AUDIT REPORT
CONCORD HOUSING AUTHORITY
CONCORD, NEW HAMPSHIRE
2002-BO-1002
MARCH 29, 2002
OFFICE OF AUDIT, NEW ENGLAND
BOSTON, MASSACHUSETTS
Issue Date
March 29, 2002
Audit Case Number
2002-BO-1002
TO: Donna J. Ayala, Director, Office of Public Housing, 1APH
FROM: Barry L. Savill, District Inspector General, Office of Audit, 1AGA
SUBJECT: Concord Housing Authority
Concord, New Hampshire
We completed an audit of the Concord Housing Authority (CHA). Our audit objectives were to
determine whether the CHA was administering its public housing and Section 8 programs in an
efficient, effective, and economical manner, and whether the CHA was complying with the terms
and conditions of its Annual Contributions Contract, applicable laws, HUD regulations, and other
applicable directives.
The report contains four findings: 1) improper procurement activities: 2) CHA lacked an
adequate system of management controls; 3) improvement needed over the Public Housing Drug
Elimination Program (PHDEP); and 4) improvement needed over administration of Section 8
Program. We identified unsupported costs totaling $58,160 relating to PHDEP and ineligible
costs of $6,108 relating to duplicate Section 8 payments.
Within 60 days, please give us for each recommendation made in this report a status report on:
(1) corrective action taken; (2) the proposed corrective action and the date to be completed; or (3)
why corrective action is unnecessary. Also, please furnish us copies of any correspondence or
directives issued because of the audit.
Should you or your staff have questions, please contact me at (617) 994-8380.
Management Memorandum
THIS PAGE LEFT
BLANK
INTENTIONALLY
2002-BO-1002 Page ii
Executive Summary
We performed an audit of the Low-Income Public Housing and Section 8 Programs operated by
the Concord Housing Authority (CHA). Our audit objectives were to determine whether the
CHA is administering its public housing and Section 8 programs in an efficient, effective, and
economical manner, and whether the CHA is complying with the terms and conditions of its
Annual Contributions Contract (ACC), applicable laws, HUD regulations, and other applicable
directives.
We determined that the CHA needs to:
Audit Results
Ø Follow proper procurement procedures in accordance
with HUD regulations and its own policies and
procedures.
Ø Implement an adequate system of management controls
over assets.
Ø Improve the administration and accountability over its
Public Housing Drug Elimination Program (PHDEP).
Ø Improve the administration of its Section 8 program.
The CHA did not follow HUD procurement regulations and
its own procurement policies and procedures. Procurement
deficiencies included: awarding contract without
competition; selecting contractors without adequate
competition; use of sole source contractor not justified; and
emergency work not performed timely. CHA could not
provide assurance to HUD that the contracts for
construction, equipment, and related services, totaling
$772,001, were awarded after the consideration of full and
open competition, and at the most favorable cost. These
weaknesses occurred because the CHA’s management did
not fulfill its responsibility to establish and implement
effective management controls over the procurement
process, including management’s failure to provide
oversight of a Coordinator hired to monitor the CHA’s
Comprehensive Grant Program.
The CHA’s management controls over bank reconciliation,
receipts, cash disbursements, tenant receivables, fixed
assets and investments were not adequate. As a result of
these management control weaknesses, the CHA’s
Page iii 2002-BO-1002
Executive Summary
resources are not adequately safeguarded against waste, loss
and misuse. These conditions exist because the CHA’s
management did not fulfill its responsibility to establish
and implement effective management controls.
The CHA needs to improve the administration and
accountability over its Public Housing Drug Elimination
Program (PHDEP). Specifically, the CHA has not: ensured
proper control and administration of patrol services; and
complied with HUD regulations which require that
activities and accomplishments in Semi-Annual
Performance Reports conform to approved PHDEP Grant
Applications. As a result, HUD has no assurance that
program objectives were met as stated in the PHDEP Grant
Applications; and, that PHDEP funds were used efficiently
and effectively. We are questioning PHDEP costs of
$58,160 for police patrols because baseline services were
not established, as required. These problems occurred
because the CHA management did not adequately monitor
the functions and responsibilities performed as part of the
PHDEP.
The CHA does not have an acceptable system of controls
over its Section 8 program. Specifically, the CHA did not
ensure that: 1) annual recertifications were performed
timely; 2) Housing Quality Standards inspections are
performed timely; 3) reasonable rent procedures were
adhered to; 4) Section 8 waiting list was maintained and
updated accordingly; 5) procedures were established to
ensure that Housing Assistance Payments made to
landlords were appropriate; and 6) certificates and vouchers
were utilized at the appropriate rate. These deficiencies
occurred because the CHA’s management did not fulfill
their responsibility to provide adequate oversight of the
Section 8 program. As a result, we are questioning $6,108
relating to overpayments to landlords.
We have provided specific recommendations to assist in
Recommendations correcting the reported deficiencies. CHA Management
must take a more active role in administering HUD
programs it operates. The CHA needs to develop and
implement procedures over procurement, management
controls over assets, and administration of the PHDEP and
Section 8 programs.
2002-BO-1002 Page iv
Executive Summary
We are also recommending that the CHA reimburse the
Findings and federal programs for amounts that are not supported; the
Recommendations unsupported portion of the $58,160 charged to the PHDEP,
and the $6,108 in ineligible costs charged to the Section 8
Program.
The findings were discussed with the CHA during the
course of the audit. We held an exit conference on
February 25, 2002. On March 1, 2002, we provided the
CHA a copy of the draft audit report for comment. We
received the CHA’s response on March 15, 2002.
We have included pertinent comments of the CHA’s
response in the Findings section of this report. The CHA’s
narrative response is provided as Appendix B. Attachments
included with the CHA response will be provided to the
Massachusetts Office of Public Housing under separate
cover.
Page v 2002-BO-1002
Executive Summary
THIS PAGE LEFT BLANK INTENTIONALLY
2002-BO-1002 Page vi
Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1. Improper Procurement Activities 5
2. CHA Lacked an Adequate System of Controls 17
3. Improvement Needed Over the Public Housing Drug Elimination
Program 27
4. Improvement Needed Over Administration of Section 8 Program 33
Management Controls 39
Appendices
A Schedule of Ineligible and Unsupported Costs 41
B Auditee Comments 43
C Distribution 61
Page vii 2002-BO-1002
Table of Contents
Abbreviations
ACC Annual Contributions Contract
ADA Americans with Disabilities Act
CD Certificate of Deposit
CFR Code of Federal Regulations
CGP Comprehensive Grant Program
CHA Concord Housing Authority
COE U.S. Army Corps of Engineers
HAP Housing Assistance Payment
HQS Housing Quality Standards
HUD Department of Housing and Urban Development
IPA Independent Public Accountant
MOU Memorandum of Understanding
NOFA Notice of Funds Availability
OIG Office of Inspector General
OMB Office of Management and Budget
PHA Public Housing Authority
PHDEP Public Housing Drug Elimination Program
PHMAP Public Housing Management Assessment Program
RFP Request for Proposals
SEMAP Section 8 Management Assessment Program
TAR Tenant Accounts Receivable
2002-BO-1002 Page viii
Introduction
A five-member Board of Commissioners, chaired by Doris Desautel, governs the Concord
Housing Authority (CHA). The Executive Director, Ian R. McLauchlan, is responsible for the
administration of CHA operations. The CHA office is located at 15 Pitman Street, Concord, New
Hampshire. The CHA is administering 224 units under the Section 8 Program and 262 units in
five projects under the Low Income Public Housing Program.
The U.S. Army Corps of Engineers (COE) performs Contract Administration Reviews for
selected Housing Authorities on behalf of HUD. The CHA was cited in June 1999 and August
2000 by the COE for problems in its procurement and contracting practices. This report also
includes a finding relating to improper procurement activities (Finding 1).
The purpose of our audit was to determine whether:
Audit Objectives
1. The CHA is using its resources and managing its
programs and operations efficiently, effectively, and
economically;
2. The CHA is complying with the terms and conditions of
its Annual Contributions Contract, applicable laws,
HUD regulations, and other applicable directives.
To accomplish the audit objectives, we:
Audit Scope and
Methodology Ø Reviewed Federal requirements including the Code of
Federal Regulations (CFR), HUD Handbooks, Public
and Indian Housing Notices and Directives, OMB
Circulars, the CHA’s organizational and administrative
structure, administrative plans and personnel policies,
and recorded minutes of the Board of Commissioners
meetings.
Ø Reviewed Independent Public Accountant (IPA) reports
for FYs 1999, 2000 and monitoring reviews conducted
by the HUD Field Office.
Ø Interviewed Massachusetts and New Hampshire State
Office of Public Housing personnel, the CHA
Executive Director and staff, and the CHA’s Fee
Accountant to obtain information relating to CHA’s
operations and management controls.
