AUDIT REPORT
BENTON HARBOR HOUSING COMMISSION
PUBLIC HOUSING CAPITAL FUND PROGRAM
BENTON HARBOR, MICHIGAN
The Commission Lacked Supporting Documentation and Did
Not Follow Procurement Requirements Regarding Its Program
2006-CH-1010
MAY 18, 2006
OFFICE OF AUDIT, REGION V
CHICAGO, ILLINOIS
Issue Date
May 18, 2006
Audit Report Number
2006-CH-1010
TO: Robert E. Nelson, Director of Public Housing Hub, 5FPH
FROM: Heath Wolfe, Regional Inspector General for Audit, 5AGA
SUBJECT: Benton Harbor Housing Commission; Benton Harbor, Michigan; The
Commission Lacked Supporting Documentation and Did Not Follow
Procurement Requirements Regarding Its Public Housing Capital Fund
Program
HIGHLIGHTS
What We Audited and Why
We audited the Benton Harbor Housing Commission’s (Commission) Public
Housing Capital Fund program (program). The audit was conducted based upon a
request from the U.S. Department of Housing and Urban Development’s (HUD)
Detroit Office of Public Housing. Our objectives were to determine whether the
Commission operated its program in a manner that provides reasonable assurance
that (1) expenditures were adequately supported and eligible and (2) procurement
transactions met the Commission’s and HUD’s requirements.
What We Found
The Commission lacked documentation to support more than $200,000 in
program expenditures and improperly used $500 in program funds to pay
expenses related to its Housing Choice Voucher program. Further, the
Commission’s procurement activities were not conducted according to its and
HUD’s requirements. These deficiencies existed because the Commission failed
to implement adequate procedures and controls, and the Commission’s board of
commissioners (board) did not exercise appropriate oversight of the program.
We informed the Commission’s acting executive director and the director of
HUD’s Detroit Office of Public Housing of minor deficiencies through a
memorandum dated May 5, 2006.
What We Recommend
We recommend that the director of HUD’s Detroit Office of Public Housing
require the Commission to (1) provide documentation to support the unsupported
expenditures or reimburse its program from nonfederal funds for the applicable
portion (2) provide documentation that it reimbursed its program from its Section 8
housing administrative fees for the improper payment of expenses related to its
Housing Choice Voucher program, and (3) implement adequate procedures,
controls, and board oversight to correct the weaknesses cited in this report.
For each recommendation without a management decision, please respond and
provide status reports in accordance with HUD Handbook 2000.06, REV-3.
Please furnish us copies of any correspondence or directives issued because of the
audit.
Auditee’s Response
We provided our discussion draft audit report to the Commission’s acting executive
director, its board president, and HUD’s staff during the audit. We held an exit
conference with the Commission’s acting executive director on April 27, 2006. We
asked the Commission’s acting executive director to provide comments on our
discussion draft audit report by May 4, 2006.
The Commission’s acting executive director provided written comments, dated
May 2, 2006. The acting executive director agreed with our findings, and agreed
to implement procedures and controls to address our findings. The complete text
of the auditee’s response can be found in appendix B of this report.
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TABLE OF CONTENTS
Background and Objectives 4
Results of Audit
Finding 1: The Commission Lacked Supporting Documentation and Improperly
Used Program Funds 5
Finding 2: The Commission’s Procurement Activities Were Not Conducted
According to Its and HUD’s Requirements 9
Scope and Methodology 14
Internal Controls 15
Followup on Prior Audits 17
Appendixes
A. Schedule of Questioned Costs 18
B. Auditee Comments 19
C. Federal Requirements and Commission’s Procurement Policy 23
D. Summary of Services Procured and Related Payments 25
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BACKGROUND AND OBJECTIVES
The Benton Harbor Housing Commission (Commission) was created for the purpose of
providing decent, safe, and sanitary living conditions for low-income individuals. It was
organized under the laws of the State of Michigan. A five-member board of commissioners
(board) oversees the Commission. The executive director is responsible for managing the
Commission’s day-to-day operations.
