the
effect of improperly possessing HUD funds for as long as
eight months.
The Authority did not properly allocate costs to its CGP.
The Authority Improperly
The costs were allocated based on a predetermined budget
Allocated Funds to CGP
amount, and the allocation percentages were subsequently
adjusted to match the budgeted amount. Further, based on
our review of the allocated costs it appeared they were
routine operating costs and, therefore, not eligible CGP
expenses. Authority personnel indicated they could not
explain the eligibility of the individual transactions. As a
result, the Authority cannot provide any assurance
$599,000 of costs charged to the CGP are eligible.
According to 24 CFR 85.20(a): “A State must expand and
account for grant funds in accordance with State laws and
procedures for expending and accounting for its own funds.
Fiscal control and accounting procedures of the State, as
well as its subgrantees and cost-type contractors, must be
sufficient to- …(2) Permit the tracing of funds to a level of
expenditures adequate to establish that such funds have not
been used in violation of the restrictions and prohibitions of
applicable statutes.”
As illustrated below, the Authority provided us a
spreadsheet showing how the costs were supposed to be
charged to CGP.
Department Amount % to CGP Amount
of Cost Allocated
Engineer $530,000 70% $371,000
Pest control $ 35,000 60% $ 21,000
Lands $230,000 90% $207,000
Total $599,000
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However, documentation provided for our review indicated
the costs charged were not related to the budget shown
above. The only similarity was the $599,000 charged to
CGP. Specifically, the Authority arbitrarily allocated 53
percent of 5,722 transactions as well as other miscellaneous
entries totaling $1,136,535 in its Miscellaneous Materials
General Ledger Account Balance at August 31, 1998
without regard to the eligibility of the specific transactions
posted to the account. Further, the $599,000 was charged
to a CGP account that is principally for staff costs.
We were told personnel responsible for the above
calculations are no longer employed by the Authority, so
the rationale for the actions could not be determined. As a
result, in order for the $599,000 to be considered eligible,
the Authority will have to show that all of the costs charged
were eligible for account #1408 management improvements
activities as reported in its annual statement to HUD and
were each 53 percent chargeable to the CGP.
The Authority did not provide adequate documentation to
Source Documentation support $1,882,942 funds drawn from LOCCS. As noted
Not Adequate To Support above, the Authority did not provide any documentation
LOCCS Draws pertaining to LOCCS draws numbers 3 and 4 until October
17, 2000 more than four months after our initial request.
The Authority believed information provided in October
adequately supported costs claimed. However, source
documentation was either not provided or the information
provided was not auditable.
We also found the Authority did not maintain adequate
documentation to identify what specific expenditures were
reimbursed through LOCCS as required. The
documentation was not adequate because it did not identify
which costs were being claimed, and did not provide source
documentation adequate to determine what invoice,
contract, etc. made up the journal entry(s) provided.
Even though Authority personnel certified funds requested
through LOCCS were correct, Authority personnel could
not provide us with documentation to fully support the
expenditures. For the most part, documentation provided
was only accounting records (i.e. general ledger activity,
journal entries), not the required source documentation
(cancelled checks, paid bills). Also, the documentation that
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was provided did not match draw down amounts as the
documentation exceeded amounts drawn and did not
identify what portion of the support was associated with the
costs claimed. Specifically, funds drawn through LOCCS
were generally only supported by aggregate changes to
general ledger accounts, and did not include detailed
transactions and required supporting documentation.
We identified these same problems in a recently completed
audit of the Authority’s Drug Elimination Program (Report
No: 00-PH-201-1001). We discussed the concerns we had
with the Authority’s method of drawing funds through
LOCCS based on general ledger activity without
maintaining any specific identification of the source
documentation associated with the expenditure. We were
told this practice would stop and all future draws would be
properly supported. However, one of the LOCCS draws
reviewed was prepared after this assurance, yet as noted
above the practice continues.
For example, one LOCCS draw included costs posted to a
CGP account totaling $56,132. However, the entry is
nothing more than the net debit associated with three
different Authority general ledger accounts. In order to
evaluate the eligibility of that amount a total of $2,184,079
in debits and $2,127,947 in credits covering 76 different
entries would have to be analyzed. Further, many of those
76 different entries include support that breaks out into
additional layers of multiple entries. The result is the entire
$56,132 is questioned since the Authority is unable to
provide documentation evidencing the specific costs
charged.
Because the Authority did not provide source
documentation for $1,882,942 of the costs claimed for the
sampled LOCCS draws, we were unable to conclude if the
funds were used for authorized purposes. We provided the
Authority with detailed schedules of questioned costs.
The Authority’s CFO stated that many of the deficiencies
cited in this finding were the result of looking at a sample
of a few draws. She indicated the LOCCS draws cited
created a special problem because the draws included many
“transferred transactions” among multiple CGP journal
entries.
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The Authority’s position that individual draws cannot be
reviewed is incorrect. Because a LOCCS draw is made for
a particular cash outlay, and the Authority is required to
maintain adequate internal controls, accounting records,
and source documentation, a LOCCS draw should stand on
its own; and the Authority should be able to provide the
source documentation to support any individual draw.