Page 1 2002-BO-1002
Introduction
Ø Interviewed the CHA staff regarding its procedures for
accounting, administration, procurement, maintenance,
occupancy, training, cash receipts, cash disbursements,
fixed assets, Public Housing Drug Elimination Program
(PHDEP), Comprehensive Grant Program (CGP), to
determine if the CHA’s procedures were adequate.
Ø Reviewed a random sample of ten out of 192 Section 8
tenant files to verify that tenants qualified as a family;
that tenants’ income was within income limits; and to
determine that recertifications were performed on an
annual basis.
Ø Examined CHA’s compliance with HUD’s utility
allowance provisions, administration of the waiting list,
rent reasonableness determinations, utilization of
Section 8 certificates and vouchers, procedures on HQS
inspections, and supervisory control inspections.
Ø Examined the CHA’s procedures and supporting
documentation for all nine CGP related contracts
awarded during the audit period.
Ø Reviewed CHA bank statements and cancelled checks
for assurance that sources of cash were accounted for.
Ø Analyzed tenant accounts receivable, fixed assets,
security deposits, cash receipts and disbursements, and
investment records to ensure that assets were
safeguarded and properly recorded in the CHA’s
records.
Ø Evaluated the CHA’s PHDEP to verify that: (1) grant
expenditures were properly accounted for, supportable,
eligible and reasonable; (2) the CHA evaluated and
monitored its PHDEP activities to ensure that the
results were in accordance with program objectives; and
(3) the CHA monitored police services provided under
the contract.
For transaction testing methodology, we used non-
representational samples rather than statistically valid
samples. The non-representational sample methodology
was more appropriate for audit testing on the areas
reviewed.
2002-BO-1002 Page 2
Introduction
The audit was conducted between March 2001 and
September 2001, and covered the period from October 1,
1998 through February 28, 2001. When appropriate, the
audit was extended to include other periods.
We conducted our audit in accordance with generally
accepted government auditing standards.
Page 3 2002-BO-1002
Introduction
THIS PAGE LEFT BLANK INTENTIONALLY
2002-BO-1002 Page 4
Finding 1
Improper Procurement Activities
The Concord Housing Authority’s (CHA) procurement practices are not in compliance with
HUD regulations and its own procurement policy. Deficiencies were noted in five of nine
contracts reviewed: (1) contract awarded without competition; (2) contractors selected without
adequate competition; (3) failure to justify sole source contractor; (4) emergency work not
performed timely; and (5) bid proposals and contract documents missing. These deficiencies
occurred because the CHA's management did not fulfill its responsibility to establish and
implement effective internal controls over the procurement process. As a result, CHA could not
provide assurance to HUD that the contracts for construction, equipment, and related services,
totaling $772,001, were procured after the consideration of full and open competition, and at the
most favorable cost.
Procurement regulations contained in the Code of Federal
HUD Requirements Regulations (24 CFR 85.36) require the Public Housing
Authority (PHA) to:
Ø Conduct all procurement in a manner to provide full
and open competition (24 CFR 85.36(c)(1)).
Ø Maintain sufficient records to show the history of a
procurement. The records should include the rationale
and justification for the method of procurement, the
type of contract, the selection of the contractor, and the
basis for the contract price (24 CFR 85.36(b)(9)).
Ø Utilize noncompetitive proposals only when the award
of the contract is infeasible under sealed bids and after
solicitation of a number of sources, competition is
determined inadequate (24 CFR 85.36(d)(4)(i)).
Procurement Handbook for Public and Indian Housing
Authorities, HUD Handbook 7460.8, paragraph 4-26 (E)
states that:
“if a housing agency receives fewer than three proposals,
the PHA should analyze the proposals and document the
reason for the poor response. Depending on the results
of the analysis, the PHA may either reject the proposals
and issue a revised solicitation or proceed to evaluate the
proposals.”
Page 5 2002-BO-1002
Finding 1
The CHA’s Procurement Policy: provides for the fair and
CHA’s Procurement Policy equitable treatment of all persons or firms involved in
purchasing by the CHA; assures that supplies, services and
construction are procured efficiently, effectively, and at the
most favorable prices available to the CHA; promotes
competition in contracting; provides safeguards for
maintaining a procurement system of quality and integrity;
and assures that CHA purchasing actions are in full
compliance with applicable Federal standards, HUD
regulations, and State and local laws.
We reviewed all nine contracts awarded during the audit
Procurement Deficiencies period and identified deficiencies associated with five of
Identified these contracts. The total cost expended for the five
contracts was $772,001 for the period from May 21, 1999
through August 31, 2001. For each of the five contracts, we
identified one violation of HUD regulations and/or the
CHA’s procurement policy as follows:
Work Performed – Note 1 Total Cost Deficiencies
Hired Coordinator to monitor $34,706 1
Comprehensive Grant Program
ADA/Renovations of community room $155,381 2
Replacement of stoves and refrigeration $145,040 3
Installation of trash compactor and lift $8,901 4
Roofing and re-caulking $427,973 5
Total $772,001
Note 1: All contracts were with the same contractor with the
exception of the contract to hire a Coordinator to monitor
the CHA’s Comprehensive Grant Program.
Deficiency Explanations:
1. Contract awarded without any competition.
2. Contractor selected with inadequate competition.
3. Failure to justify sole source.
4. Emergency work not performed timely.
5. Bid proposals and contract documents missing.
2002-BO-1002 Page 6
Finding 1
The CHA contracted for a CGP Coordinator to manage
Contractor Awarded contracting responsibilities without competition. Rather
Without Competition than prepare Requests for Proposals (RFP) for the services
and solicit responses in order to achieve open and free
competition, the CHA granted the work to the firm it
preferred. The Executive Director stated that the CHA by-
passed the bidding process because they needed to expend
the remaining CGP funds before HUD recaptured the
money. HUD allows a two-year period to obligate funds
and three years to expend the funds. Hence, there is no
assurance that the services represent those that could be
best attained.
Procurement regulations for competitive proposals, 24 CFR
85.36(d)(3), stipulate that:
“The technique of competitive proposals is normally
conducted with more than one source submitting an
offer, and either a fixed price or cost-reimbursement
type contract is awarded.”
If this method is used, the following requirements apply:
Ø RFPs will be publicized and identify all evaluation
factors and their relative importance (24 CFR 85.36
(d)(3)(i).
Ø RFPs will be solicited from an adequate number of
qualified sources (24 CFR 85.36 (d)(3)(ii).
Ø Grantees and subgrantees will have a method for
conducting technical evaluations of the proposals
received and for selecting awardees (24 CFR 85.36
(d)(3)(iii).
Ø Awards will be made to the responsible firm whose
proposal is most advantageous to the program, with price
and other factors considered (24 CFR 85.36 (d)(3)(iv).
CHA management disregarded these regulations in order to
expedite the hiring of the Coordinator. Management did not
provide adequate justification for not following regulations.
For the period from November 19, 1999 through August
17, 2001, the CGP Coordinator was paid $34,706.
Page 7 2002-BO-1002
Finding 1
There was one contract awarded by the CHA with
Contractor Selected With inadequate competition. Only one contractor submitted a
Inadequate Competition bid proposal for Americans with Disabilities Act (ADA)
renovations of the community room at Boucher
Apartments. The firm awarded this contract was already
performing work under another CHA contract (Installation
of Appliances – See Sole Source Not Justified below). The
amount of the contract was $147,648 and the final cost was
$155,381.
When the CHA did not receive an adequate number of bid
proposals, the CGP Coordinator did not follow required
procedures in awarding this contract to the sole bidder. The
CHA is required to: document the evaluation process;
document the possible reason why only one firm submitted
a bid proposal; justify why it was not necessary to re-bid; or
perform a cost or price analysis to verify the reasonableness
of the costs. Because the above procedures were not
performed and/or not documented, there is not adequate
assurance that the lowest possible price was obtained for
the services received.
We identified one instance where the CHA could not justify
Failure to Justify Sole using a sole source contractor. The CHA paid the
Source contractor $145,040 to deliver, install new stoves and
refrigerators, and dispose of 234 old stoves and
refrigerators at its five developments. Bid tabulations show
that three bid packages had been sent out, but that only one
bid was received. The CHA did not maintain records that
adequately justified awarding the contract to the sole
bidder. The CHA did not have records showing the
rationale for the method of procurement, contractor
selection and the basis for contract price as required by 24
CFR 85.36(b)(9). The CGP Coordinator’s and the
Executive Director’s primary justification for a large-scale
replacement of the appliances and their failure to follow
proper procurement procedures is that the CHA had only a
short timeframe in which to expend the remaining CGP
funds before HUD recaptured the money. The potential
recapture of the GCP funds is not justification for not
following the procurement regulations.