The Commission manages 370 federally assisted low-income housing units in three complexes
and scattered sites. It also manages 128 Section 8 Housing Choice Voucher units. In its annual
contributions contract with the U.S. Department of Housing and Urban Development (HUD), the
Commission agreed to operate each project solely for the purpose of providing decent, safe, and
sanitary housing for eligible families in a manner that promotes serviceability, economy,
efficiency, and stability of its projects.
The Public Housing Capital Fund program (program) is administered by HUD’s Office of Public
and Indian Housing’s Office of Capital Improvements. Capital funds are for the development,
financing, and modernization of public housing developments and for management
improvements. The Public Housing Reform Act of 1998 converted HUD’s Comprehensive
Grant and Comprehensive Improvement Assistance programs to the Public Housing Capital
Fund program.
HUD awarded the Commission more than $2.6 million in program grants for fiscal years 2002
through 2005. As of March 3, 2006, the Commission had drawn down more than $1.4 million in
program funds.
Between July and September 2004, HUD assessed the Commission’s public housing
performance based upon HUD’s regulations at 24 CFR [Code of Federal Regulations] Part 902
and gave the Commission a score of less than 60, making the Commission a “troubled” agency.
A consulting firm, MDStrum Housing Services, Inc., conducted an assessment of the
Commission from March 28 through April 1, 2005, to identify key issues/problems or concerns
affecting the Commission. As a result of these assessments, HUD executed memorandums of
agreement with the Commission, dated October 2004 and August 2005, requiring it to improve
its score to 60 or above.
Our objectives were to determine whether the Commission operated its program in a manner that
provides reasonable assurance that (1) expenditures were adequately supported and eligible and
(2) procurement transactions met its and HUD’s requirements.
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RESULTS OF AUDIT
Finding 1: The Commission Lacked Supporting Documentation and
Improperly Used Program Funds
The Commission lacked documentation to support $206,224 in program expenditures and
improperly used $500 in program funds to pay expenses related to its Section 8 Housing Choice
Voucher program. These problems occurred because the Commission did not implement
adequate procedures and controls over program disbursements. As a result, HUD and the
Commission lack assurance that program funds were efficiently and effectively used.
The Commission Lacked
Support for More Than
$200,000 in Program Funds
Disbursed
The Commission was unable to support the use of funds from its program. It
lacked support for its use of $206,224 from its fiscal year 2002 program. The
Commission’s former executive director requisitioned the funds via voucher
#092-223370 from HUD’s Line of Credit Control System on April 2, 2005, and
the funds were deposited into the Commission’s operating account. In April
2005, the Commission prepared three checks totaling $199,896 to be paid from
the $206,224 in program funds. The three checks were payable to First
Contracting, Inc., a window and carpet replacement contractor; however, the
checks were voided at HUD’s request.
All funds drawn under any housing program, except for the Housing Choice
Voucher program, are deposited in the Commission’s operating account and then
transferred to accounts designated for the Commission’s various programs. The
Commission continued disbursing funds from its operating account without
transferring the April 2005 draw to its program account thereby expending the
$206,224 in fiscal year 2002 program funds. The Commission was unable to
provide supporting documentation for the use of the draw. As a result, it could
not support whether the $206,224 was used in accordance with HUD’s
requirements.
An Improper Expense Was
Charged to the Program
Contrary to HUD’s regulations, the Commission charged an improper expense of
$500 to its program. It inappropriately used $500 in program funds to pay for
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consulting services that directly benefited its Housing Choice Voucher program.
Regulations at 24 [Code of Federal Regulations] 968.112(n)(3) provide that when
physical or management improvement would benefit programs other than public
housing, such as the Housing Choice Voucher program, eligible costs should be
limited to the amount directly attributable to the public housing program.
The Commission paid a consultant, Management Resource Group Inc., $1,400 for
submission of updated utility allowance estimates for its public housing ($900)
and Housing Choice Voucher ($500) programs. According to a HUD public
housing engineer at the Detroit Office of Public Housing, the Commission could
charge disbursements made to the consultant to its program under budget line
items 1408 or 1410, management improvement or administration, respectively, as
long as the services were related to public housing activities. However, the
portion of the disbursement to the consultant related to the Housing Choice
Voucher program was not eligible; that portion should have been paid with funds
from the Commission’s Section 8 administrative fees.
