oversight

Housing Authority of the City of Alton, Low-Income Housing and Public Drug Elimination Programs Alton, Illinois

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)

           AUDIT REPORT




  HOUSING AUTHORITY OF THE CITY OF ALTON
LOW-INCOME HOUSING AND PUBLIC HOUSING DRUG
          ELIMINATION PROGRAMS

              ALTON, ILLINOIS

                 2002-CH-1002

               MARCH 29, 2002


            OFFICE OF AUDIT, MIDWEST
                CHICAGO, ILLINOIS



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                                                                  Issue Date
                                                                     March 29, 2002
                                                                 Audit Case Number
                                                                     2002-CH-1002




TO:            Linford Coleman, Director of Public Housing Hub, Illinois State Office


FROM:          Heath Wolfe, District Inspector General for Audit, Midwest

SUBJECT:       Housing Authority Of The City Of Alton
               Low-Income Housing And Public Housing Drug Elimination Programs
               Alton, Illinois

We completed an audit of the Housing Authority of the City of Alton’s Low-Income Housing and
Public Housing Drug Elimination Programs. The audit resulted from citizen complaints to our
Office. The objectives of our audit were to determine whether the complainants’ allegations were
substantiated and whether HUD’s rules and regulations were followed. The complainants’ specific
allegations were: (1) the Authority’s former Executive Director was granting preferential treatment
to certain tenants; (2) improper use of HUD funds by the Authority; and (3) poor controls over the
Authority’s equipment.

We found no evidence that the Housing Authority’s former Executive Director was granting
preferential treatment to certain tenants. However, we found that the Housing Authority did not
follow HUD’s requirements, the Annual Contributions Contract, and its policies to ensure the
Authority’s Low-Income Housing and Public Housing Drug Elimination Programs were operated
efficiently and effectively. Specifically, the Authority: failed to make required tax payments
totaling $50,870; claimed at least $38,823 in excess operating subsidies over a four year period; did
not make sufficient efforts to collect tenant accounts receivable totaling $39,701; inappropriately
charged expenses of $144,767 to its Drug Elimination Grants; and improperly paid its former
Executive Director $6,635 for accrued but unused sick leave. We also found that the Housing
Authority’s system of management controls were weak. The Housing Authority’s controls did not
assure that it adhered to its policies concerning performance appraisals, inventory of equipment,
allocation of unit size, tenant grievances, rental collections and evictions, and travel
reimbursements to members of the Board of Commissioners and the Authority’s staff for
authorized travel. As a result, HUD lacks assurance that the Housing Authority’s resources were
used to the maximum extent to benefit low and moderate income tenants.




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Management Memorandum


Within 60 days, please provide us, for each recommendation made 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 Ronald Huritz, Assistant District
Inspector General for Audit, at (312) 353-6236 extension 2675 or me at (312) 353-7832.




2002-CH-1002                                Page ii

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Executive Summary
We completed an audit of the Housing Authority of the City of Alton’s Low-Income Housing and
Public Housing Drug Elimination Programs. The audit resulted from citizen complaints to our
Office. The objectives of our audit were to determine whether the complainants’ allegations were
substantiated and whether HUD’s rules and regulations were followed. The complainants’ specific
allegations were: the Authority’s former Executive Director was granting preferential treatment to
certain tenants; improper use of HUD funds by the Authority; and poor controls over the
Authority’s equipment.

We found no evidence that the Housing Authority’s former Executive Director was granting
preferential treatment to certain tenants. However, the Housing Authority did not follow HUD’s
requirements, the Annual Contributions Contract, and its policies to ensure the Authority’s Low-
Income Housing and Public Housing Drug Elimination Programs were operated efficiently and
effectively. Specifically, the Authority: failed to make required tax payments totaling $50,870;
claimed at least $38,823 in excess operating subsidies over a four year period; did not make
sufficient efforts to collect tenant accounts receivable totaling $39,701; improperly charged
expenses of $144,767 to its Drug Elimination Grants; and inappropriately paid its former Executive
Director $6,635 for accrued but unused sick leave.

We also found that the Housing Authority’s system of internal accounting and management
controls were weak. The Housing Authority’s controls did not assure that it adhered to the
Authority’s policies concerning performance appraisals, inventory of equipment, allocation of unit
size, tenant grievances, rental collections and evictions, and travel reimbursements to members of
the Board of Commissioners and the Authority’s staff for authorized travel.



                                     The Housing Authority: did not make required tax payments
 The Authority Must                  totaling $50,870; claimed at least $38,823 in excess
 Resolve Significant                 operating subsidies over a four year period; did not make
 Monetary Issues Totaling            sufficient efforts to collect tenant accounts receivable totaling
 $280,796                            $39,701; inappropriately charged expenses of $144,767 to its
                                     Drug Elimination Grants; and improperly paid its former
                                     Executive Director $6,635 for accrued but unused sick leave.
                                     As a result, HUD lacks assurance that the Housing
                                     Authority’s resources were used to the maximum extent to
                                     benefit low and moderate income tenants.

                                     The Housing Authority’s system of internal accounting and
 The Authority Needs To              management controls were weak. Specifically, controls did
 Strengthen Its Controls             not assure that the Housing Authority adhered to its own
                                     policies concerning performance appraisals, inventory of
                                     equipment, allocation of unit size, tenant grievances, rental
                                     collections and evictions, and travel reimbursements to
                                     members of the Board of Commissioners and the Authority’s

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Executive Summary


                    staff for authorized travel. As a result, HUD’s and the
                    Housing Authority’s requirements were violated, and the
                    Authority’s operations were not conducted in an efficient and
                    effective manner.

                    We recommend that HUD’s Director of the Illinois State
 Recommendations    Office of Public Housing Hub assure that the Housing
                    Authority reimburses HUD for the ineligible use of funds
                    and implements controls to correct the weaknesses cited in
                    this report.

                    We presented our draft findings to the Housing Authority’s
                    Interim Executive Director and HUD’s staff during the audit.
                    We held an exit conference with the Authority on November
                    26, 2001. The Authority agreed to implement corrective
                    action to improve its controls over: Payments-In-Lieu-Of-
                    Taxes; operating subsidy requests; tenant rental collections;
                    payment of Drug Elimination expenses; performance
                    appraisals; allocation of unit size; equipment; and travel
                    expenses and authorizations. The Authority disagreed that
                    its former Executive Director was improperly paid for
                    unused sick leave.

                    We included paraphrased excerpts of the Housing
                    Authority’s comments with each finding. The complete text
                    of the comments is in Appendix B.




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Table Of Contents

Management Memorandum                                                      i



Executive Summary                                                        iii




Introduction                                                              1



Findings

1     The Authority Must Resolve Significant Monetary Issues
      Totaling $280,796                                                   3

2     The Authority Needs To Strengthen Its Controls                    15



Management Controls                                                     23



Follow Up On Prior Audits                                               25



Appendices

    A Schedule of Ineligible Costs                                      27

    B Auditee Comments                                                  29

    C Distribution                                                      33



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Introduction
The Housing Authority of the City of Alton was established under State of Illinois law. The
Housing Authority contracts with HUD to provide low and moderate-income persons with safe
and sanitary housing through rent subsidies. A five member Board of Commissioners governs
the Authority. The Chairperson of the Board is Mary Eckhouse. During our audit, the
Authority’s former Executive Director Stanley Henderson resigned effective June 5, 2001. The
Authority’s Interim Executive Director is Jeffrey W. Copley. The Authority’s books and records
are located at 2406 Crawford Street, Alton, Illinois.