The Coordinator advised that he preferred to obtain a
contractor that would offer both installation of the new
appliances and disposal of the old equipment. According to
2002-BO-1002 Page 8
Finding 1
the CGP Coordinator, only one contractor was offering
both services. However, CHA did not maintain sufficient
documentation to support this claim.
An emergency request for the installation of a trash
Emergency Work not compactor at the CHA’s Kennedy Building was not acted
Performed Timely upon by the CHA in a timely manner. The CGP
Coordinator advised that, due to the emergency nature of
the procurement, the contract was never formally
advertised, but was handled as a public exigency or
emergency procurement. HUD regulations provide that,
“due to the public exigency or emergency for the
requirement will not permit a delay resulting from
competitive solicitation” (24CFR 85.36 (d) (4) (i) (B)).
The CHA executed a contract for $134,153 on May 31,
2001 for the installation of a trash compactor and lift
system and construction work necessary for installation.
Although the CHA awarded this contract on an emergency
basis, the contract did not identify any time frame for
completion. The CGP Coordinator advised that the
contractor was selected primarily because the contractor
was available and expressed a strong interest in performing
the work. The contractor was currently working on the
ADA renovations at Boucher Apartments when selected for
the job. As of November 13, 2001, the contract was still in
process with $8,901 paid.
HUD initially approved the trash compactor in the CHA’s
CGP Application on September 16, 1997. The work on the
compactor was scheduled for accomplishment in 1999. On
July 5, 2000, the local fire department conducted an
inspection of the Kennedy Building and cited that trash
cans located in the hallways as a fire hazard and a code
violation, adding that the violation required immediate
abatement. The abatement schedule required that the trash
cans be removed from hallways and the CHA install a trash
compactor and this compactor be operational not later than
December 31, 2000. The CHA did not comply with the fire
department’s request. The local fire department cited the
CHA a second time in their inspection on May 10, 2001, re-
emphasizing the same violations. The fire department
stated that a follow-up inspection would be conducted on
June 29, 2001. The violation was still not corrected by that
date and, in fact, was not corrected as of November 13,
2001. During this time, the project continued to utilize the
Page 9 2002-BO-1002
Finding 1
trash cans in its hallways. As a result, tenants were exposed
to fire hazards for 16 months.
Documentation provided by the CGP coordinator show that
the work for this project began in June 2001, and was
completed as of December 31, 2001. The work
completion, originally scheduled for September 30th, was
delayed due to design and layout problems associated with
installation of the compactor and the accompanying trash
chute. In our opinion, the delays encountered in the
preparation of work specifications and project design could
have been avoided had they been addressed during the 11-
month period between the citation by the Concord Fire
Department and the final contract award.
The CHA's contract files did not contain adequate histories
Bid Proposals and Contract of the procurements as required by both the CHA's
Documents Missing Procurement Policy and federal regulations. From May 21,
1999 through September 17, 2000, the CHA paid $427,973
for roofing and re-caulking work at Crutchfield
Apartments; however, there is no evidence that a bid or
proposal was either obtained or requested or that a formal
contract was issued. Without sufficient documentation
showing a history of procurement, we were unable to assess
whether costs were reasonable and eligible under this
contract. Neither the CGP Coordinator nor any CHA staff
members were able to find any documentation on file
related to this procurement. The CGP Coordinator advised
that this work pre-dated his arrival at the CHA.
The U.S. Army Corps (COE) of Engineers in June 1999
reviewed CHA’s contract administration. The COE report
also indicated that files for construction contracts were
missing or lacked many of the contract documents.
The CHA adopted an acceptable procurement policy, which
meets federal requirements. However, as shown above, the
CHA did not follow its policy in all cases and made
management decisions that are contrary to the best interests
of the CHA and its tenants. Wasteful procurements drain
the CHA's limited financial resources and contribute to
fiscal problems. It is the responsibility of the CHA
management to assure that only essential materials and
services are purchased, adopted policies are strictly adhered
2002-BO-1002 Page 10
Finding 1
to, and that procurements are made for the best possible
products at the lowest possible prices.
Auditee Comments The CHA provided the following comments for each
deficiency noted in the finding:
1. Hiring of CGP Coordinator:
The CHA acknowledged that the services of the CGP
Coordinator were obtained “without competition”. The
CHA then provided an explanation for why they
engaged the coordinator without competition. The
CHA also advised that the CHA Board voted to
terminate the contract with the CGP Coordinator
effective May 15, 2002, and to issue a new RFP for
these services.
2. Contractor Selected With Inadequate Competition:
The CHA states that bid solicitations for this work were
sent to five trade advertisers in September 2000 about
two weeks before the bid opening. The CHA stated that
they were trying to obligate FY 1998 CGP funds prior
to September 30, 2000, which, “precluded the re-
advertising and re-bidding” of this contract work.
3. Failure to Justify Sole Source Bid:
The CHA states that, in their opinion, this contract was
not “a sole source procurement”. The CHA advised
that in February 28, 2000, they were attempting to
obligate FY 1997 CGP funds before March 31, when
HUD would have recaptured these funds. The CHA
sent “bid solicitations” to three trade advertisers and
“bid packages” to three appliance vendors in early
February 2000. At the bid opening on February 28,
2000 only one bid was received. In letters sent by the
CHA Executive Director and the CGP Coordinator in
March 2000, CHA requested HUD approval of this
contract award. HUD did not respond to this request,
and CHA awarded the contract to the sole bidder on
March 28, 2000.
Page 11 2002-BO-1002
Finding 1
4. Emergency Procurement Not Performed Timely:
The CHA acknowledged that the installation of a trash
compactor was identified as part of a CGP Application
in 1997. At that time, this work was not considered a
“priority” item, and was scheduled for completion in
1999. In July 2000, the Concord Fire Department cited
CHA with a fire code violation of placing trashcans in
the hallways. CHA states that it explored the possibility
of purchasing the necessary equipment, and then
contracting separately for its installation. At some
point, CHA noted, “it soon became obvious that the
installation was going to be far more complex than
originally anticipated”. In May 2001 (eleven months
after the initial fire code violation), the Concord Fire
Department “insisted that corrective action be taken to
rectify the trash situation”. CHA identifies this action
as the “real emergency”. After CHA approached two
contractors, then working for CHA, only one of these
firms expressed interest in performing the work. This
company was awarded the contract on May 31, 2001.
The initial completion date of the work was scheduled
for September 30; it was later extended to December
31, 2001. The CHA stated that HUD approval was
granted for the emergency procurement.
5. Contract Documents Missing:
The CHA stated that they are in the process of replacing
procurement documents that are not currently in the
CGP files.
In addition, the CHA indicated that they generally concurred
with all of the audit recommendations and had initiated
corrective action in most cases.
2002-BO-1002 Page 12
Finding 1
OIG Evaluation of 1. Hiring of CGP Coordinator:
Auditee Comments
We are aware of the reasons that it was a priority for the
CHA to contract for the services of a CGP Coordinator.
These reasons do not justify circumventing the
procurement regulations. We agree with the action
taken by the CHA to terminate the CGP Coordinator’s
contract and to issue a new RFP for those services.
2. Contractor Selected With Inadequate Competion:
Documents provided by the CHA show that a fax
message was sent to the 5 trade advertisers, not “bid
solicitations” as noted in the CHA’s response. This fax
message did not include all of the relevant data needed
for potential sources to submit bids. Also, in our
opinion, the two-week period between the fax notice
being sent to the three advertisers and the bid opening
was not sufficient time for potential bidders to submit
bids. Although CHA was attempting to obligate funds
before their expiration, this did not justify awarding the
contract to the only bidder.
3. Failure to Justify Sole Source Bid:
While we agree that this contract does not represent a
sole source procurement, that is how the CHA
identified it to HUD in their letters. Documents
provided by the CHA show that a fax message was sent
to the three trade advertisers, not the “bid solicitations”
noted by CHA. The CHA provided “bid packages” to
two appliance vendors who did not request the packages
and to one contractor who was working at the CHA
under another contract. The CHA awarded the contract
to this sole bidder because they needed to obligate the
funds from their FY 1997 CGP grant. Proper planning
of the procurements by the CHA would preclude the
need to award contracts to avoid the recapture
provisions of the program. As noted previously, the
attempt to obligate funds before their expiration is not
justification for awarding the contract to the sole bidder.