* * * * * *
In summary, the Authority drew funds through LOCCS for
expenditures that could not be supported as eligible. For
the six sampled LOCCS draws that totaled $13,307,783,
where the draws were made without a specific vendor or
contractor identified, the Authority received $872,772 for
funds drawn for retainage that was not paid, improperly
allocated $599,000 to the CGP, and did not provide
documentation sufficient to facilitate an audit of an
additional $1,882,942. The CFO’s belief that in order to
conduct an audit, all LOCCS draws as opposed to a sample
of LOCCS draws must be selected for review is incorrect.
The Authority is required to provide documentation to
support the LOCCS draw and evidence compliance with the
Federal requirements that require the Authority to maintain
records which adequately identify the source and
application of funds provided for financially assisted
activities; assure funds are used solely for authorized
purposes; and support accounting records with source
documentation.
The Authority acknowledged it drew funds for contract
Auditee Comments retention not paid and mistakenly allocated LOCCS draws
meant for operating subsidy to the Comprehensive Grant
Program. Additionally, the Authority acknowledged it could
not provide source documentation to account for its LOCCS
draws as required. The Authority stated these deficiencies
were attributed to: (1) financial system conversions; (2)
employee departures; (3) draws selected for review that
contained many transferred transactions through journal
entries; and (4) the Authority’s former practice of drawing
funds based on general ledger activity. The Authority,
however, felt the OIG’s conclusions were unwarranted and
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premature given the documentation that was provided with
the Authority’s written response.
The Authority has also indicated it has stopped the practice
of drawing funds based on general ledger activity and has
implemented a system established by the Chief Financial
Officer that details the source documentation related to the
draw.
We do not agree with the Authority’s position that the OIG’s
OIG Evaluation of conclusions regarding the draws selected for review are in
Auditee Comments any way premature or unwarranted. The Authority is
required to maintain its books and records to permit a timely
and effective audit. Clearly, that was not the case. Further,
the OIG has continued to review and evaluate documentation
provided by the Authority. In fact, the Authority was given
another opportunity to provide the OIG with documentation
sufficient to trace to supporting documentation. This
additional documentation was still not adequate to address
the deficiencies cited. While, we are encouraged by the
Authority’s development and implementation of a system to
ensure LOCCS draws are properly supported, we cannot
conclude whether or not the improvements are effective and
are being followed as they were implemented after draws we
selected for review. These improvements should be evident
during routine program monitoring and future audit efforts.
Recommendations We recommend you require the Authority to:
2A. Repay from non-Federal funds $872,772 unless it
can provide supporting documentation that shows
how the contractor retention drawn in error was
offset against other program expenses. Supporting
documentation should include: a schedule listing
when the Authority actually spent the $872,772;
what specific invoices or contracts were paid with
the funds; and what the Authority did when it
ultimately paid the contractors for the retainage that
had been previously drawn.
2B. Repay from non-Federal funds $599,000 and
$1,882,942 of miscellaneous materials expenses
allocated to CGP, and amounts determined to be
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unauditable, respectively, unless it can provide
records to support eligibility.
We recommend you:
2C. Verify the Authority has stopped the practice of
drawing funds from LOCCS based on general
ledger activity, and ensure the Authority’s recently
developed systems are adequate and that the
Authority maintains source documentation for funds
drawn through LOCCS.
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Finding 3
The Authority Needs To Improve Its Controls
Over Cash Disbursements
The Authority’s Finance Department did not have adequate controls over cash disbursements.
The Authority did not develop and implement a comprehensive policies and procedures manual
for the Finance Department as repeatedly recommended by its Independent Public Accountants.
We found a number of disbursements were not processed consistent with normal business
practice. Specifically, the Authority:
• Could not account for all checks;
• Did not properly record disbursements in its books of account;
• Wrote a significant number of manual checks; and
• Could not provide adequate documentation to support disbursements.
Because of the internal control weaknesses listed above, the Authority is placing HUD funds at
an unnecessary risk, as there is no assurance funds have been used as intended, including
$381,807 of expenditures detailed in this finding.
Internal controls are a major part of managing any
Background
organization. An internal control system is made up of
plans, methods, policies and procedures to meet an
organization’s mission, goals, and objectives. The
organization’s internal control system requirements change
over time because business conditions change. The
business environment changes because of changes in laws
and regulations, societal concerns, technology, managerial
philosophies, and leadership.
Prudent business practices prescribe policies and
procedures should be communicated in writing. The
documentation aspect is critical because oral
communication of policies and procedures is unreliable;
spoken words can be changed too easily, forgotten or never
even heard. Further, it is important for organizations to
have consolidated policies and procedures organized
systematically. Fragmented or decentralized policies and
procedures hinder the employees using them and do not
ensure for their consistent application. Frequent turnover in
any organization affects negatively the internal control
environment and makes continual training even more
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Finding 3
essential. A healthy internal control environment that
includes sound policies and procedures, an effective
training program and good supervision, can minimize the
negative effects such turnover can cause.