The Commission Did Not
Always Comply with Its
Controls
The Commission did not always properly implement its disbursement controls
when approving check disbursements. According to the Commission’s financial
management/internal financial controls policy, a check should be signed by the
executive director and the Commission’s treasurer. The Commission’s treasurer
is one of its board members. For example, the Commission issued check number
1368, dated March 10, 2004, under its program to the architects James Childs
Architects, which was signed by the former executive director but not signed by
the Commission’s treasurer or board member.
For at least five program check disbursements, the Commission could not support
whether it followed its controls by ensuring that the executive director and/or the
treasurer signed the checks. Copies of the five checks on file at the Commission
did not reveal the signature of one or two of the signers and the cancelled checks
for the disbursements were not available for review.
The Commission generally lacked evidence that its former or acting executive
director reviewed the invoices for payments or that its accounts payable clerk
approved invoices by comparing them to contracts as required by the
Commission’s financial controls policy. According to the accounts payable clerk,
she did not receive the invoices for the program. Instead, the former executive
director received the invoices and instructed the accounts payable clerk on the
checks to write for the program, including vendor and dollar amount.
Additionally, the former executive director did not always indicate the appropriate
account number and “approved for payment” on the invoices.
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The Commission and Its
Commissioners Did Not
Implement Adequate
Procedures and Controls
The Commission did not implement adequate procedures and controls for its
disbursements. It did not implement adequate controls to ensure funds were
properly spent for program activities by regularly reviewing program budgets
before incurring expenses or making check disbursements. Additionally, the
Commission did not transfer funds drawn from HUD’s Line of Credit Control
System into the appropriate program account when received or in a timely manner
to ensure the funds were used as designated for the program.
According to the former executive director, the Commission’s board fired her
before she had the opportunity to transfer the program funds from the
Commission’s operating account to its program account. Additionally, she said
she was not provided the opportunity to update the Commission’s staff or its
board on the activities in progress or outstanding at the time she was fired. The
acting executive director, who was previously the Commission’s deputy director,
said she had no knowledge of the drawdown until the former executive director
left the Commission. After that, the Commission did not transfer the funds
because the amount of the program funds differed from the amount remaining in
its operating account. The acting executive director believes the Commission
spent the funds on items other than program activities.
The Commission’s board did not adequately monitor the activities of its former
executive director and the overall operations of the Commission. The board
relied on information provided by the former executive director without obtaining
or performing independent verifications.
One former commissioner, who was on the Commission’s board for more than 10
years and left the board in September 2005, said she was not that familiar with
HUD’s requirements and only became more familiar with them after the
assessments conducted by HUD in July and September 2004, and MDStrum
Housing Services, Inc., in April 2005. One of the current commissioners also
informed us that he did not always closely review the information provided the
Commission for the board’s review.
Based on our review of the Commission’s program bank account statements and
its board meeting minutes, the board was generally approving the Commission’s
check disbursements after the checks had cleared its bank account. For example,
according to the Commission’s August 11, 2004, board meeting minutes, check
number 1381 was included in the list of bills for approval and was approved for
payment via board resolution #2074; however, this occurred after the check
cleared the Commission’s bank account on April 15, 2004. Additionally, there
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was no evidence that the board reviewed the applicable invoice for approval of
payment.
As a result, HUD funds were not used efficiently and effectively.
Recommendations
We recommend that the director of HUD’s Detroit Office of Public Housing
require the Commission to
1A. Provide documentation to support the $206,224 in unsupported program
disbursements cited in this finding or reimburse its program from nonfederal
funds for the applicable amount.
1B. Provide documentation that it reimbursed its program $500 from its Section
8 housing administrative fees for the improper allocation of the consultant
study cited in this finding.
1C. Implement adequate procedures and controls to ensure program expenditures
meet its and HUD’s requirements. The procedure and controls should
include but not be limited to requisitioning program funds from HUD’s
Line of Credit Control System for actual program expenses, depositing
program funds into the Commission’s appropriate bank account,
disbursing program funds for expenses related to the Commission’s
program with supporting documentation, appropriate check signatures by
the Commission’s personnel, comparison of contractor invoices to ensure
that expenses are appropriate program obligations according to
contractors’ contracts, notating contractor invoices as approved for
payment to avoid duplicate payment, and appropriate oversight by the
Commission’s board over program activities.