Page 13 2002-BO-1002
Finding 1
4. Emergency Procurement Not Performed Timely:
As noted, the compactor was included in CHA’s 1997
CGP Application for completion in 1999. Although
this project may not have been a high priority, CHA
management recognized this work requirement and it
was scheduled in the CGP Plan accordingly. When the
Concord Fire Department cited CHA with the fire code
violation in July 2000, CHA had been using trashcans
in the hallways for almost two years. We do not agree
with CHA’s claim that the real emergency occurred in
May 2001. Having been aware of this requirement
since 1997, and having recognized that the use of
hallway trashcans was an untenable solution to the trash
problem, CHA should have responded immediately and
awarded a contract after being cited by the Fire
Department in July 2000. The CHA had more than
enough time to procure this contract in a timely manner
to avoid any need to procure the contract under
emergency measures.
5. Contract Documents Missing:
CHA should provide support for the contract to HUD.
Recommendations We recommend that you:
1A. Require the CHA to provide assurance that, in the
future, all phases of the CHA’s procurement policy
are effectively carried out.
1B. Require the CHA to provide justification for the
procurement decisions made in awarding the
contracts totaling $772,001 in cost.
1C. Instruct your staff to perform an evaluation and cost
estimation on the work specifications included in
the projects pertaining to each contract award.
1D. Require the CHA to reimburse the amount of any
contracts awarded in excess of the estimated costs
derived from the HUD evaluation and cost
estimation.
2002-BO-1002 Page 14
Finding 1
1E. Require the CHA to maintain documentation
supporting the basis for contracts awarded.
1F. Require the CHA to develop and use independent
cost estimates for evaluating bids received
whenever possible.
Page 15 2002-BO-1002
Finding 1
THIS PAGE LEFT BLANK INTENTIONALLY
2002-BO-1002 Page 16
Finding 2
CHA Lacked an Adequate
System of Controls
The Concord Housing Authority (CHA) did not maintain an adequate system of controls over its
assets. This condition exists because CHA management did not fulfill its responsibility to
establish and implement effective management controls. In addition to the conditions cited in
other findings contained in this report (Procurement Drug Elimination Program and Section 8
Program), we identified specific management control deficiencies in the following categories:
Ø Tenant Accounts Receivable (TAR) was not reconciled.
Ø Rent collection procedures were not followed.
Ø Maintenance materials were not properly accounted for.
Ø Improper allocation and accounting of Federal Program costs.
Ø Inadequate management of fixed assets.
Ø Policies needed for deposit accounts.
Ø Bank accounts were overdrawn and the accounts were not properly reconciled.
Ø Inadequate training for CHA staff and a lack of job descriptions.
As a result of these insufficient management controls, CHA resources were not adequately
safeguarded against waste, loss and misuse; and HUD has little assurance that the CHA was
following the appropriate laws, regulations, and policies.
The basic purpose of a system of management controls is to
Management Control
promote the efficient operation of an organization. The
System
system of management controls consists of all measures
employed by an organization to: 1) safeguard assets from
waste, fraud and inefficient use; 2) promote accuracy and
reliability in the accounting records; 3) encourage and
measure compliance with policies and procedures; and 4)
evaluate the efficiency of operations. In essence,
management controls consist of all measures taken to
provide management the assurance that everything is
functioning as it should. It is the responsibility of CHA’s
Page 17 2002-BO-1002
Finding 2
Executive Director to assure that management control
policies and procedures are enforced.
HUD regulations state that the financial management
systems of grantees must meet internal control standards.
The regulations also stipulate that effective control and
accountability must be maintained for all grant funds, real
and personal property, and other assets. Grantees must
adequately safeguard all such property and must ensure that
it is used solely for authorized purposes (24 CFR
85.20(b)(3)).
Regulations further state that grantees must maintain
records, which adequately identify the source and
application of funds provided to financially assisted
activities. These records must contain information
pertaining to grant awards and authorizations, obligations,
unobligated balances, assets, liabilities, outlays or
expenditures, and income (24 CFR Part 85.20(b)(2)).
The CHA’s TAR did not accurately reflect total receivables
TAR not Accurate due from tenants. CHA does not maintain reliable
documentation from which to determine the exact amount of
tenant receivables, and how long tenant rents were
outstanding. CHA uses the following data to manage tenant
receivables: records of tenant cash receipts; tenant
transaction histories, the "Tenant Balances Report;" and the
"Aged Accounts Receivable Report". The balance in the
General Ledger Tenant Accounts Receivable did not
reconcile with the Aged Account Receivable Report. As a
result, CHA could not provide adequate assurance that the
General Ledger Tenant Account Receivable balance of
$55,866 was accurate.
As of June 30, 2001, the CHA Finance Director could not
provide evidence of any reconciliation of the Tenant
Accounts Receivable to supporting records and documents.
The CHA has not adhered to the requirements of its’ own
Rent Collection Policy not policy. As of June 30 2001, there were a total of 13
Followed residents from two of the five housing projects who failed
to pay rent, and there were four tenants who underpaid their
rent. As of July 31, 2001, CHA management had not
initiated adequate collection actions for these 17 residents.
In an evaluation of CHA's collection efforts, we examined
2002-BO-1002 Page 18
Finding 2
five of the larger tenant account balances and found that
four of them were under a repayment plan. Our review
disclosed that none of the four are adhering to the
repayment plan. In one example, the tenant at 7 Jennings
Drive (Haller Apts.) entered into a repayment plan on June
16, 2000 to pay $50 per month in addition to the normal
rent, for one year. As of June 16, 2000, the tenant owed
$730. By June 30, 2001, the amount owed increased to
$2,102 while under the repayment plan. The CHA needs to
follow its’ collection procedures in taking timely collection
actions.
HUD Regulations require that accounting records be
Maintenance Materials not supported by source documents (HUD Guidebook 7510.1,
Accounted for Sections II.6, PIH Low-Rent Technical Accounting Guide).
The CHA did not properly control employee use of the three
credit cards for purchase of materials and supplies from local
department stores. For the period of January 1, 2000 to
August 31, 2001, the CHA had purchases totaling $44,253
from three local supply stores. From our review of
supporting documentation, we could not determine which
CHA employees purchased the items. Purchases were either
not supported with purchase orders or, when they were, the
purchase orders were incomplete. In most instances, the
purchase orders reviewed did not:
Ø Include a proper description of item(s) purchased.
Ø Identify the individual who approved or authorized the
purchase.
Ø Indicate where items were to be delivered or received.
Ø Indicate what CHA employee was designated to receive
and sign for the item purchased.
Based on the records available for review, we were unable
to determine whether the items purchased were for the
benefit of the CHA.
Page 19 2002-BO-1002
Finding 2
Section 15 of the Annual Contributions Contract (ACC)
Improper Allocation of requires the CHA to maintain complete and accurate books
Program Costs of account and records in connection with the development
and operation of the project, including records that permit a
speedy and effective audit.
The CHA commingles its costs among various federally
funded programs, and does not always record correct
amounts to the appropriate programs such as the Public
Housing Drug Elimination Program (PHDEP) and the
Comprehensive Grant Program. Amounts charged to
programs are often not adjusted to the appropriate accounts
until months later when the CHA Fee Accountant prepares
adjusting journal entries. To illustrate, CHA’s former
Finance Director charged PHDEP salaries of $27,500,
earned from October 1999 to September 2000, to the CHA
payroll account, but failed to record this salary cost to the
PHDEP account. The Fee Accountant subsequently created
a journal entry on September 30, 2000 posting the salaries
to the “Tenant Services Salaries” (Account 4210, the
correct PHDEP account established for salaries). The
CHA’s Finance Director should have been recording the
salaries to the Tenant Services Account on a consistent
basis; however, most Finance Directors hired by the CHA
in the past several years lacked the training and/or
knowledge to perform these routine tasks.
Federal regulations require grantees to 1) maintain detailed
Fixed Assets not Properly property records of equipment, 2) conduct physical
Recorded inventories of property and equipment and reconcile the
results with property records once every 2 years, and 3)
develop control systems to ensure adequate safeguarding of
assets against loss, damage, and theft of property (24 CFR
85.32(d)(1) to (3).
The CHA has not established adequate controls to ensure
that fixed assets are properly recorded and managed.
Although records were maintained for appliances
(refrigerators and stoves) by serial number and location,
there were no similar records for maintenance and office
equipment, including computers and printers. The CHA
management indicated that inventories of maintenance and
office equipment had been conducted; however, there was
no documentation to support this claim. Without sufficient
documentation to support the annual inventory of these
2002-BO-1002 Page 20
Finding 2
equipment items, there is limited assurance that CHA assets
have not been lost or stolen, or were susceptible to
unauthorized use. CHA management was not aware of the
requirement that inventory records should be maintained
for maintenance equipment and office equipment.