As of February 2002, the Housing Authority operated three HUD-funded programs: (1) a Low-
Income Housing Program consisting of 329 units; (2) a Public Housing Drug Elimination Grant
Program; and (3) a Comprehensive Improvement Assistance Program. The Low-Income
Housing Program is designed to provide housing to low and moderate income individuals whose
annual income does not exceed 80 percent of the median income for the surrounding community.
HUD’s Drug Elimination Grant Program provides grants to public housing authorities to reduce
drug-related crime in and around public housing sites. The Comprehensive Improvement
Assistance Program funds capital improvements and related management improvements in
public housing developments to upgrade living conditions, correct physical conditions, and
achieve operating efficiency and economy.



                                    The objectives of our audit were to determine whether the
 Audit Objectives                   complainants’ allegations were substantiated and whether
                                    HUD’s rules and regulations were followed.

                                    We conducted the audit at HUD’s Illinois State Office and
 Audit Scope And                    the Housing Authority’s office. We performed our on-site
 Methodology                        audit work between February 2001 and September 2001.

                                    To accomplish our audit objectives, we interviewed: HUD’s
                                    staff; the Housing Authority’s former and current officials,
                                    former and current staff, and the fee accountant, nine of the
                                    Authority’s tenants; and the Mayor of the City of Alton.

                                    We analyzed the following items: tenant files; cash
                                    disbursements and invoices; vendor files; vacancy reports; all
                                    of the Public Housing Drug Elimination Program Grant
                                    vouchers for January 1, 1997 to March 31, 2001; Board
                                    meeting minutes; payroll records and personnel files; Line of
                                    Credit Control System reports; bank statements and canceled
                                    checks; equipment records; cash receipts and registers; all of
                                    the travel vouchers for travel outside of the Housing
                                    Authority's jurisdiction (defined as the St. Louis
                                    metropolitan area and the entire State of Illinois) for the

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Introduction


               period April 1, 1997 to March 31, 2001; general ledgers;
               tenant accounts receivable-occupancy reports; audited
               financial statements; waiting list; rent rolls; and the
               Authority’s policies and procedures.

               We also reviewed: HUD’s files for the Housing Authority;
               Sections 6 and 309 of the Annual Contributions Contract
               between HUD and the Authority; Parts 85, 761, 886, 966,
               and 990 of Title 24 of the Code of Federal Regulations;
               HUD’s Public and Indian Housing Notice 96-35; HUD Form
               52723-Calculation of Performance Funding System
               Operating Subsidy; HUD Form 52267-Computation of
               Payments-In-Lieu-Of-Taxes; HUD Form 52728-Housing
               Authority Calculation of Occupancy Percentage for a
               Requested Budget Year; and the Cooperation Agreement
               dated August 19, 1958 between the Authority and the City
               of Alton.

               The audit covered the period April 1, 1997 to March 31,
               2001. This period was adjusted as necessary. We
               conducted the audit in accordance with generally accepted
               government auditing standards.

               We provided a copy of this report to the Housing
               Authority’s Interim Executive Director and to the
               Chairperson of the Board of Commissioners.




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                                                                                           Finding 1


        The Authority Must Resolve Significant
          Monetary Issues Totaling $280,796
The Housing Authority of the City of Alton did not follow HUD’s requirements, the Annual
Contributions Contract, and its policies to ensure the Housing Authority’s Low-Income Housing
and Public Housing Drug Elimination Programs were operated efficiently and effectively.
Specifically, the Housing Authority: (1) failed to make required tax payments totaling $50,870; (2)
claimed at least $38,823 in excess operating subsidies over a four year period; (3) did not make
sufficient efforts to collect tenant accounts receivable totaling $39,701; (4) inappropriately charged
expenses of $144,767 to its Drug Elimination Grants; and (5) improperly paid its former Executive
Director $6,635 for accrued but unused sick leave. The Housing Authority's former and current
Executive Directors did not exercise their responsibilities to implement effective controls over the
Authority’s Programs. As a result, HUD lacks assurance that the Housing Authority’s resources
were used to the maximum extent to benefit low and moderate income tenants.



                                       24 CFR Part 990.109(b)(3)(iii)(B) states if the recalculated
 HUD’s Requirements                    vacancy percentage is greater than three percent or more
                                       than five vacant units, housing authorities will adjust their
                                       requested budget year occupancy percentage by excluding
                                       from their calculation of unit months available all units
                                       vacant for longer than 12 months that are not vacant units
                                       undergoing modernization or are not units vacant due to
                                       circumstances and actions beyond authorities’ control.
                                       These units are considered long-term vacancies.

                                       24 CFR Part 990.109(b)(3)(iv)(A) requires that housing
                                       authorities are to reduce their operating subsidy calculations
                                       to 20 percent of the allowable expense level for long-term
                                       vacancies. This requirement is also outlined in HUD’s
                                       Public and Indian Housing Notice 96-35.

                                       HUD Form 52723, Calculation of Performance Funding
                                       System Operating Subsidy instructions, states housing
                                       authorities should not include units defined as long-term
                                       vacant units or units approved for non-dwelling use in the
                                       calculation for unit months available. Housing authorities
                                       receive operating subsidy from HUD based upon their unit
                                       months available.




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Finding 1


                          24 CFR Part 761.15(d)(2) specifically states that costs
                          incurred prior to the effective date of a Public Housing Drug
                          Elimination Grant Agreement are ineligible expenses.

                          Section 6 of the Annual Contributions Contract, between
 Annual Contributions     HUD and the Housing Authority of the City of Alton,
 Contract                 requires that during the development and operation of the
                          Housing Authority’s projects, the Authority will perform
                          and comply with all applicable provisions of the
                          Cooperation Agreement, including the provisions relating
                          to Payment-In-Lieu-Of-Taxes. In return for exempting the
                          Housing Authority’s low-income housing developments
                          from property taxes and special assessments, the Authority
                          agrees to remit Payment-In-Lieu-Of-Taxes to the local
                          governing body.

                          Section 309 of the Annual Contributions Contract requires
                          the Housing Authority to submit accurate and complete
                          financial data to HUD.

                          The Housing Authority’s Rent Collection Policy, effective
 Housing Authority’s      January 1, 1996, states prompt payment of rent and charges
 Policies                 is required for continued occupancy by a public housing
                          resident. Payments not received by the Housing Authority on
                          the 10th day of each month are considered delinquent. On or
                          after the 11th day of the month, the Housing Authority will
                          serve the resident with a written Notice of Termination. The
                          Notice includes a demand for immediate payment of the
                          delinquent charges and a 14-day grace period before the
                          Housing Authority may begin the eviction process.

                          The Housing Authority’s 1982 Personnel Policy Benefits
                          Manual states an employee who is separated for
                          unsatisfactory job performance or resignation will not be
                          paid for any accumulated sick leave.

                          The Housing Authority was properly accruing for a liability
 The Authority Did Not    known as Payments-In-Lieu-Of-Taxes for Fiscal Years
 Make Payments-In-Lieu-   1998 to 2000. However, the Authority failed to make any
 Of-Taxes                 payments on the $50,870 owed to Madison County, Illinois.
                          The amount owed did not include Fiscal Year 2001.