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Finding 2: The Commission’s Procurement Activities Were Not
Conducted According to Its and HUD’s Requirements
The Commission’s procurement activities were not conducted according to its and HUD's
requirements. It did not (1) maintain sufficient records detailing significant procurement
histories, (2) have written selection procedures for all procurement transactions, (3) procure
architectural services in a manner providing for full and open competition, (4) perform a cost or
price analysis for every procurement transaction including contract modifications or independent
cost estimates, and (5) have a purchase order or a properly executed contract for services
procured with six contractors reviewed for its program. Additionally, the Commission could not
provide evidence that it had an approved procurement policy for the period October 2003
through July 2005. These problems existed because the Commission lacked adequate
procurement procedures and controls. As a result, HUD lacks assurance that the Commission’s
procurement awards were conducted through full and open competition.
Procurement Histories Were
Not Supported by Sufficient
Records
The Commission did not maintain sufficient records detailing the significant history
of its procurement activities or transactions for the period October 2003 through July
2005 with at least 10 contractors. The files or records for its procurement activities
generally did not include the rationale of the method of procurement, selection of
contract type, contractor selection or rejection, and basis for the contract price. Due
to the lack of sufficient documentation, the Commission could not support whether
there was any change orders related to these procurements or whether they were
properly approved by its board.
We also reviewed the Commission’s procurement activities with eight contracts for
the period August 2005 through January 2006 to determine whether the Commission
had improved on its procurement procedures and its activities met HUD’s
requirements. The Commission had contracts for all eight contracts; however, it
lacked sufficient records detailing the significant history of its procurement activities
for at least two contracts.
The Commission Generally Did
Not Have Written Selection
Procedures
The Commission lacked written selection procedures for all procurement
transactions. It did not incorporate or have a clear and accurate description of the
technical requirements for the material, product, or service to be procured and
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identify all requirements which the offerors must fulfill and all other factors to be
used in evaluating bids or proposals.
Architectural Services Were
Procured without Full and
Open Competition
The Commission did not procure architectural services in a manner providing for
full and open competition. Instead, it sole sourced the services for several years
with one architectural firm, James Childs Architects. According to the president
of James Childs Architects, the firm provided services to the Commission for 10
years before it was terminated in January 2005. After the initial selection of the
firm, the Commission contacted the firm when architectural services were needed
for various projects.
The Commission Provided No
Support for Cost or Price
Analysis or Independent Cost
Estimates
The Commission did not perform a cost or price analysis for every procurement
transaction including contract modifications. It also did not always make
independent estimates before receiving bids or proposals. According to the
Commission’s former executive director, the architectural firm performed cost
analysis for the Commission. However, the Commission lacked evidence to
support that the cost or price analysis or independent cost estimates were
performed. The president of James Childs Architects said his firm performed the
cost or price analysis for the Commission, but he would have to locate the
documentation to support his claim. The president subsequently provided us
documentation of the cost or price analysis; however, the documentation related
to cost estimates for professional services and construction costs related to the
Commission’s HOPE VI program, not its Public Housing Capital Fund program.
As a result, the Commission and HUD could not be assured that contract prices
were reasonable.
The Commission Did Not Enter
into Contractual Agreements
for Services Received
The Commission lacked a purchase order or a properly executed contract for
services procured regarding six program contracts for the period October 2003
through July 2005. For example, the Commission only possessed a proposal,
dated October 2003, from a contractor, The Schiff Group, for consulting services
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concerning the Commission’s HOPE VI application preparation. There was no
contract with The Schiff Group, although the Commission made payments of
more than $60,000 to the contractor in April 2004. Additionally, the Commission
procured advertising services with the local newspaper, Herald-Palladium, on
various dates between October 2003 and July 2005 by placing advertisements for
such items as receiving bids, professional help, and the sale of vehicles.
However, it did not prepare purchase orders for the advertising services.