Using computer assisted audit tools and techniques we
determined 412 checks were not accounted for on Authority
disbursement registers for 1998 and 1999. We followed up
with Authority personnel to determine if they had adequate
controls to safeguard checks and whether they could
provide an explanation for the missing checks. We found
the Authority did not have adequate controls, and 61 of the
412 checks were not properly accounted for as illustrated
below:
• Authority manual records indicated 43 checks were
voided; however, the Authority could not produce
the voided checks;
• Authority could not provide any explanation for the
disposition of four checks; and
• Fourteen checks dated during the audit period and
negotiated were not recorded on Authority books
and records provided for our review.
Because the Authority does not have adequate controls or
safeguards over its bank checks, and also did not routinely
reconcile its bank accounts, HUD funds are at risk since
there is no assurance funds have been used as intended.
The Authority wrote a $19,200 check payable to cash, but
The Authority Did Not
recorded it in the general ledger as payable to Housing Auth
Properly Record
City of Pgh. A former Authority Procurement Officer
Disbursements
negotiated the check. We were told the check was made
payable to cash to pay for entertainment at an Authority
funded drug prevention program, and the reason it was
recorded differently was the Authority’s system would not
allow a check to be entered as payable to cash. A review of
four vendor contracts for which the cash payment was made
did not specify a cash payment was required, in fact, the
terms of three of the contracts clearly indicated that
payment could be made by certified check, bank draft, or
money order. Because the Authority has not established
policies and procedures that need to be followed, Authority
personnel circumvented built in system controls and,
2001-PH-1005 Page 32
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Finding 3
therefore, increased the risk that HUD funds could be used
improperly.
In our review of disbursements, we also found two other
checks were not properly recorded as illustrated below:
Check
Number Amount Description
113324 $ 7,703 This check was not posted to the general
ledger. Therefore, the expense was not
recognized on Authority books of account.
103625 $ 5,880 The Authority purchased $6,000 worth of
certificates for this $5,880. The $120
discount was not recorded on the Authority’s
books.
Check number 113324 was issued as a replacement for
another check that had an incorrect payee. The check was a
manual check processed outside the normal check run and
the information was to have been processed with the next
weekly run. That did not happen and the check was not
posted to the general ledger. As a result, cash has been
overstated and expenses understated.
Check number 103625 was used to purchase certificates
from a local grocery chain. Certificates were purchased at
discount and once sold at face value would realize a profit
for the Authority. The Authority did not record the
discount realized on the purchase that would be transferred
as income once the certificates were resold. Also, the
Authority offset the cash expenditure by reducing other
income. Until the certificates were resold, the cost
represents an expense to the Authority. As a result, the
Authority understated both income and expenses.
The Authority wrote a large number of manual checks.
Disbursements Were Not
During our audit period the Authority wrote an average of
Processed Through The
34 manual checks each month. Because manual checks do
Authority’s Normal Bill
not get processed through the Authority’s normal bill
Paying Process
paying process there is an increased likelihood that
disbursements will not be processed properly. For
example, we noted manual checks were prepared to pay a
provider for Authority employee health benefits. Although
the payment was due on July 29, 1999, the vendor was not
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Finding 3
paid until October 1, 1999, thereby placing employee health
benefits coverage in jeopardy.
Additional examples of concerns raised as a result of
issuing manual checks include the following:
Check number 102929 was a manual check written on
December 18, 1997 to a HOPE VI limited partnership for
$556,834.93. Under the Authority’s normal bill paying
process, accounts payable checks at the Authority were
generally signed by a signature stamp bearing the names of
the former Executive Director and Director of Finance.
The Authority’s former Executive Director and Deputy
Director signed this manually prepared check. We noted
there was no mailing address on the check raising the
question how the recipient received the check. Also, the
check was not executed until February 4, 1998 or 47 days
after it was prepared. Since manual checks are generally
necessary to expedite the payment process, it is unclear why
a manual check was necessary in this circumstance.
Check number 103886 was a manual check written on
January 15, 1998 to a program recipient for $13,300.89. In
reviewing other checks for this program recipient, we noted
all other checks, except the manual check noted above,
were endorsed with a deposit stamp and deposited into the
same bank account. The manual check in question was
endorsed by an individual and processed by another bank.
During our review of the Authority’s disbursement process,
The Authority Did Not we noted concerns with the adequacy of supporting
Adequately Support documentation for the following payments:
Disbursements
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Finding 3
Check
Number Amount Description
109072 $ 27,385 The Authority was not able to provide
documentation identifying the funding
source for this payment. However, based on
the documentation obtained, it appears this
disbursement was funded through the CGP
for consulting and cost of the initial
inventory for a store in one of the
Authority’s communities, and according to
program requirements may not be CGP
eligible.
108860 $225,000 This check settled an Authority legal matter.
Documentation was not provided to detail
the legal matter. Additionally, HUD’s Mid-
Atlantic Office of General Counsel was not
made aware of the litigation as required by
HUD guidelines.
120431 $128,465 This disbursement to install digital cable
wiring in several communities was not
made timely. Further, HUD’s Pittsburgh
Office of Public Housing indicated work
was not done according to Authority budget
submissions.
115685 $ 10,898 This disbursement was to reimburse the
Authority’s former Executive Director for
miscellaneous expenditures in February
1999. According to documentation
provided by the Authority, some of the
reimbursements were for expenses incurred
during 1998, more than a year earlier.