                          Payment-In-Lieu-Of-Taxes is an assessment paid to the local
                          governing body having jurisdiction over a housing authority
                          in return for the governing body exempting the authority’s

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                                                                              Finding 1


                           low-income housing developments from property taxes and
                           special assessments. The calculation of Payments-In-Lieu-
                           Of-Taxes is based on five percent of an authority’s dwelling
                           income (rental, non-rental, and excess utilities) less utility
                           expenses or the amount of the property taxes, if the
                           properties were not exempted, whichever is less.

                           The Housing Authority’s Independent Auditor reported this
                           situation as a finding in both the Fiscal Year 1998 and 1999
                           audit reports. The Authority’s Interim Executive Director
                           said he was uncertain why the Payments-In-Lieu-Of-Taxes
                           were not made on a timely basis. Payment of these monies
                           was the responsibility of the Housing Authority’s former
                           Executive Director who resigned from the Authority on
                           June 5, 2001.

                           On July 31, 2001, the Authority’s Interim Executive Director
                           sent a letter to the Madison County Treasurer’s Office
                           proposing to make twelve payments of $4,239 each
                           beginning September 2001.          The Authority’s Interim
                           Executive Director said he intended to liquidate some of the
                           Authority’s investment securities to remit the payments.

                           As a result of the Housing Authority’s failure to make the
                           Payments-In-Lieu-Of-Taxes when due, the Annual
                           Contributions Contract and the Cooperation Agreement
                           between the Authority and Madison County were violated.
                           The Authority could have faced a severe cash shortage if the
                           County rejected the Authority’s payment proposal and
                           demanded that the funds be immediately paid in full.

                           The Housing Authority claimed and was paid at least
The Authority Claimed      $38,823 in excess operating subsidy between April 1, 1997
Excess Operating Subsidy   and March 31, 2001. Operating subsidies are paid to
For Long-Term Vacant       housing authorities to cover the difference between an
Units                      allowable level of operating expenses and available income.
                           Because the Housing Authority included units that were
                           vacant for as long as 20 years in prior years’ operating
                           subsidy calculations, the total amount of excess subsidy
                           paid to the Authority is higher.

                           Four apartment complexes totaling 329 units are under the
                           Housing Authority’s jurisdiction. At least 20 years ago, six
                           units at the Joesting Terrace complex were vandalized and
                           the building’s water heater, furnace, and plumbing were

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Finding 1


               destroyed. The Authority’s Board of Commissioners at that
               time decided it would be too expensive to make repairs, so
               the units were gutted but never rehabilitated for occupancy,
               leaving only 323 units for occupancy.

               When the Housing Authority’s former Executive Director
               prepared the Calculation of Performance Funding System
               Operating Subsidy forms, he used 329 units as the basis for
               claiming subsidy rather than 323 units. We also determined
               that in subsequent calculations the Authority’s former
               Executive Director made estimates or used incorrect amounts
               for the rent roll and units-occupied portions of the subsidy
               calculations. HUD’s Illinois State Office of Public Housing
               Hub made adjustments to the calculations based on verbal
               information obtained from the Authority’s former Executive
               Director; however, the information the former Director
               provided was incorrect.

               The Housing Authority’s former Executive Director said he
               received training on how to complete HUD Form 52723 -
               Calculation of Performance Funding System Operating
               Subsidy. In addition, the Authority’s former Executive
               Director said he received and read HUD’s Notices and
               regulations regarding the calculation of operating subsidy for
               long-term vacant units. However, the former Executive
               Director said he was not aware that the six units were
               included in the calculations for operating subsidies or that the
               units should have been categorized as long-term vacancies.
               The explanation by the Authority’s former Executive
               Director is inconsistent since he acknowledges that he
               received training on how to complete HUD Form 52723 and
               read HUD’s requirements.          Regardless, the Authority
               received excess operating subsidies from HUD.

               The Housing Authority’s incorrect reporting of long-term
               vacancies resulted in the Authority receiving excess
               operating subsidies between April 1, 1997 and March 31,
               2001. The table on page 7 of this report shows the excess
               subsidies paid to the Authority by Fiscal Year.




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                                                                             Finding 1


                                         Subsidy     Corrected             Excess
                            Fiscal     Amount Paid Subsidy Due            Subsidy
                            Year       To Authority To Authority            Paid
                            1997         $480,878     $482,862            $(1,984)
                            1998          498,649      474,811             23,838
                            1999          488,564      480,307               8,257
                            2000          508,653      499,941               8,712
                            Total                                         $38,823
                          The excess subsidy paid to the Housing Authority for the
                          Fiscal Years shown above could have been used to support
                          the operations of other housing authorities or for other
                          program related purposes.

                          The Housing Authority did not make sufficient efforts to
The Authority’s Efforts   collect its Tenants Accounts Receivable balance that totaled
To Collect Receivables    $39,701 as of March 31, 2001. This amount was nearly
Were Poor                 equal to total rent receipts for a one-month period. In
                          addition, the Housing Authority violated its Rent Collection
                          Policy by extending collection efforts before it initiated
                          eviction procedures.

                          According to the Housing Authority’s Interim Executive
                          Director, the amount of the Authority’s Tenant Accounts
                          Receivable grew because more units were occupied, but an
                          increasing number of tenants did not meet their lease
                          obligations. Some tenants consistently paid late; thus,
                          incurring late charges that further increased the Receivable
                          balance. The Authority’s Interim Executive Director said he
                          began his collection efforts by going door-to-door to request
                          payment to avoid delivering 14-day eviction notices to
                          delinquent tenants. Several written Notices of Termination
                          were issued to at least 13 tenants more than once. In some of
                          these cases, the Housing Authority failed to follow through
                          with the eviction process and allowed residents to become
                          delinquent on rental payments for an average of three to
                          seven months.

                          The Housing Authority’s Rent Collection Policy requires
                          collection procedures to be initiated on or after the 11th day
                          of the month, if the tenant fails to make the required
                          payment. The Authority’s Interim Executive Director said he
                          did not actively pursue collection until tenants became two
                          months behind on their payments. Sometime during the
                          second month of not receiving payments, the Authority’s

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Finding 1


                          Interim Executive Director said he started the process of
                          issuing the 14-day notice.

                          The Housing Authority allowed tenants who were delinquent
                          on their rental payments, including those who were in the
                          eviction process, to arrange a payment plan to bring their
                          accounts current. According to the Authority’s Interim
                          Executive Director, most tenants made some type of payment
                          each month but the amount paid was never the minimum
                          amount due. Section B, paragraph 3(e)(ii), of the Authority’s
                          Rent Collection Policy states after the eviction process is
                          initiated, the tenant must make payment of all rent in arrears
                          in full and no partial payments will be accepted.

                          Between August 1998 and March 2001, the Housing
                          Authority wrote-off 129 delinquent tenant accounts totaling
                          $78,989. This included 14 tenants who made no rental
                          payments and 25 tenants who paid less than half of the
                          amount due. Unless the Housing Authority actively starts
                          to collect delinquent rents or evict tenants according to its
                          Rent Collection Policy, the Authority’s Tenants Accounts
                          Receivable balance will continue to increase. This situation
                          creates the possibility that the Authority may be unable to
                          meet its monthly expenses.

                          The Housing Authority improperly used Public Housing
 The Authority Charged    Drug Elimination Grant funds to pay expenses that were
 Costs To Drug Grants     incurred prior to the effective dates of the Grants, and for
 Before The Grants Were   expenses that were not eligible under the Drug Elimination
 Awarded                  Grant Program.