The CHA lacked adequate written policies and procedures
Policies Needed for Deposit for monitoring its deposit accounts. In a letter dated May
Accounts 12, 2000, the CHA Fee Accountant cited “hundreds of
thousands of dollars” in 16 deposit accounts that were
accumulating either low or no interest income. In one
example, a certificate of deposit (CD) in the amount of
$108,556 had expired in February 2000 and was then
placed by the bank into the local program account of CHA
where it earned no interest. The Fee Accountant, in a
follow-up letter dated September 13, 2000, indicated that
the $108,556 was still in the non-interest bearing account.
At one time, the CHA Finance Director could not identify
the specific CD accounts held with each bank, the amount
of the CD in each account and how much interest was being
earned. During the course of our audit, CHA had begun to
convert these 16 CD accounts into three high-yield “sweep”
accounts. The CHA Fee Accountant, who addressed this
issue in separate correspondence to the CHA on May 12,
2000, September 13, 2000, and November 10, 2000,
estimated that approximately $30,000 was lost in fiscal year
2000 by not investing these funds properly.
CHA did not reconcile its bank account statements with the
Bank Accounts Overdrawn financial records in a timely manner. In most instances,
bank account statements were not reconciled until more
than a month after they were received. This led to
overdrafts in the Public Housing bank account in the
amounts of $7,803 and $45,125 for November 2000 and
March 2001, respectively. The CHA Fee Accountant
informed CHA management that bank account statements
should be reconciled within two to three days of their
receipt. Prudent practice and generally accepted accounting
principles dictate that the CHA cash balance be properly
monitored and that, at a minimum, bank accounts be
reconciled in a timely manner.
Page 21 2002-BO-1002
Finding 2
Our review identified a high turnover of personnel and a
Staff Inadequately Trained lack of continuity among the CHA management staff,
especially as it pertained to the Finance Department. In our
opinion, this deficiency is a contributing factor to the poor
management control environment at the CHA. The CHA
has had five Finance Directors in the past three years and
has experienced staff turnover in other departments as well.
Statements obtained from CHA personnel and from the
CHA Fee Accountant indicate that the staff has received
inadequate on-the-job and/or formal training, and a general
lack of management oversight in this regard.
We reviewed the personnel files for four CHA management
employees and noted that there was a job description for
only one position, the Executive Director. There were no
job descriptions for the other three: the Director of Finance;
the Director of Housing; and the Resident Service
Coordinator. During the audit, we requested copies of job
descriptions for these positions; however none was
provided. The lack of job descriptions could impede the
CHA’s Executive Director’s ability to manage and evaluate
its staff.
HUD regulations stipulate that the assessment of training
needs for PHA staff, and the addressing of those needs are
essential management requirements. Management must
ensure that employees have the skills necessary for the
PHA to succeed. The issue of assessing training needs is
closely linked to the process of evaluating employee
performance and to the quality of job descriptions. PHA
management needs to assure through training and hiring
practices that those employees with responsibility to carry
out work processes understand what is expected of them
(HUD Directive 7460.9G, Organization, Management, and
Personnel Monitoring Guidebook, Chapter 2, Sections 2-5
and 2-9).
Our review showed that CHA did not always comply with
Management Problems administrative controls and procedures as a means of
ensuring adequate management control over CHA
operations. As noted in Findings 1, 3 and 4 of this report,
CHA has experienced management problems, which affect
its ability to carry out its housing programs efficiently and
effectively. In our opinion, CHA’s failure to provide
adequate on the job training for its staff, frequent turnovers
2002-BO-1002 Page 22
Finding 2
in staff, and a failure to develop appropriate operational
policies and procedures contributed to the problems
identified during our audit.
CHA is in the process of developing written policies and
procedures for its operations. Formal written policies and
procedures provide direction for day-to-day operations and
help maintain consistency in all housing authority
functions. As noted, the prior lack of adequate written
policies and procedures has contributed to the ineffective
and inconsistent operations of CHA. CHA’s Financial
Policies and Procedures pertaining to cash receipts, tenant
receivables, Section 8 program, and Fixed Asset inventory
had not yet been fully implemented.
The CHA’s management is responsible for the lack of
management controls and the problems associated with the
high turnover of personnel. An important element of
management controls is job descriptions for staff, especially
for the Executive Director. Our review noted that the job
description for the position of Executive Director requires:
(1) performance of highly administrative and supervisory
work in planning, organizing and directing CHA
operations, (2) oversight of the maintenance of records and
books of accounts showing receipts and expenditures, and
(3) rendering to the Board an accounting of the financial
condition of the CHA.
Auditee Comments The CHA provided the following comments for each
management control weakness identified:
1. Tenant Accounts Receivable not Accurate
The CHA stated that it has been working with its
computer consultant to resolve TARs. As of January
2002, the account remains out of balance by $378.
2. Rent Collection Policy not Followed
The CHA acknowledged that its Rent Collection Policy
has not always been followed, but that it is currently
enforcing this policy in an aggressive manner.
Page 23 2002-BO-1002
Finding 2
3. Maintenance Supplies not Accounted for
The CHA disputed the audit finding by stating that, in
their opinion, credit card purchases have been properly
documented and authorized. CHA also requested
clarification on statements in the audit finding
indicating that we were unable to determine where the
purchased items were used and whether the items
purchased were for the benefit of CHA.
4. Improper Allocation of Program Costs
The CHA acknowledged the past practice and advised
that in-house staff was making the proper allocation
monthly.
5. Fixed Assets not Properly Recorded
The CHA indicated that they are now conducting
annual inventories and have all funds properly invested.
6. Bank Accounts not Reconciled Timely
The CHA advised that the bank accounts are now
reconciled within a day or two of receiving the
statements.
7. Staff Inadequately Trained
The CHA disputed the conclusion in the audit finding
that CHA staff was inadequately trained. CHA’s
response lists several courses taken by staff members
from May 1999 through March 2002. The CHA also
acknowledged that position descriptions are being
prepared and will be finalized by May 2002.
* * * * * * * *
The CHA concurred with all of the recommendations in
this finding and has taken action or plans to take action to
correct the deficiencies noted in the finding. Also, the
CHA Board of Commissioners has adopted a Financial
Procedures Guide, prepared by the CHA Fee Accountant,
for immediate implementation in March 2002. This Guide
addresses most of the deficiencies noted in the finding.
2002-BO-1002 Page 24
Finding 2
OIG Evaluation of 1. Tenant Accounts Receivable not Accurate
Auditee Comments
CHA has taken action to address this deficiency,
however, the account has not been fully reconciled yet.
2. Rent Collection Policy not Followed
CHA’s reported corrective action is adequate for this
condition.
3. Maintenance Supplies not Accounted for
Our review focused on credit card purchases from
October 2000 through March 2001. It appears from the
CHA response that they have improved their controls
over the credit cards. We deleted the statement
indicating that we were unable to determine where the
purchased items were used. Our concern was that the
supporting documentation did not indicate where the
items were delivered. Our comment indicating that we
were unable to determine whether the items purchased
were for the benefit of the CHA relates to the same
matter. We were unable to identify from the supporting
documentation who authorized the purchase, where it
was delivered or who received the material. Without
this information we could not determine if the items
purchased benefited the CHA.
4. Improper Allocation of Program Costs
CHA’s reported corrective action is adequate for this
condition.
5. Fixed Assets not Properly Recorded
CHA’s reported corrective action is adequate for this
condition.
6. Bank Accounts not Reconciled Timely
CHA’s reported corrective action is adequate for this
condition.
Page 25 2002-BO-1002
Finding 2
7. Staff Inadequately Trained
Of the 14 training sessions for staff members listed in
CHA’s response, 12 occurred either during or after our
on-site review. In general, the period of review for the
audit, from October 1998 through February 2001,
reflected the condition cited as to inadequate training.
Recent efforts by CHA to address the training issue, as
is evident from the CHA response, should correct this
deficiency. The new job descriptions should be
forwarded to HUD when complete.
The CHA had initiated adequate corrective actions to
close four of the six recommendations in our draft
report. The recommendations pertaining to rent
collection procedures, credit card purchases, allocation
of program costs, recording of fixed assets, and the
reconciling of bank accounts have been deleted. We
also revised the two remaining recommendations
regarding reconciliation of the TARs and the
preparation of job descriptions for CHA staff.
Recommendations We recommend that you require the CHA to:
2A. Ensure that the Tenant Accounts Receivable is
reconciled.
2B. Submit job descriptions for your staff’s review and
approval.
2002-BO-1002 Page 26
Finding 3
Improvement Needed Over the
Public Housing Drug Elimination Program
The Concord Housing Authority (CHA) did not administer its Public Housing Drug Elimination
Program (PHDEP) in accordance with HUD requirements and guidelines. Specifically, the CHA
did not:
Ø Follow procedures to ensure proper control and administration under the contract for
police patrol services provided.
Ø Ensure that (1) reported activities and accomplishments in its Semi-Annual Performance
Reports conform to approved PHDEP Grant Applications, and (2) a resident survey was
performed by an organization independent of the CHA.