Additionally, $957 of the reimbursements
may not have been appropriate and included
miscellaneous entertainment, and an
Authority police towing charge.
Authority personnel indicated the Authority no longer
employs many of the employees responsible for the
deficiencies noted throughout this finding. Specifically, the
Finance Department has had at least five different
individuals head the Department since July 1997.
We acknowledge the Authority has had frequent turnover in
the Finance Department. However, frequent turnover is not
an acceptable reason for the Authority’s inability to develop
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Finding 3
and implement policies and procedures as recommended in
each of the last three financial statement audits done by the
Authority’s Independent Auditor. Clearly, sound policies
and procedures that need to be followed are an important
constant in an environment where employee turnover is so
prevalent.
* * * * * *
In summary, the Authority needs to significantly improve
its internal controls over the disbursement process. Initially
the Authority needs to develop and implement policies and
procedures over its disbursement process and maintain
adequate documentation to support decisions made. We
believe these policies and procedures are essential in light
of the Authority’s frequent turnover. Without effective
controls and procedures, the Authority will not be able to
adequately function; and errors and omissions identified
throughout this finding are likely to continue.
Auditee Comments The Authority agreed that it had prior deficiencies with
controls over disbursements. However, the Authority
stated many of the deficiencies cited by the OIG have or are
being addressed by corrective actions to include: (1) no
longer writing checks payable to cash; (2) limiting the
issuance of manual checks to emergency situations which
must be approved by the CFO; and (3) regular
reconciliation of accounts. Additionally, the Authority has
indicated it is in the process of developing a Policy and
Procedures Manual for the Finance Department.
The Authority took great exception to questionable expense
reimbursement requests by the former Executive Director.
During the exit conference, the former Executive Director
reiterated he has always scrutinized his expense requests to
ensure they are proper. The former Executive Director
stated he does not even use an Authority credit card to
mitigate any possibility of impropriety. The Authority
stated the former Executive Director was not given the
opportunity to address the OIG’s concerns. Further, the
Authority stated that according to its internal records, the
$957 of questionable expenditures was previously
identified by the Finance Department and it recommended
that the costs be transferred to a non-Federal fund account.
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Finding 3
Regarding the remaining questioned costs, the Authority
has stated it will provide further documentation to justify
eligibility.
OIG Evaluation of We are encouraged by the Authority’s commitment to
Auditee Comments improve its financial controls over cash disbursements.
However, the Authority has made the same commitment to
implement proposed corrective actions in its response to
annual financial statement findings. Regarding the
questionable expenditures incurred by the former Executive
Director, we assured the Authority we would make
necessary report adjustments as long as they provided
documentation consistent with their response. However,
this documentation was not provided.
Recommendations We recommend the Authority:
3A. Develop and implement a procedures manual for the
Finance Department to address internal control
issues generally and the numerous issues cited in
this finding including: stop the practice of writing
checks payable to cash; restrict the process of
writing manual checks; and identifying
circumstances acceptable to generate manual
checks.
3B. Produce the checks that have been noted as void or
provide an explanation for each check as to why
they could not be found. Produce the four checks
which could not be found and that have not been
noted as voided. Include in the procedures manual
what should be done with/to a voided check.
3C. Provide documentation to support the eligibility of
the $381,807 of expenses paid with the following
check numbers: 109072, 108860, 120431, and
115685. Documentation for check number 108860
is to be approved by the Regional Counsel Mid-
Atlantic. In addition, identify all other litigation
that was not properly approved and submit to
Regional Counsel Mid-Atlantic for approval.
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Finding 3
Repay, from non-Federal funds, those amounts not
properly supported.
3D. Provide documentation to assure that the accounting
entries involving check number 113324 were made.
Specifically, include in the procedures manual steps
to increase the assurance all checks written are
posted to accounting records. Also, provide
documentation to show that the accounting entries
for check number 103625 have all been made.
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Management Controls
In planning and performing our audit of the Authority, we considered the management controls to
determine our auditing procedures and not to provide assurance on management control. The
Authority’s management is responsible for establishing effective management controls.
Management control is the process effected by the Authority’s Board, managers, and other
personnel, designed to provide reasonable assurance for achieving objectives for program
operations, validity and reliability of data, compliance with applicable laws and regulations, and
safeguarding resources.
We determined that management controls over Cash
Management Controls
Disbursements, LOCCS draws, and Procurement were
Assessed
relevant to our audit objectives. For each of those activities,
we assessed the risk, control environment, control activities,
and internal monitoring and reporting functions. We made
our assessment and gained our understanding through a
testing of transactions in each of the activities.
It is a significant weakness if management controls do not
Significant Weaknesses
provide reasonable assurance that resource use is consistent
Found
with laws, regulations, and policies; that resources are
safeguarded against waste, loss, misuse; and that reliable data
is obtained, maintained, and fairly disclosed in reports.
Our audit disclosed significant weaknesses with Procurement
(Finding 1), LOCCS draws (Finding 2), and Cash
Disbursements (Finding 3).