                          HUD awarded Drug Elimination Grants totaling $246,474 to
                          the Housing Authority in 1998, 1999, and 2000 as follows:

                                       Year of Award    Amount of Award
                                           1998            $98,700
                                           1999             72,360
                                           2000             75,414
                                           Total          $246,474

                          We reviewed all of the vouchers charged to the Authority’s
                          Public Housing Drug Elimination Grants for period April 1,
                          1997 to March 31, 2001. We considered these charges with
                          respect to the effective dates of each Grant, noting that


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                                                          Finding 1


       $140,890 in expenses was improperly charged to the Grants
       before their respective effective dates as follows:

                                  Amount Charged Before
               Year of Award      Effective Date of Grant
                   1998                  $ 85,038
                   1999                     27,615
                   2000                     28,237
                   Total                 $140,890

       24 CFR Part 761.15 states costs incurred prior to the
       effective date of the Grant Agreement are not allowable
       expenses. The charges occurred between three to 11 months
       before the Agreements’ effective dates. HUD’s Acting
       Director of the Illinois State Office of Public Housing
       Operations Division said expenses incurred prior to the
       effective dates of the Grants should have been charged to the
       specific Grant that was effective at the time the expenses
       were incurred. As of March 26, 2002, there was only
       $16,990 in funds left for the Authority to draw down from
       the 1998 and 1999 Grants, and no monies were left from the
       2000 Grant.

       In addition, the Housing Authority charged $3,877 of
       ineligible expenses to its Public Housing Drug Elimination
       Grants as follows:

                                                     Amount
                      Ineligible Expense             Charged
             Stripping and waxing floors              $1,695
             Supplies for Christmas Party                105
             Polo shirts for Housing
             Authority’s staff and tablecloth
             with Authority’s logo                       379
             Supplies for Thanksgiving Dinner            132
             Supplies for Halloween Party                348
             Winter caps for maintenance staff            96
             Circus tickets                              965
             Food for chili cook-off and
             resident council meeting                    157
                             Total                    $3,877

       The payment of expenses before the effective date of the
       Public Housing Drug Elimination Grants and the ineligible

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Finding 1


                            expenses occurred because the Housing Authority’s
                            personnel responsible for administering the Grants were
                            unfamiliar with the Grants’ requirements. Also, the
                            Authority’s accounting controls were weak and not closely
                            supervised by the Board of Commissioners (see Finding 2).

                            The Housing Authority’s former Executive Director received
 The Authority Improperly   payment for $6,635 in accrued, but unused sick leave in
 Paid Its Former Director   violation of the Authority’s Personnel Policy Benefits
 For Unused Sick Leave      Manual.

                            Section C, paragraph 6, of the Housing Authority’s Personnel
                            Policy Benefits Manual states an employee who is separated
                            for unsatisfactory job performance or resignation will not be
                            paid for any accumulated sick leave. Paragraph 8 of the
                            Authority’s Manual states employees who have applied for
                            retirement will be permitted to receive pay for any unused
                            sick leave accumulated up to 90 days. The Authority’s
                            Board of Commissioners must approve the final payment of
                            the accumulated sick leave.

                            The Housing Authority’s former Executive Director did not
                            retire, but resigned from his position effective June 5, 2001.
                            Therefore, the former Director’s actions made him ineligible
                            to receive payment for the accumulated sick leave. The
                            Housing Authority was also unable to locate a Board of
                            Commissioners’ resolution that approved the payment. One
                            of the Authority’s Commissioners said he did not recall the
                            Board granting such approval.

                            The improper payment of the accumulated sick leave to the
                            Housing Authority’s former Executive Director occurred
                            because the Authority’s management did not adhere to its
                            Benefits Manual. Additionally, the Authority’s accounting
                            controls were weak and not closely supervised by the Board
                            of Commissioners (see Finding 2). As a result, HUD lacks
                            assurance that the Housing Authority’s resources were used
                            to the maximum extent to benefit low and moderate income
                            tenants.



    Auditee Comments        [Excerpts paraphrased from the Housing Authority of the
                            City of Alton’s comments on our draft finding follow.


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                                                           Finding 1


       Appendix B, pages 29 to 31, contains the complete text of
       the comments for this finding.]

       The Housing Authority is presently making payments on its
       past due Payment-In-Lieu-Of-Taxes. The first payment was
       made in October 2001. The Housing Authority intends to
       continue to make monthly payments until the past due
       amount is paid in full. The Housing Authority will also pay
       future obligations relating to Payment-In-Lieu-Of-Taxes as
       the obligation comes due.

       In regard to the Excess Performance Funding System
       Operating Subsidy, it is the Housing Authority’s position that
       the finding is correct in that the Authority currently has only
       323 occupiable units. The Housing Authority agrees that it
       received excess subsidy for the six units. The Housing
       Authority’s Board of Commissioners authorized and directed
       the Authority’s Interim Executive Director to deprogram the
       six units from the Authority’s roles so the mistake will not be
       repeated in the future.

       The Housing Authority agrees that it failed to strictly comply
       with the Rent Collection Policy. The Authority intends to
       carefully review and revise its Policy in an effort to more
       aggressively collect rents and accounts receivable. This will
       include the filing of Citations to Discover Assets and Wage
       Garnishments if current and former tenants who owe rent to
       the Authority are currently employed.

       The Authority will repay HUD $3,877 for the ineligible
       expenses charged to the Drug Elimination Grants during the
       audit period. The Housing Authority’s former Executive
       Director informed the Board of Commissioners that the
       expenditures were proper.

       The Housing Authority believes that the finding requiring it
       to seek recovery of $6,635 for sick leave paid in error to the
       Authority’s former Executive Director is incorrect.
       Apparently, the HUD audit personnel did not examine the
       Housing Authority’s Personnel Policy Benefits Manual
       adopted on April 1, 1997. It is the opinion of the Housing
       Authority’s attorney that the Authority would be
       unsuccessful in a court proceeding attempting to recover the
       amount paid to the former Executive Director.


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Finding 1




   OIG Evaluation Of   We confirmed that the Housing Authority made six
   Auditee Comments    Payment-In-Lieu-Of-Taxes disbursements to Madison
                       County beginning in September 2001.

                       The April 1, 1997 revision to the Authority’s Personnel
                       Policy Benefits Manual makes no direct reference to the
                       issue of accumulated sick leave payments. Instead, the
                       Manual references and incorporates an earlier version of the
                       Policy, which does not directly mention this issue. In
                       reviewing the Authority’s Benefits Manual back to 1982 that
                       does make a direct reference to sick leave payments, the
                       1982 Manual permits payment of accumulated, unused sick
                       leave to employees who retired from the Authority.
                       Additionally, the Authority’s 1982 Benefits Manual
                       expressly prohibits such payments to employees who resign
                       from the Authority. Therefore, the Housing Authority was
                       not permitted to pay its former Executive Director for the
                       unused sick leave.

                       The actions planned by the Housing Authority, if fully
                       implemented, regarding the deprogramming of the six units
                       and collection of Tenant Accounts Receivable should
                       improve the Authority’s operations.

                       Besides repaying HUD $3,877 for the ineligible expenses
                       charged to the Public Housing Drug Elimination Grants, the
                       Housing Authority should also reimburse HUD for the
                       $140,890 in expenses that were improperly charged to the
                       Grants before their respective effective dates. Repayment
                       to HUD should be made from non-Federal funds.