The Commission initially entered into a contract for security guard services with
Rover Security Guard Agency, Incorporated (Rover Security), on April 27, 1994.
The contract was valid for only six months from the execution date. In April
2000, the Commission advertised for bids concerning security guard services and
sent out three bid requests, but only received one bid from Rover Security. The
Commission had a partially completed protective services contract, dated 2000,
for its Harbor Towers project with information on Rover Security including a
compensation rate of $14 per hour, which was signed by the president of the
agency. However, the Commission did not sign the contract.
The Commission’s
Documentation Was Not Clear
Regarding the Effective Date of
Its Procurement Policy
The Commission had a procurement policy and procedures required by HUD for
the period October 2003 through July 2005. The policy generally followed
HUD’s regulations. However, it was not clear whether the policy was established
by board resolution number 1349 during the Commission’s board meeting held on
July 17, 1990. The Commission’s capital funds coordinator was not sure of the
policy’s effective date.
Conclusion
The commissioners did not adequately monitor the activities of the former
executive director or the overall operations of the Commission. They relied on
information provided by the former executive director.
One former commissioner, who was on the Commission’s board for more than 10
years and left the board in September 2005, said she was not that familiar with
HUD’s requirements and only became more familiar with them after the
assessments conducted by HUD in July and September 2004, and MDStrum
Housing Services, Inc., in April 2005. One of the current commissioners also
informed us that he did not always closely review the information provided to the
Commission for the board’s review.
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The Commission did not possess a contract and/or change order register to track and
control its contracts and change orders. It also did not properly organize its contract
documentation for goods or services procured into separate files for easy access.
Documentation such as proposals, agreements, and applications for payments were
generally mixed together for various vendors or contractors.
The Commission maintained the documentation for contracts or services in various
locations, including the interim executive director’s office at the Commission’s
administrative offices and the capital funds coordinator’s office located at the
Commission’s Buss project. During our audit, the Commission’s human resources
assistant located some procurement-related documentation such as notices and bids
in unmarked boxes at the Commission’s maintenance supervisor’s office located at
the Virginia Edwards Community Center. According to the human resources
assistant, who was formerly the administrative assistant, the items were boxed up
and placed in the storage space after the former executive director left the
Commission.
The former executive director told us that she had organized contract or procurement
documentation at the Commission by contracts and in filing cabinets. However, the
Commission was unable to locate the procurement documentation for the majority
of the procurement activities reviewed. According to the president of James Childs
Architects, the Commission did not require any specific form or documentation from
his firm for recordkeeping. For instance, the architectural firm sometimes provided
either verbal or written cost estimates during meetings with the Commission.
The capital funds coordinator, who gradually got involved in the Commission’s
procurement activities starting in October 2004, was not formally trained in
procurement activities until July 2005. According to the former executive
director, individuals assigned to Commission’s procurement activities did not
receive much formal training on procurement. Instead, they read up on the related
items and attended HUD workshops that were not necessarily focused on
procurement.
As a result, HUD lacks assurance that the Commission’s procurement awards
were conducted through full and open competition. Additionally, HUD cannot be
assured that funds were used effectively and efficiently for the Commission’s
procurement activities or that the costs charged for the procured services were
reasonable.
Recommendations
We recommend that the director of HUD’s Detroit Office of Public Housing
require the Commission to
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2A. Implement adequate procedures and controls to ensure that its
procurement policy approved by its board and HUD’s requirements are
met, including conducting contract awards through full and open
competition.
2B. Implement an adequate filing system for its contracted goods or services
to ensure that required documentation is properly maintained and
complete.
2C. Implement contract and change order registers to properly track and control
the Commission’s contracts and change orders.
2D. Implement procedures and controls for its board concerning the procurement
process and continually monitor the Commission’s contracting and
procurement activities to ensure compliance with its and HUD’s
requirements.
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SCOPE AND METHODOLOGY
We performed our audit at HUD’s Detroit Office of Public Housing and the Commission’s
administrative offices located at 721 Nate Wells Drive, Benton Harbor, Michigan. We
performed our on-site audit work between September 2005 and March 2006.