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Management Controls
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Follow Up On Prior Audits
The HUD Office of Inspector General (OIG) previously audited the Authority’s Drug
Elimination Program. The audit report (Number 00-PH-201-1001) was issued October 20, 1999.
The full report can be viewed from our website at http://www.hud.gov/oig/states/pa.html. The
report had one finding with many of the same concerns expressed in this report. The
recommendations are still open.
There are no other open recommendations from prior audits done at the Authority.
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Follow Up On Prior Audits
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Appendix A
Schedule of Questioned Costs
Finding Number Ineligible 1/ Unsupported 2/
1 $1,382,874 $3,118,773
2 $3,257,714
3 $ 381,807
Total $1,382,874 $6,758,294
1/ Ineligible amounts are not allowed by law, contract, HUD or local agency policies or
regulations.
2/ Unsupported amounts are not clearly eligible or ineligible, but warrant being contested
(i.e. lack of satisfactory documentation to support the eligibility of the costs).
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Appendix A
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Appendix B
Summary of Ineligible and Unsupported Costs
For Finding 1
Management Contract Changes Total Ineligible 1/ Unsupported 2/
Number Amount
3485 $ 9,975 $ 23,984 $ 33,959 $ 33,959
3928 24,825 24,825 24,825
3506 553,000 459,631 1,012,631 459,631
3874 291,200 1,251,007 1,542,207 $1,251,007 291,200
3875 178,190 189,050 367,240 367,240
4090 70,870 70,870 70,870
4160 632,150 3,070 635,220 635,220
2516 9,999 20,001 30,000 30,000
2541 9,999 432,375 442,374 442,374
2551 40,000 723,454 763,454 763,454
3406 44,800 161,300 206,100 131,867
Total $1,865,008 $3,263,872 $5,128,880 $1,382,874 $3,118,773
1/ Ineligible amounts are not allowed by law, contract, HUD or local agency policies or
regulations. Contrary to Federal purchasing regulations, Management Numbers 3406 and
3874 included contract modifications to increase quantity and for work items outside the
scope of the original contract.
2/ Unsupported amounts are not clearly eligible or ineligible but warrant being contested
(i.e. lack of satisfactory documentation to support the eligibility of the costs). As detailed
in Appendix C that follows, the Authority did not provide documentation to support the
history of the above contract awards.
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Appendix B
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Appendix C
Summary of Procurement Contracts Reviewed
Number of
Procurement Number of Number of
Contract Contract Steps Steps Steps not
Number Amount Change Order Total Evaluated 1/ Followed Followed Notes
Materials and Supplies Purchases from $4,000 to $10,000
3485 $9,975 $23,984 $33,959 15 0 15 See pg. 48
Materials and Supplies Purchases from $10,000 to $49,999
3928 $24, 825 $24,825 23 7 16 See pg. 49
Materials and Supplies Purchases over $50,000 and greater
3506 $ 553,000 $459,631 $1,012,631 24 13 11 See pg. 50
3874 291,200 1,251,007 1,542,207 24 9 15 See pg. 51
3875 178,190 189,050 367,240 24 13 11 See pg. 52
4090 70,870 70,870 24 13 11 See pg. 53
4092 328,592 328,592 24 17 7 See pg. 54
4113 494,000 13,580 507,580 24 18 6 See pg. 55
4153 829,000 133,908 962,908 24 16 8 See pg. 56
4160 632,150 3,070 635,220 24 13 11 See pg. 57
4342 1,589,000 (69,457) 1,519,543 24 16 8 See pg. 58
Professional Services Purchases from $4,000 to $10,000
2516 $9,999 $20,001 $30,000 12 2 10 See pg. 59
2541 9,999 432,375 442,374 12 2 10 See pg. 60
Professional Services Purchases from $10,000 to $49,999
2551 $40,000 $723,454 $763,454 15 2 13 See pg. 61
3406 44,800 161,300 206,100 15 7 8 See pg. 62
Total $5,105,600 $3,341,903 $8,447,503
1/ All applicable procurement steps evaluated. The number of procurement steps required
depended on the type and amount of purchase.
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Appendix C
Emergency Site Work
Management Number 3485
Contract amount $ 9,975
Change order 23,984
Revised contract amount $33,959
Standard Procurement Procedures For Housing Authority Procurement Steps
Of Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source X
amount.
6. Enter requisition into computer system. X
7. Approve requisition. X
8. Review other government contracts for item availability. X
9. If item is available under another government contract, go
to #15, if not go to #10 below. X
10. Obtain telephone, fax or written quotes from at least three
vendors for requested item. X
11. Document quotes that were received – item purchased,
company name, contact person, date, time and amount of
quote. X
12. Compare lowest quote to cost estimate. X
13. If lowest quote is comparable to cost estimate, go to #15. X
14. If lowest quote is not comparable to cost estimate,
go to #10 above. X
15. Create purchase order and purchase item(s). X
Totals 15
Back to pg. 47
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Appendix C
Concrete Work
Management Number 3928
Contract amount $24,825
Change order
Revised contract amount $24,825
Standard Procurement Procedures For Housing Authority Procurement steps
Of Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source X
amount.