Due to lack of proper controls to ensure costs were reasonable and supported, we are questioning
unsupported PHDEP costs of $58,160 incurred for police patrol services. We believe these
conditions exist because of the CHA’s inadequate financial record keeping and failure to follow
HUD guidelines established for the PHDEP program. As a result, HUD has no assurance that all
program objectives were met as stated in the PHDEP Grant Applications; and, that PHDEP funds
were used in the most efficient and effective manner.
HUD Regulations state that Grantees are responsible for
CHA’s Responsibilities managing the day-to-day operations of grant and subgrant
supported activities. Grantees must monitor grant and
subgrant activities to assure compliance with applicable
Federal requirements and that performance goals are being
achieved. Grantee monitoring must cover each program,
function or activity of the grant (24 CFR 761.35).
In addition, grantees must establish an auditable system to
provide adequate accountability for funds that it has been
awarded (24 CFR 761.30 (b)(6)(c)).
Page 27 2002-BO-1002
Finding 3
The CHA did not charge law enforcement costs (for police
Record Keeping Inadequate patrols) in accordance with PHDEP budgets submitted with
Grant Applications in program years 1995 through 1999.
Our review determined that:
Ø Costs charged to the CHA General Ledger accounts for
police patrol services did not agree with amounts shown
on PHDEP Grant Applications.
Ø Police patrol charges were not adequately substantiated
with supporting documents such as officer reports.
Ø The CHA did not execute a valid agreement with the
Concord Police Department until September 23, 1998,
some 33 months after services were initiated.
The CHA discontinued their use of police patrols as of
December 2000.
CHA spent $58,160 of the ($96,200) total budgeted for
police patrols in PHDEP Program Years 1995 to 1999:
PHDEP Program Year Funds Awarded Funds Expended
1995 $25,000 $16,832
1996 $40,000 $20,312
1997 $0 $6,637
1998 $24,000 $7,747
1999 $7,200 $6,632
Total $96,200 $58,160
The CHA’s PHDEP Grant Agreement Article I, Part 8
requires that,
“The Grantee not make or cause to be made any changes
to the services without the express written consent by
HUD, the granting of which consent shall be in the sole
discretion of HUD.”
The CHA files do not indicate that the CHA had HUD
approval for any changes to the PHDEP Programs. The
CHA recorded charges totaling $6,637 for police patrol
services in Program Year 1997, even though the 1997
PHDEP Grant Application did not provide for any law
enforcement/police patrol costs. The 1998 PHDEP Grant
Application shows a budget of $24,000 for police patrols;
however, only $7,747 of this $24,000 was charged for
police patrols.
2002-BO-1002 Page 28
Finding 3
Police officers patrolling the CHA developments were
required to routinely file reports of patrols performed. For
the period of December 29, 1999 to February 29, 2000, the
Concord Police worked a total of 72 shifts, indicating that a
total of 72 Officer’s Reports should be documented in the
CHA’s files. Of the 72 Officer’s Reports that should have
been on file, we found reports for only 45. There were no
reports submitted for the remaining 27 shifts.
The basis for hourly rates charged by the Police Department
was not substantiated and documented in CHA records. Our
review of invoices revealed that the hourly rate charged was
$30 at the start of the contract and increased to $37 sometime
prior to September 2000. CHA management personnel were
unable to provide supporting documentation that
substantiated the basis for either the $30 per hour rate or the
$37 per hour rate. There is no written documentation or
information with regard to how the police were to be
compensated even in their agreement for services.
CHA did not adhere to proper procedures in administration
Contract for Police Services of their Memorandum of Understanding (MOU) with the
Concord Police Department. Specifically, the MOU: (1)
was not executed timely; (2) did not address hourly rates;
and (3) did not define a baseline for police services.
HUD regulations provide that police services can only be
funded under PHDEP for services, which exceed those
provided under its Cooperation Agreement. An applicant
seeking funding for this activity must first establish a
baseline by describing the current level of services provided
by local law enforcement (in terms of the kinds of services
provided, the number of officers and equipment and the
actual percent of their time assigned to the developments
proposed for funding), and then demonstrate that the funded
activity will represent an increase over this baseline (24 CFR
761.17 (a)(2)(i).
A PHDEP Notice of Funds Availability (NOFA) published
in the Federal Register on April 1, 1994 provides:
“Expenditures for activities under this section may not be
incurred until the grantee and the local law enforcement
agency execute a contract for the additional law enforcement
services” (Paragraph I (c)(2)(v)).
Page 29 2002-BO-1002
Finding 3
The CHA did not enter into the MOU with the Concord
Police Department until September 23, 1998, although the
Police Department had been providing services since June
1996. CHA management was unable to explain why a
contract was not executed earlier. The MOU stipulated
that: (1) the CHA would inform the Concord Police of any
alleged criminal activity within its developments; (2) a
hotline would be established for CHA residents to report
criminal activity to the Police; (3) the Concord Police
would report to the CHA all alleged criminal activity
occurring on or near Housing Authority property; and (4)
the Concord Police Department would name a member of
its staff as liaison officer to the CHA.
The MOU did not specify either “baseline” or “above
baseline” for police services, and CHA management were
unable to provide any additional documentation or
clarification to support what was considered baseline police
services. We are questioning the $58,160 disbursed to the
Police Department because the CHA cannot determine if
services provided exceeded “baseline.”
The CHA has not complied with PHDEP Guidebook
Activities not Reported requirements in its preparation of the Semi-Annual
Performance Reports submitted January 1999 to December
2000. The Semi-Annual Performance Report is designed to
measure the progress of PHAs in achieving their program
goals, and HUD uses the information contained in these
reports to monitor PHDEP grants. A new electronic system
for Semi-Annual Reporting became effective July 1, 1999,
and the reporting requirement applied to both existing and
future grants. This system, which requires a separate report
for each open and active grant, contains several major
components for reporting information. Our review
disclosed discrepancies and unsupported data with the
reporting for three components: crime statistics, PHDEP
activities, and resident surveys.
2002-BO-1002 Page 30
Finding 3
Some of the data reported in crime statistics could not be
Crime Statistics supported. For example, we verified actual crime statistics
reported for the current and last reporting periods with
CHA records, however, CHA records were not available to
verify the crime statistics numbers for the baseline period.
As already discussed, the baseline for police services had
not been defined.
The CHA did not report all program activities and
PHDEP Supported accomplishments as required. For example, the CHA's
Activities 1998 PHDEP Grant provides $24,000 to be allocated for
Reimbursement of Law Enforcement (Police Patrols) and
the 1997 PHDEP provides $10,500 to be allocated for the
purchase of playground equipment for one of the CHA
projects. CHA did not report these as accomplishments in
its Performance Reports. The Performance Reports also
indicate that the CHA Drug Elimination Coordinator
initiated various PHDEP-related activities and programs.
However, due to the disorganization and poor record
keeping of PHDEP records and files at CHA, supporting
documentation could not be located for these activities and
programs reported in Performance Reports. In the PHDEP
Performance Report for FY 1998, Section 4.1 describes
community organizing activities. The CHA performance
report showed that 19 participants took part in these
activities for a total of 375 hours. We were unable to locate
any supporting documentation that either identified the 19
participants or described what specific activities were
performed.
CHA failed to conduct, and report on a Resident Survey in
Result of Resident Surveys 1999, and CHA did not ensure that surveys were conducted
by an independent organization. In accordance with the
PHDEP Instruction Guidebook for the Semi-Annual
Performance Reporting System, annual surveys of residents
of PHDEP-targeted developments are to be performed by
an organization not associated with the Housing Authority
(CHA), and the results of these surveys must be reported in
the January Semi-Annual Report. The CHA reported a
resident survey taken in January 2000, however, CHA files
do not indicate that this survey was conducted by an
organization independent of CHA. CHA management was
unaware of the requirement that surveys be performed
independently.
Page 31 2002-BO-1002
Finding 3
Auditee Comments The CHA has taken action to contact the Concord Police
Department and request further information regarding the
hourly rates charged and data on the baseline services
provided by the police prior to the PHDEP. The CHA has
also indicated that they will maintain the required records
to comply with HUD regulations including the filing of
semi-annual reports.
OIG Evaluation of The actions taken and planned by CHA should correct the
deficiencies noted in the finding. Your staff’s review of
Auditee Comments
documentation provided by the CHA concerning: (1)
hourly rates for police patrols, and (2) baseline services
provided by the police, will determine if the CHA needs to
reimburse any funds to HUD.
Recommendations We recommend that you require the CHA to:
3A Provide supporting documentation to substantiate
the basis for the hourly rates paid for police patrol
services under the PHDEP.