   Recommendations     We recommend that the Illinois State Office Director of
                       Public Housing Hub assure that the Housing Authority of the
                       City of Alton:

                       1A.      Makes all the required Payments-in-Lieu-of-Taxes
                                to Madison County.

                       1B.      Reimburses HUD $38,823 from non-Federal funds
                                for the excess operating subsidy claimed between
                                April 1, 1997 and March 31, 2001.

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       1C.      Reimburses HUD $144,767 ($140,890 plus $3,877)
                from non-Federal funds for the payment of costs
                charged to the Grants before their effective dates and
                the ineligible expenses paid from Grant funds.

       1D.      Takes any and all appropriate action to recapture the
                $6,635 of unused sick leave that was improperly
                paid to the former Executive Director. If the
                Housing Authority is unable to recapture the money,
                the Authority should reimburse the improper sick
                leave payment from non-Federal funds to the
                appropriate program.

       1E.      Implements procedures and controls to follow HUD’s
                requirements, the Annual Contributions Contract,
                and/or the Authority’s policies regarding: (1)
                Payment-In-Lieu-Of-Taxes; (2) claims for operating
                subsidies; (3) use of Public Housing Drug
                Elimination Grant funds; and (4) payment of unused
                sick leave.




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                                                                                        Finding 2


The Authority Needs To Strengthen Its Controls
The Housing Authority of the City of Alton’s system of internal accounting and management
controls were weak. Specifically, controls did not assure that the Housing Authority adhered to its
own policies and procedures concerning performance appraisals, inventory of equipment, allocation
of unit size, tenant grievances, rental collections and evictions, and travel reimbursements to
members of the Board of Commissioners and the Authority’s staff for authorized travel. In
addition, the Board of Commissioners did not exercise adequate supervisory control over the
Authority’s financial activities and the former Executive Director. As a result, HUD’s and the
Housing Authority’s requirements were violated, and the Authority’s operations were not
conducted in an efficient and effective manner.



                                      Management controls comprise the plan of organization,
 Management Control                   methods, and procedures adopted by management to ensure
 Requirements                         the safeguarding of resources against waste, loss, and misuse.
                                      Management should establish physical controls to secure and
                                      safeguard vulnerable assets.        Periodic comparisons of
                                      resources with the recorded accountability should be made to
                                      help reduce the risk of errors, fraud, misuse, or unauthorized
                                      alteration.

                                      24 CFR Part 85.32 requires housing authorities to maintain
  HUD’s Regulations                   detailed property records, take a physical inventory every
                                      two years, and reconcile the inventory with property
                                      records. Authorities’ records must show the property
                                      description, source, title, cost, acquisition date, location,
                                      use, and condition.

                                      24 CFR Part 966.52 states housing authorities will furnish
                                      each tenant and resident organization a copy of its
                                      grievance procedures.

                                      24 CFR Part 886.325 requires housing authority residents
                                      to notify their authority if there is a change in the family's
                                      composition and transfer to the appropriate sized unit.
                                      Upon receipt of this notification, the authority agrees to
                                      offer the family a suitable unit as soon as one becomes
                                      vacant and ready for occupancy. The family will have
                                      priority over individuals on the authority's waiting list
                                      seeking the same sized unit.




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                             The Housing Authority’s Employee Manual, effective April
 Authority’s Requirements    1997, requires annual performance appraisals to be done for
                             all of the Authority’s employees.

                             The Housing Authority’s By-Laws, dated March 19, 1986,
                             requires the Authority’s Secretary-Treasurer or designee to
                             have the care and custody of the Authority’s funds and
                             deposit the funds in the Authority’s bank account(s). The
                             Secretary-Treasurer will keep regular books of accounts
                             showing receipts and expenditures and will provide to the
                             Authority at each regular meeting, or more often if requested,
                             an account of transactions and the financial condition of the
                             Authority. The Secretary-Treasurer will keep in safe custody
                             the seal of the Authority and will have the power to affix
                             such seal to all contracts and instruments authorized for
                             execution by the Authority.

                             The Housing Authority's Travel Policy, effective March 4,
                             1997, states all travel outside of the Authority's jurisdiction
                             will be approved by Board resolution. The Policy also
                             states all travel expenses will be recorded, signed by the
                             traveler, and approved by the Authority’s Executive
                             Director prior to reimbursement.

                             The Housing Authority's Rent Collection Policy, dated
                             January 1, 1996, states after the 10th day of each month,
                             rent is considered delinquent and on the 11th day of the
                             month tenants will be served a termination notice by the
                             Authority.

                             The Housing Authority’s Inventory Control Policy requires
                             an inventory of materials and supplies be performed at least
                             once a year.

                             Public Housing Authority Commissioners have a
 Responsibilities Of Board   responsibility to HUD to ensure national housing policies are
 Of Commissioners            carried out, and to the Authority’s Executive Director and
                             employees to provide sound and manageable directives. The
                             Commissioners are accountable to their locality and best
                             serve it by monitoring operations to be certain that housing
                             programs are carried out in an efficient and economical
                             manner.

                             The Housing Authority’s Board of Commissioners did not
 Commissioners’              maintain adequate oversight of the Authority’s assets and
 Oversight Was Inadequate
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       operations. The Commissioners were not completely aware
       of their duties either as a Board or as individual officers
       because significant Board responsibilities were left to the
       Housing Authority’s former Executive Director, Quality
       Control and Fiscal Director, and Office Manager.

       As an example, the Housing Authority’s Secretary-
       Treasurer was not adequately performing the financial
       oversight or custodial responsibilities as required by the
       Authority’s By-laws. The Secretary-Treasurer did not have
       custody of the Housing Authority’s corporate seal, did not
       properly control the Authority’s bank accounts and the
       deposits made to those accounts, failed to keep proper
       records showing receipts and expenditures, and generally
       did not control the financial transactions of the Authority.
       These duties were apparently delegated to the Housing
       Authority’s staff; however, such delegation would have
       required the Board of Commissioners to adopt a formal
       resolution. The Authority was unable to provide us a
       resolution that authorized the delegation of authority.

       The Housing Authority’s Board of Commissioners said
       they did not consistently receive reports of the Authority’s
       financial condition from the former Executive Director. In
       addition, the Commissioners said they did not fully
       understand the reports they did receive that dealt with other
       Housing Authority business matters. We observed Board
       members signing the Authority’s checks without
       thoroughly reviewing the supporting documentation. The
       former Executive Director resigned from the Authority on
       June 5, 2001. The Housing Authority’s former Executive
       Director routinely presented disbursements to the
       Authority’s Board without providing the purpose of the
       disbursements.

       During the course of the audit in May 2001, the Housing
       Authority’s Secretary-Treasurer died; thus, creating more
       uncertainty over the adequacy of the Authority’s controls.
       As a result of the minimal oversight exercised by the
       Housing Authority’s Board of Commissioners, the
       Commissioners had inadequate knowledge of the
       Authority’s financial condition. A stronger system of
       management controls over the Authority’s assets and
       activities of the former Executive Director would have


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Finding 2


                             avoided the previously cited problems, enabling the Board
                             to set appropriate and attainable goals for the Authority.