6. Enter requisition into computer system. X
7. Approve requisition. X
8. Review other government contracts for item availability. X
9. If item is available under another government contract,
go to #23, if not go to #10. X
10. Advertise and issue solicitation. X
11. Hold pre-bid conference, if needed. X
12. Receive bids. X
13. Conduct bid opening. X
14. Review bids for responsiveness. X
15. Compare lowest quote to cost estimate. X
16. If low quote is comparable to cost estimate, go to #18. X
17. If low quote is not comparable to cost estimate, return to X
#10.
18. Select lowest quote as successful bidder. X
19. Confirm successful bidder. X
20. Issue Notice of Intent to Award to all bidders. X
21. Prepare contract. X
22. Execute contract. X
23. Create purchase order and purchase item(s). X
Totals 7 16
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Appendix C
Site Hazard Reduction
Management Number 3506
Contract amount $ 553,000
Change order 459,631
Revised contract amount $1,012,631
Standard Procurement Procedures For Housing Authority Procurement Steps
Of Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding
source amount. X
6. Obtain HACP Board of Director’s approval. X
7. Enter requisition into computer system. X
8. Approve requisition. X
9. Review other government contracts for item
availability. X
10. If item is available under another government
contract, go to #24, if not go #11. X
11. Advertise and issue solicitation. X
12. Hold pre-bid conference, if needed. X
13. Receive bids. X
14. Conduct bid opening. X
15. Review bids for responsiveness. X
16. Compare lowest quote to cost estimate. X
17. If low quote is comparable to cost estimate, go to
#19. X
18. If low quote is not comparable to cost estimate, X
return to #11.
19. Select lowest quote as successful bidder. X
20. Confirm successful bidder. X
21. Issue Notice of Intent to Award to all bidders. X
22. Prepare contract. X
23. Execute contract X
24. Create purchase order and purchase item(s). X
Totals 13 11
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Appendix C
Concrete Replacement Work
Management Number 3874
Contract amount $ 291,200
Change order 1,251,007
Revised contract amount $1,542,207
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source amount. X
6. Obtain HACP Board of Director’s approval. X
7. Enter requisition into computer system. X
8. Approve requisition. X
9. Review other government contracts for item availability. X
10. If item is available under another government contract,
go to #24, if not go #11. X
11. Advertise and issue solicitation. X
12. Hold pre-bid conference, if needed. X
13. Receive bids. X
14. Conduct bid opening. X
15. Review bids for responsiveness. X
16. Compare lowest quote to cost estimate. X
17. If low quote is comparable to cost estimate, go to #19. X
18. If low quote is not comparable to cost estimate, return to #11. X
19. Select lowest quote as successful bidder. X
20. Confirm successful bidder. X
21. Issue Notice of Intent to Award to all bidders. X
22. Prepare contract. X
23. Execute contract. X
24. Create purchase order and purchase item(s). X
Totals 9 15
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Appendix C
Concrete Replacement and Repair Work
Management Number 3875
Contract amount $178,190
Change order 189,050
Revised contract amount $367,240
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source X
amount.
6. Obtain HACP Board of Director’s approval. X
7. Enter requisition into computer system. X
8. Approve requisition. X
9. Review other government contracts for item availability. X
10. If item is available under another government contract,
go to #24, if not go to #11. X
11. Advertise and issue solicitation. X
12. Hold pre-bid conference, if needed. X
13. Receive bids. X
14. Conduct bid opening. X
15. Review bids for responsiveness. X
16. Compare lowest quote to cost estimate. X
17. If low quote is comparable to cost estimate, go to #19. X
18. If low quote is not comparable to cost estimate, return to X
#11.
19. Select lowest quote as successful bidder. X
20. Confirm successful bidder. X
21. Issue Notice of Intent to Award to all bidders. X
22. Prepare contract. X
23. Execute contract. X
24. Create purchase order and purchase item(s). X
Totals 13 11
Gasline Relocation Back to pg. 47
Management Number 4090
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Appendix C
Contract amount $70,870
Change order
Revised contract amount $70,870
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source amount. X
6. Obtain HACP Board of Director’s approval. X
7. Enter requisition into computer system. X
8. Approve requisition. X
9. Review other government contracts for item availability. X
10. If item is available under another government contract,
go to #24, if not go #11. X
11. Advertise and issue solicitation. X
12. Hold pre-bid conference, if needed. X
13. Receive bids. X
14. Conduct bid opening. X
15. Review bids for responsiveness. X
16. Compare lowest quote to cost estimate. X
17. If low quote is comparable to cost estimate, go to #19. X
18. If low quote is not comparable to cost estimate, return to #11. X
19. Select lowest quote as successful bidder. X