To accomplish our audit objectives, we reviewed HUD’s regulations at 24 CFR [Code of Federal
Regulations] Parts 85, 905, and 968, HUD Handbook 7460.8 and Guidebook 7485.3, State of
Michigan’s Public Act 18 of 1933, HUD’s Public Housing Capital Fund Processing Notices for
fiscal years 2003 through 2005, Office of Management and Budget Circular A-87, data from
HUD’s Line of Credit Control System for fiscal years 2002 through 2005, the Commission’s
annual contributions contract with HUD, board meeting minutes for October 2003 through
September 2005, the Commission’s procurement policy, bank statements and canceled checks,
HUD’s 2004 management review report, the Commission’s annual audited financial statements
for the period ending September 30, 2003, and 2004, HUD’s files for the Commission, and the
Commission’s procurement files and documentation. We also interviewed HUD’s staff and the
Commission’s former and current employees, former and current commissioners, contractors,
and former fee accountant.
We initially selected a random sample of procurement activities with 15 contractors or vendors
out of a universe of 18 for review to determine whether the Commission followed its own
procurement policy and HUD’s requirements, using the U.S. Army Audit Agency’s Statistical
Sampling System. However, upon further review of the procurement documentation possessed
by the Commission, we determined that services were procured with several vendors outside of
our audit period or services were not procured with the vendors. Therefore, we reviewed the
Commission’s procurements activities with 14 vendors or contractors under the program from
October 1, 2003, through July 31, 2005. We also reviewed check disbursements totaling
$670,509 from the Commission’s fiscal years 2002 and 2003 program for the period October 1,
2003, through July 31, 2005.
The audit covered the period October 1, 2003, through July 31, 2005. We adjusted the period as
necessary. We performed our audit in accordance with generally accepted government auditing
standards.
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INTERNAL CONTROLS
Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:
• Effectiveness and efficiency of operations,
• Reliability of financial reporting, and
• Compliance with applicable laws and regulations, and
• Safeguarding resources.
Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.
Relevant Internal Controls
We determined the following internal controls were relevant to our objectives:
• 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 the relevant controls identified above.
A significant weakness exists if internal controls do not provide reasonable
assurance that the process for planning, organizing, directing, and controlling
program operations will meet the organization’s objectives.
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Significant Weakness
Based on our review, we noted the following significant weakness:
• The Commission lacked adequate procedures and controls over its program
disbursements and procurement activities (see findings 1 and 2).
16
FOLLOWUP ON PRIOR AUDITS
This is the first audit of the Commission’s program by HUD’s Office of Inspector General (OIG).
The most recent independent auditor’s report covered the year ending September 30, 2004. The
report contained seven findings, one of which concerning invoice approval and dual signatures,
relates to finding 1 in this audit report.
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APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
Recommendation
number Ineligible 1/ Unsupported 2/
1A $206,224
1B $500
1C
Totals $500 $206,224
1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
that the auditor believes are not allowable by law; contract; or federal, state, or local
polices or regulations.
2/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
or activity when we cannot determine eligibility at the time of audit. Unsupported costs
require a decision by HUD program officials. This decision, in addition to obtaining
supporting documentation, might involve a legal interpretation or clarification of
departmental policies and procedures.
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Appendix B
AUDITEE COMMENTS
19
Auditee Comments
20
Auditee Comments
Auditee Comments
21
Auditee Comments
22
Appendix C
FEDERAL REQUIREMENTS AND COMMISSION’S
PROCUREMENT POLICY
Office of Management and Budget Circular A-87, C(1)(j), “Factors Affecting Allowability of
Costs”, states that costs must be adequately documented.
Regulations at 24 CFR [Code of Federal Regulations] 85.20, “Standards for Financial
Management Systems,” requires the Commission’s financial management systems to meet
standards concerning financial reporting, accounting records, internal control, budget control,
allowable cost, source documentation, and cash management. For example, the Commission is
required to maintain adequate records identifying the source and application of funds provided
for financially-assisted activities. Additionally, the Commission must compare actual
expenditures or outlays with budgeted amounts for each grant or subgrant.
HUD's Program Integrity Bulletin, issued in November 1990, defines the roles and
responsibilities of public housing authority commissioners. The commissioners are to
• Establish and approve by-laws, resolutions, and policies and procedures for internal and
external monitoring controls and for detecting and preventing program fraud, waste,
mismanagement, and abuse.