                             Between April 1, 1997 and March 31, 2001, the Housing
 Performance Appraisals      Authority’s Board of Commissioners did not perform
 Were Not Conducted          annual performance appraisals of the Authority’s former
                             Executive Director to achieve the annual goals set forth by
                             the Board. The Authority’s Employee Manual required
                             appraisals be performed of all of the Authority’s
                             employees.       The Authority’s Commissioners said
                             performance evaluations were not completed for the former
                             Executive Director because he either did not make himself
                             available at the time his evaluations were scheduled or he
                             failed to provide requested information on his
                             accomplishments to facilitate the evaluations. Although
                             evaluations were not done, the Authority’s Board of
                             Commissioners awarded salary increases to the former
                             Executive Director between April 1997 and March 2001.

                             The Housing Authority violated HUD’s regulations
 HUD’s Regulations           concerning equipment inventory, unit size allocations, and
 Regarding Inventory, Unit   grievance procedures for tenants.
 Allocation, And Tenant
 Grievances Were Not         The Housing Authority’s control over equipment was
 Followed                    insufficient and inconsistent. Inventories were not performed
                             on a two-year cycle, and the Authority’s inventory records
                             lacked serial or identification numbers for all items of
                             equipment. Although the Authority’s personnel said an
                             inventory was performed in 1998, they were unable to
                             provide supporting documentation.

                             The Housing Authority allowed individuals and families,
                             including a Board Commissioner and Authority employees,
                             to occupy units for as long as seven years when they did not
                             meet the family composition guidelines to occupy the units.
                             This condition is known as over housing. In one case, an
                             individual tenant was housed in a three-bedroom unit since
                             1985. A one-bedroom unit is required by HUD’s regulation.
                             Appropriately sized units became available, but in most cases
                             the Housing Authority made no attempt to transfer the
                             tenants. As of September 10, 2001, 39 tenants appeared on
                             the Authority’s over housed list.

                             The Housing Authority’s written grievance procedures
                             included three of the four elements required by 24 CFR Part

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                         966.52. However, the Housing Authority did not provide a
                         copy of the grievance procedures to each tenant as required.

                         The Housing Authority’s Interim Executive Director and
                         other staff members said they were unaware of the
                         complete content of HUD’s regulation. The Authority’s
                         staff was aware that inventories of equipment were required
                         to be reconciled every two years, but they said they were
                         unaware that serial or identification numbers were also
                         required. The Housing Authority was unable to explain
                         why over housed tenants were not transferred to smaller
                         units. Personnel for the Authority said a copy of the
                         grievance procedures were posted in the Housing
                         Authority’s office lobby, but they said they were not aware
                         that a copy was required to be provided to each tenant.

                         As a result of these violations, the Housing Authority was
                         not operated in an efficient and effective manner.

                         Control procedures over the Housing Authority’s Board-
The Authority’s Rental   approved Rent Collection and Travel Policies were weak.
Collection And Travel
Policies Were Violated   The Authority’s Rent Collection Policy was not
                         consistently enforced with respect to tenant lease violations.
                         According to the Policy, tenants’ rents were considered
                         delinquent after the 10th day of the month. On the 11th
                         day, the Policy required that a non-paying tenant be served
                         with a termination notice. However, this was not always
                         done.

                         We reviewed 67 of the Housing Authority’s tenant files and
                         determined that in at least 10 cases, the Authority waited at
                         least two months to serve termination notices. Payment
                         agreements were then made between the Authority and
                         tenants, but the agreements were not enforced and eviction
                         actions were not taken. Additional delays in serving
                         termination notices may have occurred that were not
                         included in our review.

                         Travel completed and travel expenses claimed by the
                         Housing Authority’s personnel did not always comply with
                         the Authority’s Travel Policy. The Travel Policy required
                         that all travel outside of the Housing Authority's
                         jurisdiction (defined as the St. Louis metropolitan area and


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                    the entire State of Illinois) be approved by a Board
                    resolution.

                    Of the 45 trips taken by the Housing Authority’s personnel
                    between April 1, 1997 and March 31, 2001, 19 travel
                    vouchers were submitted. The Housing Authority was
                    unable to locate travel vouchers for the remaining 26 trips.
                    Of the 19, the Authority’s Board only adopted resolutions
                    authorizing six trips. All 19 trips required approval by the
                    Housing Authority’s Board in advance by resolution.

                    The Housing Authority’s Travel Policy also required that
                    all travel expenses were to be recorded, signed by the
                    traveler, and approved by the Authority’s Executive
                    Director prior to reimbursement. Of the 19 travel vouchers
                    submitted between April 1, 1997 and March 31, 2001, the
                    Housing Authority’s Executive Director approved only four
                    vouchers (21 percent).

                    The Housing Authority’s Interim Executive Director, who
                    previously served as the Authority’s Housing Manager, said
                    the former Executive Director controlled most of the
                    Authority’s operations and was responsible for the
                    situations previously noted.

                    As a result of the previously mentioned violations, the
                    Housing Authority’s tenant accounts receivable balance
                    steadily increased because the Authority failed to enforce
                    its Rent Collection Policy (see Finding 1). In addition, the
                    Authority exposed itself to unauthorized personal travel
                    because Board resolutions were not adopted and travel
                    vouchers were not consistently submitted or properly
                    processed.

                    In summary, management controls were extremely weak
                    because of the Housing Authority’s Board of
                    Commissioners and former Executive Director’s failure to
                    implement the necessary controls to ensure the Authority
                    was operated according to program requirements.




 Auditee Comments   [Excerpts paraphrased from the Housing Authority of the
                    City of Alton’s comments on our draft finding follow.


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                                                                         Finding 2


                    Appendix B, pages 31 and 32, contains the complete text of
                    the comments for this finding.]

                    The Housing Authority’s Board of Commissioners and
                    employees intend to correct the problem of inadequate
                    oversight over the Authority’s assets and operations by
                    implementing additional training; additional oversight of the
                    reporting of the Authority’s financial condition; careful
                    review of expense check documentation prior to the signing
                    of checks; and annual performance appraisals of the
                    Executive Director and other employees.

                    The Housing Authority filed 10 new evictions and forcibly
                    evicted eight households. Seven households voluntarily
                    vacated their units after receiving either a Notice to
                    Terminate or a summons to appear in Court. The Authority
                    entered into Past Due Rent Repayment Plans with
                    approximately 30 tenants.

                    Travel expense vouchers will be more carefully reviewed and
                    the Executive Director will ensure that vouchers are
                    submitted for each trip taken by Housing Authority’s
                    personnel.



OIG Evaluation Of   The actions planned by the Housing Authority, if fully
Auditee Comments    implemented, should improve its controls over program
                    operations.




Recommendations     We recommend that the Illinois State Office Director of
                    Public Housing Hub assure that the Housing Authority of the
                    City of Alton:

                    2A.      Implements procedures and controls to assure that
                             HUD’s regulations and/or the Housing Authority’s
                             requirements are followed regarding performance
                             appraisals, inventory of equipment, allocation of unit
                             size, tenant grievances, rental collections and
                             evictions, and travel reimbursements.

                    We also recommend that the Illinois State Office Director
                    of Public Housing Hub:

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               2B.      Pursues administrative action against the Housing
                        Authority’s Board of Commissioners if within six
                        months they do not improve their oversight of the
                        Authority’s operations.




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Management Controls
In planning and performing our audit, we considered the management controls of the Housing
Authority of the City of Alton in order to determine our auditing procedures, not to provide
assurance on the controls. Management controls include the plan of organization, methods, and
procedures adopted by management to ensure that its goals are met. Management controls include
the processes for planning, organizing, directing, and controlling program operations. They include
the systems for measuring, reporting, and monitoring program performance.