3B. Provide evidence that the police services received
by the CHA exceeded baseline by $58,160.
3C. To reimburse the program for that portion of the
$58,160, which does not exceed baseline services
and/or not supported.
3D. Establish procedures that will provide for effective
monitoring and accurate reporting of the PHDEP in
accordance with HUD regulations.
2002-BO-1002 Page 32
Finding 4
Improvement Needed Over
Administration of Section 8 Program
The Concord Housing Authority (CHA) needs to improve the administration of its Section 8
program. Specifically, CHA needs to ensure that: (1) annual recertifications are performed in a
timely manner; (2) Housing Quality Standards (HQS) inspections and supervisory quality control
inspections are performed timely; (3) reasonable rent procedures are followed; (4) Section 8
waiting list is maintained and updated accordingly; (5) procedures are established to ensure that
Housing Assistance Payments (HAP) made to landlords are correct; and (6) it increases
utilization of certificates and vouchers. These weaknesses occurred because the CHA’s
management did not fulfill its responsibility to provide adequate administration of the Section 8
program. The lack of effective controls resulted in unnecessary delays in processing tenant
documentation, a lack of assurance that tenants are living in safe and sanitary conditions,
overpayments to landlords totaling $6,108, and under utilization of Section 8 certificates and
vouchers.
Federal Regulations require that Public Housing
Recertification Required Authorities (PHAs) must re-examine the income and
composition of all families at least once every 12 months.
At the time of the annual re-examination of family income
and composition, the PHA shall require the family to
submit any certification, release, information or
documentation as the PHA or HUD determines to be
necessary (24 CFR 982.516(a) and (g)).
Our review disclosed that 73 of 195 leased tenants were not
Recertifications not Timely recertified on time. The re-examinations for these tenants
were overdue ranging from one to 29 months. The
following table shows a summary of the tenants who were
not recertified timely:
Number of Months Overdue Number of Notifications Overdue
1 to 6 Months 28
7 to 12 Months 30
Over 12 Months 15
The CHA’s Executive Director stated that he was aware
that many of the Section 8 recertifications were overdue
and he agreed to take corrective action.
Page 33 2002-BO-1002
Finding 4
Federal regulations require that the PHA must inspect each
Inspection Requirements unit leased to a family at least annually, and at other times
as needed, to determine if the unit meets HQS. The
regulations also stipulate that the PHA conducts
supervisory quality control HQS inspections. (24 CFR
982.405)
The CHA is not inspecting all units to ensure they meet
HQS Inspections not HQS. As of July 20, 2001, our review of the CHA Section
Performed 8 (Tenant) database, disclosed that 91 of 189 leased units
were not inspected. For nine of the 91 units, inspections
were not performed for over two years. The goal of the
Section 8 program is to provide decent, safe, and sanitary
housing to lower income families. The HQS standards
protect tenants receiving assistance under the program by
guaranteeing a minimum level of acceptable housing.
Without annual inspections by the CHA, there are no
assurances that HUD is paying for decent, safe, and sanitary
housing.
In addition, CHA has failed to monitor the quality of
housing through supervisory quality control inspections.
Because the CHA does not monitor inspections, it does not
have the information needed to ensure an inspector’s work
is in compliance with HUD regulations. A proper
monitoring system assures high performance when
inspectors are aware that their work is subject to review.
The CHA’s Director of Housing is cognizant of the fact that
many units are overdue for inspections and plans on taking
the necessary corrective action. The Executive Director
and Director of Housing indicated that they were not aware
of the requirements regarding supervisory quality control
inspections. The Director of Housing informed us that, in
the future, the CHA will re-inspect units to ensure that
inspectors are conducting thorough inspections.
Federal Regulations require the PHA to determine that the
Reasonable Rent rent to the owner is a reasonable rent in comparison to rent
Requirements for other comparable unassisted units. To make this
determination, the PHA must consider: (1) the location,
quality, size, unit type, and age of the contract unit and (2)
any amenities, housing services, maintenance, and utilities
to be provided by the owner (24 CFR 982.507(b)).
2002-BO-1002 Page 34
Finding 4
The Executive Director and Director of Housing indicated
Rent Procedures Not that they were not aware of the requirements for
Followed determining reasonable rent. As a result, there is no
assurance that the rents allowed by the CHA for the owners
of Section 8 units are reasonable. The Director of Housing
advised that she would take the necessary measures to
implement a system to determine reasonable rents.
Federal regulations require a Housing Authority to select
Waiting List Requirements participants from their waiting list in accordance with
admission policies in its Administrative Plan (24 CFR
982.204). The CHA’s Section 8 Administrative Plan
dictates that the Authority will update and purge its waiting
list at least annually to ensure that the pool of applicants
reasonably represents interested families.
The CHA did not comply with its own administrative
Waiting List not Updated policies and procedures in maintaining and updating its
Section 8 waiting list. We selected the first ten applicants
from the CHA Section 8 waiting list. Three of the 10
applicants were current tenants on the CHA HAP Rent Roll
demonstrating that CHA is not updating and maintaining
their Section 8 waiting list. The CHA’s Director of
Housing has no knowledge of when the CHA last updated
its waiting list. The Section 8 waiting list should be
updated and purged on annual basis to avoid delays caused
when attempts are made to contact individuals who should
not be on the list.
HUD regulations require financial management systems of
Administration grantees to provide effective control and accountability for
Requirements all grant funds, real and personal property, and other assets.
(24 CFR Part 85.20 (b)(3)).
Office of Management and Budget (OMB) Circular A-87,
states that housing authorities are responsible for the
efficient and effective administration of federal awards
through the application of sound management practices
(Attachment A, paragraph A(2)(a)(1)).
Page 35 2002-BO-1002
Finding 4
The CHA was paying two landlords who were no longer
Section 8 Landlords active in the Section 8 program. In addition, the CHA was
Overpaid paying two other landlords for the same tenant who was
documented in two separate Section 8 programs. Also,
there were three landlords who received duplicate
payments. As a result, the CHA overpaid landlords a total
of $6,545. The Director of Housing agreed that the CHA
made overpayments and duplicate payments to landlords
totaling $6,545, and indicated that the funds would be
recovered. As of July 17, 2001, $437 had been recovered,
with $6,108 remaining.
The Section 8 Management Assessment Program (SEMAP)
Utilization Requirements is a management assessment system that HUD uses to
measure the annual performance of Public Housing
Authorities (PHAs) that administer the Section 8 tenant-
based certificate and voucher programs. One indicator
under SEMAP used to measure the performance of PHAs is
the “Lease-up” rate. Ratings are based upon the percentage
of units leased. PHAs receive a zero rating for occupancy
percentages under 95 percent.
The CHA’s lease up rate for Section 8 vouchers and
Certificates not Utilized certificates was below the required lease-up rate of 95
percent for fiscal years 1999 through 2001. As of October
1, 1999, CHA records indicate that the utilization rate was
86 percent for certificates and 88 percent for vouchers. In
fiscal year 2000, the percentages decreased significantly for
both certificates and vouchers to 81 percent. The CHA did
improve its utilization rates to 91 percent for certificates
and 88 percent for vouchers in fiscal year 2001; however,
the CHA is still below the required percentage. The CHA’s
failure to maintain an acceptable level of utilization has
limited affordable housing opportunities for low-income
families on the CHA’s waiting list.
CHA management has been aware of their low Section 8
Corrective Action not utilization for a few years, through its annual self-
Implemented certification process (PHMAP and SEMAP) but has not
implemented any corrective action. The Director of
Housing for Section 8 stated that one of the most pressing
problems involved the low Fair Market Rents.
2002-BO-1002 Page 36
Finding 4
Auditee Comments 1. Recertifications, Unit Inspections and Supervisory
Inspections
The CHA stated that they had conducted all of the
overdue recertifications and all are current as of March
20, 2002. The CHA also stated that the City of
Concord’s Building Department was assisting in
conducting the overdue HQS inspections, that 33
remain to be completed, and they should be completed
by May 31, 2002. The CHA further stated that the
CHA’s Director of Maintenance randomly inspected
five percent of the occupied units and is now routinely
conducting quality control inspections on one of every
twenty units.
2. Reasonable Rent Requirements
The CHA stated that they developed procedures for
determining rent reasonableness that included
contacting landlords throughout the City of Concord.
The CHA gathered data regarding the bedroom size,
unit location, amenities and utilities as well as any
services provided. The CHA also stated that they had
developed new rent reasonableness certification forms
that were now being used.
3. Waiting List Requirements
The CHA stated that the Section 8 waiting list was
updated in November 2001 and that an annual update of
the waiting list will be conducted every May.
4. Overpayments to Section 8 Landlords
The CHA advised that they had collected $5,666 of the
$6,108 in overpayments to landlords and that a small
claims court action was being initiated to collect the
balance of $442.