20. Confirm successful bidder. X
21. Issue Notice of Intent to Award to all bidders. X
22. Prepare contract. X
23. Execute contract. X
24. Create purchase order and purchase item(s). X
Totals 13 11
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Appendix C
Site Improvements and Playground Installation
Management Number 4092
Contract amount $328,592
Change order
Revised contract amount $328,592
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source amount. X
6. Obtain HACP Board of Director’s approval. X
7. Enter requisition into computer system. X
8. Approve requisition. X
9. Review other government contracts for item availability. X
10. If item is available under another government contract,
go to #24, if not go to #11. X
11. Advertise and issue solicitation. X
12. Hold pre-bid conference, if needed. X
13. Receive bids. X
14. Conduct bid opening. X
15. Review bids for responsiveness. X
16. Compare lowest quote to cost estimate. X
17. If low quote is comparable to cost estimate, go to #19. X
18. If low quote is not comparable to cost estimate, return to #11. X
19. Select lowest quote as successful bidder. X
20. Confirm successful bidder. X
21. Issue Notice of Intent to Award to all bidders. X
22. Prepare contract. X
23. Execute contract. X
24. Create purchase order and purchase item(s). X
Total 17 7
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Appendix C
Hydronic Boiler Replacement
Management Number 4113
Contract amount $494,000
Change order 13,580
Revised contract amount $507,580
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source amount. X
6. Obtain HACP Board of Director’s approval. X
7. Enter requisition into computer system. X
8. Approve requisition. X
9. Review other government contracts for item availability. X
10. If item is available under another government contract,
go to #24, if not go to #11. X
11. Advertise and issue solicitation. X
12. Hold pre-bid conference, if needed. X
13. Receive bids. X
14. Conduct bid opening. X
15. Review bids for responsiveness. X
16. Compare lowest quote to cost estimate. X
17. If low quote is comparable to cost estimate, go to #19. X
18. If low quote is not comparable to cost estimate, return to #11. X
19. Select lowest quote as successful bidder. X
20. Confirm successful bidder. X
21. Issue Notice of Intent to Award to all bidders. X
22. Prepare contract. X
23. Execute contract. X
24. Create purchase order and purchase item(s). X
Totals 18 6
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Appendix C
Replacement of Furnace
Management Number 4153
Contract amount $829,000
Change order 133,908
Revised contract amount $962,908
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source amount. X
6. Obtain HACP Board of Director’s approval. X
7. Enter requisition into computer system. X
8. Approve requisition. X
9. Review other government contracts for item availability. X
10. If item is available under another government contract, X
go to #24, if not go to #11.
11. Advertise and issue solicitation. X
12. Hold pre-bid conference, if needed. X
13. Receive bids. X
14. Conduct bid opening. X
15. Review bids for responsiveness. X
16. Compare lowest quote to cost estimate. X
17. If low quote is comparable to cost estimate, go to #19. X
18. If low quote is not comparable to cost estimate, return to #11. X
19. Select lowest quote as successful bidder. X
20. Confirm successful bidder. X
21. Issue Notice of Intent to Award to all bidders. X
22. Prepare contract. X
23. Execute contract. X
24. Create purchase order and purchase item(s). X
Totals 16 8
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Appendix C
General Landscaping
Management Number 4160
Contract amount $632,150
Change order 3,070
Revised contract amount $635,220
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source X
amount.
6. Obtain HACP Board of Director’s approval. X
7. Enter requisition into computer system. X
8. Approve requisition. X
9. Review other government contracts for item availability. X
10. If item is available under another government contract, X
go to #24, if no go to #11.
11. Advertise and issue solicitation. X
12. Hold pre-bid conference, if needed. X
13. Receive bids. X
14. Conduct bid opening. X
15. Review bids for responsiveness. X
16. Compare lowest quote to cost estimate. X
17. If low quote is comparable to cost estimate, go to #19. X
18. If low quote is not comparable to cost estimate, return to #11. X
19. Select lowest quote as successful bidder. X
20. Confirm successful bidder. X
21. Issue Notice of Intent to Award to all bidders. X
22. Prepare contract. X
23. Execute contract. X
24. Create purchase order and purchase item(s). X
Totals 13 11
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Appendix C
Site Improvements
Management Number 4342
Contract amount $1,589,000
Change order (69,457)
Revised contract amount $1,519,543
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source amount. X
6. Obtain HACP Board of Director’s approval. X
7. Enter requisition into computer system. X
8. Approve requisition. X
9. Review other government contracts for item availability. X
10. If item is available under another government contract, X
go to #24, if not go to #11.