                                      We determined the following management controls were
 Relevant Management                  relevant to our audit objectives:
 Controls

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


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


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


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

                                      We assessed all of the relevant controls identified above.

                                      It is a significant weakness if management controls do not
                                      provide reasonable assurance that the process for planning,
                                      organizing, directing, and controlling program operations
                                      will meet an organization’s objectives.

                                      Based on our review, we believe the following items are
  Significant Weaknesses              significant weaknesses:

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                      ·   Program Operations

                      The Housing Authority was not operated according to
                      program requirements. Specifically, the Authority: failed to
                      make required tax payments totaling $50,870; claimed at
                      least $38,823 in excess operating subsidies over a four year
                      period; did not make sufficient efforts to collect tenant
                      accounts receivable totaling $39,701; improperly charged
                      expenses of $144,767 to its Public Housing Drug
                      Elimination Grants; improperly paid its former Executive
                      Director $6,635 for accrued but unused sick leave; did not
                      perform annual performance appraisals of its former
                      Executive Director; failed to follow HUD’s regulations
                      regarding equipment inventory, unit size allocations, and
                      grievance procedures for tenants; and did not ensure that its
                      staff travel was properly authorized and travel expenses
                      complied with the Authority’s Policy (see Findings 1 and
                      2).

                      ·   Validity and Reliability of Data

                      The Housing Authority: provided inaccurate information to
                      HUD regarding the number of long-term vacant units; and
                      failed to include serial or identification numbers for
                      equipment in the Authority’s inventory records (see
                      Findings 1 and 2).

                      ·   Compliance with Laws and Regulations

                      The Housing Authority did not follow HUD’s regulations
                      regarding: requests for operating subsidies; payment of
                      expenses from its Public Housing Drug Elimination Grants;
                      controls over equipment; allocation of unit sizes; and
                      procedures concerning tenant grievances (see Findings 1
                      and 2).

                      ·   Safeguarding Resources

                      The Housing Authority improperly: claimed at least $38,823
                      in excess operating subsidies over a four year period; charged
                      expenses of $144,767 to its Public Housing Drug
                      Elimination Program; and paid its former Executive Director
                      $6,635 for accrued but unused sick leave (see Findings 1 and
                      2).


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Follow Up On Prior Audits
This is the first audit of the Housing Authority of the City of Alton by HUD’s Office of Inspector
General. The latest Independent Auditor’s Report for the Housing Authority covered the fiscal
year ended March 31, 2000. The Report contained three findings. One of the three findings is
reported in this report.

       Independent Auditor’s Report                        This Report
                                       The Authority Must Resolve Significant Monetary
       Excessive Tenants Accounts      Issues Totaling $280,796 and The Authority Needs
         Receivable (Finding 1).          To Strengthen Its Controls (Findings 1 and 2).




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                                                                                    Appendix A

Schedule Of Ineligible Costs


            Recommendation
               Number                        Ineligible Costs 1/

                    1B                           $ 38,823
                    1C                            144,767
                    1D                              6,635
                   Total                         $190,225


1/   Ineligible costs are costs charged to a HUD-financed or insured program or activity that the
     auditor believes are not allowable by law, contract, or Federal, State, or local policies or
     regulations.




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                                                                                        Appendix B

Auditee Comments

                                        November 16, 2001



U.S. Department of Housing and Urban Development
Office of Inspector General for Audit, Midwest
77 West Jackson Boulevard, Room 2646
Chicago, Illinois 60604-3507

Attention: Ronald F. Huritz

In re: City of Alton Housing Authority Audit Findings

Dear Mr. Huritz:

The purpose of this letter is to respond to your letter of October 25, 2001 as requested.



                   The Alton Housing Must Resolve
                     Significant Monetary Issues
                        Totaling $318,085.00
The Alton Housing Authority admits the accuracy of the information in the “Criteria” section
except that the Housing Authority disagrees with the statement that “...an employee who is
separated for unsatisfactory job performance or resignation shall not be paid for any accumulated
sick leave.” is found in the Employee Manual of the Housing Authority of the City of Alton as
adopted on April 1, 1997. The quoted language is contained in prior Employee Manuals that
have been pre-empted by the April 1, 1997 Manual.

The Alton Housing Authority is presently making payments on its past due Payment in Lieu of
Taxes Obligation to the Madison County Treasurer pursuant to an oral agreement. The
agreement calls for payment of the past due amount owed to Madison County in the amount of
$50,870.00 in equal monthly installments of $4,239.00. The first of such payments was made in
October of 2001. The Housing Authority intends to continue to make monthly payments as
agreed until the past due amount is paid in full. The Housing Authority will also pay future
obligations relating to PILOT payments as the obligation comes due. The Board of
Commissioners of the Alton Housing Authority was not informed by the former Executive
Director that the Housing Authority failed to make the PILOT payments when due.



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Appendix B


In regard to the Excess Performance Funding System Operating Subsidy, it is the Housing
Authority’s position that the finding is correct in that the Housing Authority currently has only
323 occupiable units as indicated in the Audit finding. The Housing Authority agrees that it has
received excess subsidy for the six units for the audit period as indicated. The Board of
Commissioners of the Housing Authority has authorized and directed the Interim Executive
Director of the Housing Authority to deprogram the six units from the Housing Authority roles
so that the mistake will not be repeated in the future. Three of the units are the subject matter of
a Demolition Application to be submitted to HUD.

The Housing Authority agrees that it has failed to strictly comply with the Rent Collection Policy
of the Housing Authority. The Housing Authority intends to carefully review and revise its Rent
Collection Policy in an effort to more aggressively collect its rent and accounts receivables. The
Housing Authority has pursued a more aggressive eviction procedure that has resulted in the
following actions in the past 120 days:

               1)      The Housing Authority has filed ten (10) new evictions; and

               2)      The Housing Authority has forcibly evicted eight (8) households on which
                       prior Judgments of Possession had been obtained through the use of the
                       Madison County Sheriff’s Department; and

               3)      Seven (7) households have voluntarily vacated their units after receiving
                       either a Notice to Terminate Lease, or a Summons to appear in a State
                       Court; and

               4)      The Housing Authority has entered into Past Due Rent Repayment Plans
                       with approximately thirty (30) tenants.

The Alton Housing Authority also intends to more aggressively pursue collection of the post
occupation or post judgment Tenants Account Receivable balance. This will include the filing of
Citations to Discover Assets and Wage Garnishments if the tenants or former tenants owing rents
to the Housing Authority are currently employed.

The Alton Housing Authority has established a separate interest-bearing account and has
deposited $30,440.00 into that account to segregate the Tenant Security Deposits. Tenant
Security Deposits received in the future will be deposited into the account.

The Housing Authority will repay HUD $3,877.00 for ineligible expenses charged to Drug
Elimination Grants during the audit period. The Housing Authority Commissioners were told by
the former Executive Director that the expenditures were proper.

The Housing Authority has contacted its accountant and will adjust Housing Authority records to
associate expenses with the Drug Elimination Grant that was in effect at the time the expenses
were incurred. The Housing Authority Commissioners were unaware of the incorrect accounting
practice that occurred under the direction of the former Executor Director.