5. Utilization of Section 8 Vouchers
The CHA stated that they concurred with the
recommendation and that a corrective action plan to
Page 37 2002-BO-1002
Finding 4
achieve a 95 percent utilization rate will be developed
no later than June 15, 2002 along with a request to
increase the Fair Market Rents. The CHA also stated
that they would submit status reports as required by
HUD.
OIG Evaluation of The CHA concurred with all of our recommendations and
Auditee Comments had initiated adequate corrective actions to close two of the
recommendations in our draft report concerning rent
reasonableness procedures and updating of the Section 8
waiting list. We also revised two other recommendations.
The CHA had conducted the overdue annual
recertifications and the required supervisory control
inspections. We therefore deleted these items from our
draft recommendations. As of March 20, 2002, the CHA
also collected $5,666 out of the $6,108 of overpayments to
landlords. We therefore reduced the amount to be
recovered to $442. The CHA should provide
documentation in support of the $5,666 to HUD.
Recommendations We recommend that you require the CHA to:
4A. Provide assurance that HQS inspections are
performed timely.
4B. Provide documentation to your staff in support of
the $5666 collected, and to recover the remaining
overpayments of $442.
4C. Develop and submit a corrective action plan, for
your review and approval, to achieve at least 95
percent utilization rate for certificates and vouchers.
4D. Submit status reports to your staff on progress on
increasing the utilization rate until 95 percent is
achieved.
2002-BO-1002 Page 38
Management Controls
In planning and performing our audit, we obtained an understanding of the management controls
used by the Concord Housing Authority (CHA) that were relevant to our audit objectives. We
reviewed the CHA’s management control systems to determine our auditing procedures and not to
provide assurance on management controls.
Management controls consist of a plan of organization and methods and procedures adopted by
management to ensure that resource use is consistent with laws, regulations, and policies; that
resources are safeguarded against waste, loss, and misuse; and that reliable data is obtained,
maintained, and fairly disclosed in reports.
We determined that the following management control
Relevant Management areas were relevant to our audit objective:
Controls
Ø General Administration and Accounting
Ø Safeguards over assets and records
Ø Tenants Accounts Receivable
Ø Section 8
Ø Cash Receipts and Disbursements
Ø Procurement and Contracting
Ø Public Housing Drug Elimination Program
A significant weakness exists if management controls do
not give reasonable assurance that resource use is
consistent with laws, regulations, and policies; that
resources are safeguarded against waste, loss, and misuse;
and that reliable data are obtained, maintained, and fairly
disclosed in reports.
Our review identified significant weaknesses in all of the
Significant Weaknesses management control areas we assessed. Specific control
weaknesses applicable to HUD programs are as shown in
Finding 1, (Procurement), Finding 3, (PHDEP), and
Finding 4, (Section 8). Control weaknesses applicable to
administrative and financial functions were summarized
and presented in Finding 2.
Page 39 2002-BO-1002
Management Controls
THIS PAGE LEFT
BLANK
INTENTIONALLY
2002-BO-1002 Page 40
Appendix A
Schedule of Ineligible and Unsupported Costs
Ineligible Unsupported
Findings Costs 1/ Costs 2/
3. Baseline services not identified $58,160
4. Duplicate landlord payments $6,108
1/ Ineligible costs are those costs that are questioned because of an alleged violation
of a provision of law, regulation, contract, grant, cooperative agreement, or other
agreement or document governing the expenditure of funds.
2/ Unsupported Costs are those costs whose eligibility cannot be clearly determined
because they were not supported by adequate documentation.
Page 41 2002-BO-1002
Appendix A
THIS PAGE LEFT
BLANK
INTENTIONALLY
2002-BO-1002 Page 42
Appendix B
Auditee Comments
Page 43 2002-BO-1002
Appendix B
2002-BO-1002 Page 44
Appendix B
Page 45 2002-BO-1002
Appendix B
2002-BO-1002 Page 46
Appendix B
Page 47 2002-BO-1002
Appendix B
2002-BO-1002 Page 48
Appendix B
Page 49 2002-BO-1002
Appendix B
2002-BO-1002 Page 50
Appendix B
Page 51 2002-BO-1002
Appendix B
2002-BO-1002 Page 52
Appendix B
Page 53 2002-BO-1002
Appendix B
2002-BO-1002 Page 54
Appendix B
Page 55 2002-BO-1002
Appendix B
2002-BO-1002 Page 56
Appendix B
Page 57 2002-BO-1002
Appendix B
2002-BO-1002 Page 58
Appendix B
Page 59 2002-BO-1002
Appendix B
THIS PAGE LEFT BLANK INTENTIONALLY
2002-BO-1002 Page 60
Appendix C
Distribution
Inspector General, G
Deputy Assistant Inspector General for Audit, GA
Assistant Inspector General for Audit, GA
Assistant Inspector General for Investigation, GI
Director, Program Research and Planning Division, GAP
Director, Information Systems Audit Division, GAA
Counsel to the Inspector General, GC
Central Records, GF
Semi-Annual Report Coordinator, GF
Assistant Inspector General, Office of Management & Policy, GF
Director of Internal Affairs, GF
Secretary, S
Deputy Secretary, S
Chief of Staff, S
Deputy Chief of Staff for Policy & Programs, S
Deputy Chief of Staff for Intergovernmental Affairs, S
Senior Advisor to Deputy Secretary, S
Assistant to the Secretary for White House Liaison, F
Press Secretary/Senior Communications Advisor to the Secretary, W
Chief Executive Officer for Administrative Operations and Management, S
Assistant Deputy Secretary for Field Policy and Management, SFD
Chief Information Officer, Q
Chief Financial Officer, F
General Counsel, C
Special Counsel, C
President, Ginnie Mae, T
Assistant Secretary for Congressional and Intergovernmental Relations, J.
Assistant Secretary for Housing/Federal Housing Commissioner, H
Assistant Secretary for Community Planning and Development, 1AHMLAP
Assistant Secretary for Public and Indian Housing, P
Deputy Director, Center for Faith-Based and Community Initiatives, AK
Director, Office of Departmental Equal Employment Opportunity, U
Director, Office of Departmental Operations and Coordination, I
Director, Office of Federal Housing Enterprise Oversight, L
Director, Office of Healthy Homes and Lead Hazard Control, L
General Deputy Assistant Secretary for Policy Development and Research, H
General Deputy Assistant Secretary for Fair Housing and Equal Opportunity, E
General Deputy Assistant Secretary for Administration, AA
Special Agent-In-Charge, 1AGI
Primary Field Audit Liaison Officer, 3AFI
Departmental Audit Liaison Officer, FMA
Auditee
Acquisitions Librarian, Library, AS
District Inspector General (2-11)
Page 61 2002-BO-1002
Appendix C
Regional Directors
Stanely Czerwinski, Director, Housing and Telecommunications Issues, United States General
Accounting Office, 441 G Street, NW, Room 2T23, Washington, DC 20548
Steve Redburn, Chief, Housing Brach, Office of Management & Budget, 725 17th Street, NW,
Room 9226, New Executive Office Building, Washington, DC 20503
The Honorable Fred Thompson, Ranking Member, Committee on Governmental Affairs, 340
Dirksen Senate Office Building, United States Senate, Washington, DC 20510
The Honorable Joseph Lieberman, Chairman, Committee on Governmental Affairs, 706 Hart
Senate Office Bldg., United States Senate, Washington, DC 20510
The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn Bldg.,
House of Representatives, Washington, DC 20515
The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform, 2204
Rayburn Bldg., House of representatives, Washington, DC 20515
Andy Cochran, House Committee on Financial Services, 2129 Rayburn H.O.B., Washington, DC
20515
Clinton C. Jones, Senior Counsel, Committee on Financial Services, U.S. House of
Representatives, B303 Rayburn H.O.B., Washington, DC 20515
2002-BO-1002 Page 62
Filename: ig211002.PDF
Directory: D:
Template: C:\WINNT\Profiles\caroliv\Application
Data\Microsoft\Templates\Normal.dot
Title: The following audit report content requirements are
presented herein to better illustrate the required audit report format
Subject:
Author: HUDware IIa Test User
Keywords:
Comments:
Creation Date: 3/29/02 1:22 PM
Change Number: 3
Last Saved On: 3/29/02 1:44 PM
Last Saved By: Vincenta Carolina
Total Editing Time: 16 Minutes
Last Printed On: 3/29/02 1:45 PM
As of Last Complete Printing
Number of Pages: 72
Number of Words: 11,203 (approx.)
Number of Characters: 63,860 (approx.)
Concord Housing Authority, Concord, New Hampshire
Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-03-29.
Below is a raw (and likely hideous) rendition of the original report. (PDF)