11. Advertise and issue solicitation. X
12. Hold pre-bid conference, if needed. X
13. Receive bids. X
14. Conduct bid opening. X
15. Review bids for responsiveness. X
16. Compare lowest quote to cost estimate. X
17. If low quote is comparable to cost estimate, go to #19. X
18. If low quote is not comparable to cost estimate, return to #11. X
19. Select lowest quote as successful bidder. X
20. Confirm successful bidder. X
21. Issue Notice of Intent to Award to all bidders. X
22. Prepare contract. X
23. Execute contract. X
24. Create purchase order and purchase item(s). X
Totals 16 8
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Appendix C
Legal Service and Advice on Construction
Project/Resident Training
Management Number 2516
Contract amount $ 9,999
Change order 20,001
Revised contract amount $30,000
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimate cost is within budget/funding source. X
6. Obtain quote from at least one vendor for requested service. X
7. Compare quote to cost estimate. X
8. If quote is comparable to cost estimate, go to #10 below. X
9. If quote is not comparable to cost estimate, go to #6 above. X
10. Prepare contract. X
11. Execute contract. X
12. Issue notice to proceed. X
Totals 2 10
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Appendix C
Legal Advices and Services
Management Number 2541
Contract amount $ 9,999
Change order 432,375
Revised contract amount $ 442,374
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimate cost is within budget/funding source. X
6. Obtain quote from at least one vendor. X
7. Compare successful quote to cost estimate. X
8. If quote is comparable to cost estimate, go to
#10 below. X
9. If quote is not comparable to cost estimate, go to #6 above. X
10. Prepare contract. X
11. Execute contract. X
12. Issue notice to proceed. X
Totals 2 10
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Appendix C
Legal advices and services
Management Number 2551
Contract amount $ 40,000
Change order 723,454
Revised contract amount $763,454
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source. X
6. Obtain telephone, fax or written quotes from at least three
vendors for requested services. X
7. Document quotes that were received – item being quoted,
company name, contact person, date, time and amount of quote. X
8. Compare successful vendor’s quote to cost estimate. X
9. If successful vendor’s quote is comparable to cost estimate, go
to #11 below. X
10. If successful vendor’s quote is not comparable to cost
estimate, go to #6 above. X
11. Obtain City of Pittsburgh MBE/WBE Committee approval. X
12. Issue Notice of Intent to Award to all bidders. X
13. Prepare contract. X
14. Execute contract. X
15. Issue notice to proceed. X
Totals 2 13
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Appendix C
Financial Audit for 1997 and 1998
Management Number 3406
Contract amount $ 44,800
Change order 161,300
Revised contract amount $206,100
Standard Procurement Procedures For Housing Authority Of Procurement Steps
Pittsburgh Followed
Yes No
1. Determine requirements. X
2. Identify funding source/review for budget. X
3. Prepare specifications. X
4. Secure independent cost estimate. X
5. Ensure estimated cost is within budget/funding source. X
6. Obtain telephone, fax or written quotes from at least three X
vendors for requested services.
7. Document quotes that were received – item being quoted, X
company name, contact person, date, time and amount of
quote.
8. Compare successful vendor’s quote to cost estimate. X
9. If successful vendor's quote is comparable to cost estimate, X
go to #11 below.
9. If successful vendor’s quote is not comparable to cost X
estimate, go to #6 above.
10. Obtain City of Pittsburgh MBE/WBE Committee X
approval.
11. Issue Notice of Intent to Award all bidders. X
12. Prepare contract. X
13. Execute contract. X
14. Issue notice to proceed. X
Totals 7 8
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Appendix D
Auditee Comments
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Appendix E
Distribution
Acting Executive Director, Housing Authority of the City of Pittsburgh, 200 Ross Street,
Pittsburgh, PA 15219
Chairman, Housing Authority of the City of Pittsburgh, 200 Ross Street, Pittsburgh, PA 15219
Secretary’s Representative, Mid-Atlantic, 3AS
Pittsburgh Area Coordinator, 3ES
Acting Director, Office of Public Housing, Pittsburgh Area Office, 3EPH
Public Affairs Officer, Mid-Atlantic, 3AS
Audit Liaison Officer, 3AFI
Audit Liaison Officer, Office of Public and Indian Housing, PF (Room 5156)
Departmental Audit Liaison Officer, FM (Room 2206)
Special Agent in Charge, 3AGI
DIGA’s
Assistant Deputy Secretary for Field Policy and Management, SDF (Room 7108)
Deputy Chief Financial Officer for Finance, FF (Room 2202)
Director, Office of Budget, FO (Room 3270)
Acquisitions Librarian Library, AS (Room 8141)
Principal Staff
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, 340 Dirksen
Senate Office Building, US Senate, Washington, DC 20510
The Honorable Joseph Lieberman, Ranking Member, Committee on Governmental Affairs, 706
Hart Senate Office Building, US Senate, Washington, DC 20515
Ms. Cindy Fogleman, Subcommittee on Oversight and Investigations, Room 212, O’Neil House
Office Building, Washington, DC 20515
Director, Housing and Community Development Issue Area, US GAO, 441 G Street, N.W.,
Room 2474, Washington, DC 20548, Attn: Stanley Czerwinski
The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn
Building, House of Representatives, Washington, DC 20515
The Honorable Henry Waxman, Ranking Member, Committee on Government Reform, 2204
Rayburn Building, House of Representatives, Washington, DC 20515
Mr. Steve Redburn, Chief, Housing Branch, Office of Management & Budget, 725 17th Street,
N.W., Room 9226, New Executive Office Building, Washington, DC 20503
Ms. Carolyn G. Bowden, General Accounting Office, Deputy Director for Planning and
Reporting/Operations, GAO FraudNET, P.O. Box 1736, Washington, DC 20013
Ms. Anabell Kinney, City Controller’s Office, City-County Building, 414 Grant Street,
Pittsburgh, PA 15219
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2001-PH-1005
Housing Authority of the City of Pittsburgh, Comprehensive Audit of Various Activities, Pittsburgh, Pennsylvania
Published by the Department of Housing and Urban Development, Office of Inspector General on 2001-05-03.
Below is a raw (and likely hideous) rendition of the original report. (PDF)