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The Housing Authority intends to seek technical assistance from HUD on accounting procedures
relating to Drug Elimination Grants and to provide proper training for its personnel on the proper
treatment of expenses incurred.

The Housing Authority believes that the finding requiring it to seek recovery of $6,635.00 for
sick leave paid in error to the former Executive Director is incorrect. Apparently, HUD audit
personnel did not examine the most recent Housing Authority Personnel Policy Benefits Manual
which was adopted on April 1, 1997. The current policy does not provide as indicated in the
HUD finding. In addition, certain employees (including the former Executive Director) were
promised that they would receive the accumulated sick pay upon severance of their employment.
It is the Housing Authority’s attorney’s opinion that the Housing Authority would be
unsuccessful in a court proceeding attempting to recover the amount paid to the former Executive
Director.



                 The Alton Housing Authority Must
                  Strengthen its Internal Controls

The Alton Housing Authority admits the accuracy of the information in the “Criteria” section.

However, the Housing Authority states that the By-Laws of the Housing Authority of the City of
Alton were amended on June 5, 2001 to delete the position of Secretary-Treasurer.

The Board of Commissioners and employees of the Housing Authority of the City of Alton
intend to correct the problem of inadequate oversight over the Housing Authority’s assets and
operations by the Housing Authority Commissioners implementing the following:


       1)      Additional Board of Commissioner training; and

       2)      Additional Board of Commissioner oversight of the reporting of the Housing
               Authority’s financial condition; and

       3)      Board of Commissioner careful review of expense check documentation prior to
               the signing of checks; and

       4)      Board of Commissioners annual performance appraisal of the Executive Director
               position. The Board of Commissioners will further require job performance
               appraisals to be made by the Executive Director relating to all Housing Authority
               Department Heads; and




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       5)      The violation of the Federal Regulations concerning equipment inventory
               requirements, unit size allocations, and grievance procedures for tenants will be
               corrected and will not occur in the future.

       6)      That additional training for Housing Authority staff on Federal Regulations which
               impact its programs and operations will be addressed.

The Housing Authority agrees that it has failed to strictly comply with the Rent Collection Policy
of the Housing Authority. The Housing Authority intends to carefully review and revise its Rent
Collection Policy in an effort to more aggressively collect its rent and accounts receivables. The
Housing Authority has pursued a more aggressive eviction procedure that has resulted in the
following actions in the past 120 days:

               1)     The Housing Authority has filed ten (10) new evictions; and

               2)     The Housing Authority has forcibly evicted eleven (11) households on
                      which prior Judgments of Possession had been obtained through the use of
                      the Madison County Sheriff’s Department; and

               3)     Seven (7) households have voluntarily vacated their units after receiving
                      either a Notice to Terminate Lease, or a Summons to appear in a State
                      Court;

               4)     The Housing Authority has entered into Past Due Rent Repayment Plans
                      with approximately thirty (30) tenants.

The Alton Housing Authority also intends to more aggressively pursue collection of the post
occupation or post judgment Tenants Account Receivable balance. This will include the filing of
Citations to Discover Assets and Wage Garnishments if the tenants or former tenants owing rents
to the Housing Authority are currently employed.

That Travel Expense Vouchers will be more carefully reviewed, and the Executive Director will
ensure that Travel Expense Vouchers are submitted for each trip taken by Housing Authority
personnel.

                                             Very truly yours,

                                             Housing Authority of the City of Alton



                                             By____/signed/__________________________

                                               Jeffrey W. Copley, Interim Executive Director



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                                                                                Appendix C

Distribution
Regional Director, Midwest (2)
Director of Public Housing Hub, Illinois State Office (2)
Secretary, S (Room 10000)
Deputy Secretary, SD (Room 10100)
Senior Advisor to Deputy Secretary, SD (Room 10100)
Assistant to the Secretary for White House Liaison, S (Room 10216)
Press Secretary/Senior Communications Advisor to the Secretary, S (Room 10226)
Chief of Staff, S (Room 10000)
Acting Assistant Secretary for Administration, A (Room 10110)
Assistant Secretary for Congressional and Intergovernmental Relations, J (Room 10120)
Director of Departmental Equal Employment Opportunity, U (Room 2112)
Deputy Chief of Staff for Policy and Programs, S (Room 10214)
Deputy Chief of Staff for Intergovernmental Affairs, S (Room 10214)
Director of Center for Faith-Based and Community Initiatives, K (Room 10184)
General Counsel, C (Room 10110)
Acting Assistant General Counsel, Midwest
Assistant Secretary for Housing-Federal Housing Commissioner, H (Room 9100)
General Deputy Assistant Secretary for Policy Development and Research, R (Room 8100)
Assistant Secretary for Community Planning and Development, D (Room 7100)
President of Government National Mortgage Association, T (Room 6100)
Acting Assistant Secretary for Fair Housing and Equal Opportunity, E (Room 5100)
Assistant Secretary for Public and Indian Housing, P (Room 4100)
General Deputy Assistant Secretary for Public and Indian Housing, P (Room 4100)
Acting Deputy Assistant Secretary for Public Housing Investments, PT (Room 4130)
Deputy Assistant CFO for Financial Management, FM (Room 2206)
Acting Deputy Assistant Secretary for Public and Assisted Housing Delivery, PH (Room 4204A)
Deputy Assistant Secretary for Administration and Budget/CFO, PC (Room 4234)
Audit Liaison Officer for Public and Indian Housing, PF (Room 5156)
Chief Information Officer, Q (Room P8206)
Director of Departmental Operations and Coordination, I (Room 2124)
Chief Financial Officer, F (Room 10234)
Director of Audit Coordination/Departmental Audit Liaison Officer, FMA (Room 2206)
Director of Risk Management, FMR (Room 2214)
CFO Audit Liaison Officer, FMA (Room 2206)
Audit Liaison Officer, 3AFI (2)
Director of Enforcement Center, V (200 Portals Building)
Acting Director of Multifamily Assistance Restructuring, Y (4000 Portals Building)
Acquisitions Librarian, Library, AS (Room 8141)
Acting Director of Federal Housing Enterprise Oversight, (1700 G Street NW, Room 4011)
Director of Healthy Homes and Lead Hazard Control, L (3206 Portals Building)
Chief Executive Officer, S (Room 10220)
Assistant Deputy Secretary for Field Policy and Management, M (Room 7108)
Special Counsel, C (Room 10126)


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Appendix C


Senior Advisor, Subcommittee on Criminal Justice, Drug Policy & Human Resources, B 373
        Rayburn House Office Building, Washington DC 20515
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 Building, United States Senate, Washington DC 20510
The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn
        Building, United States House of Representatives, Washington DC 20515
The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform,
        2204 Rayburn Building, United States House of Representatives, Washington DC 20515
Associate Director of Housing and Telecommunications Issues, United States General
        Accounting Office, 441 G Street N.W., Room 2T23, Washington DC 20548
Steve Redburn, Chief of Housing Branch, Office of Management and Budget, 725 17th Street,
        N.W., Room 9226, New Executive Office Building, Washington DC 20503
Andy Cochran, House Committee on Financial Services, 2129 Rayburn House Office Building,
        Washington DC 20515
Clinton C. Jones, Senior Counsel, Committee on Financial Services, B303 Rayburn Building,
        United States House of Representatives, Washington DC 20515
Interim Executive Director, Housing Authority of the City of Alton (2)
Chairperson of the Board of Commissioners, Housing Authority of the City of Alton




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