• Review and monitor budgets and other documents to ensure expenditures are in compliance
with federal and local laws, and other requirements.
• Ensure that the public housing authority is acting legally and with integrity in its daily
operations.
• Understand their responsibilities and roles in relation to the executive director.
• Provide clear and concise policy guidelines to the executive director.
• Perform their ultimate responsibility to (a) make policy decisions for determining how
programs are administered, (b) obtain funds from various resources, and (c) protect funds
needed to keep the public housing authority operating.
• Be responsible for the actions and decisions made by the executive director and the other
authority staff.
Regulations at 24 CFR [Code of Federal Regulations] 85.36(b)(9) require a grantee to maintain
sufficient records detailing the significant history of a procurement, including the rationale of the
method of procurement, selection of contract type, contractor selection or rejection, and the basis
for the contract price. Regulations at 24 CFR [Code of Federal Regulations] 85.36(c)(1) require
all procurement transactions to be conducted in a manner that provides for full and open
competition.
Regulations at 24 CFR [Code of Federal Regulations] 85.36(f)(1) require that a cost or price
analysis be performed in connection with every procurement action including contract
23
modifications. Additionally, a grantee is required to make independent estimates, as a starting
point, before receiving bids or proposals.
Regulations at 24 CFR [Code of Federal Regulations] 968.112(n)(3) provide that when physical
or management improvement would benefit programs other than public housing, such as a
Section 8 program, eligible costs should be limited to the amount directly attributable to the
public housing program.
HUD Handbook 7460.8, REV-1, “Procurement Handbook for Public Housing Agencies and
Indian Housing Authorities,” requires the Commission to plan its contracts in advance and
attempt to obtain full and open competition to ensure that quality goods and services are obtained
at a reasonable price.
The Commission’s procurement policy provides that the executive director or designee shall
ensure that contracts and modifications are in writing and are supported by sufficient
documentation covering the procurement history, including the method of procurement selected,
the selection of the contract type, the rationale for selecting or rejecting offers, and the basis for
the contract price.
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Appendix D
SUMMARY OF SERVICES PROCURED AND RELATED
PAYMENTS
Estimated Services or Contract
Contract amount paid on activities under exists (yes Contract
Contractor amount contract contract or no) date
First Contracting, Carpet/flooring
Inc. $259,720 $256,418 replacement Yes June 17, 2004
First Contracting, Window
Inc. $514,000 $522,285 replacement Yes June 17, 2004
Five Star Heating 2003; exact
and Air date
Conditioning $13,830 $13,830 Chimney repairs No undetermined
Five Star Heating 2004; exact
and Air Wind damage date
Conditioning $3,250 $3,250 repairs No undetermined
Various amounts No (No
Various ($1,726 with purchase
Herald-Palladium amounts program funds) Advertising order) Various dates
Industrial $3,422 per
Sanitation, Inc. month $0 Trash removal Yes June 30, 2005
$1,750 plus
maximum
reimbursable $1,895 (includes Design professional Copy
James Childs expense of reimbursable services for received, not January 30,
Architects $250 expenses) chimney repairs signed 2003
$10,000 Design professional
James Childs (excluding services for March 1,
Architects reimbursable) $10,000 compactor Yes 2003
$9,250 Design professional
James Childs (excluding services for security September 1,
Architects reimbursable) $8,325 system Yes 2003
$33,500 Design professional
James Childs (excluding services for window October 27,
Architects reimbursable) $28,860 replacement Yes 2003
Design professional
$16,410 services for
James Childs (excluding carpet/flooring October 27,
Architects reimbursable) $11,285 replacement Yes 2003
$22,250 Design professional Yes (letter
James Childs (excluding services for HOPE of January 13,
Architects reimbursable) $23,250 VI application agreement) 2004
Design professional
James Childs services for September 29,
Architects $8,500 $6,500 generator Yes 2004
25
Estimated Services or Contract
Contract amount paid on activities under exists (yes
Contractor amount contract contract or no) Contract date
J&G Yes (work June 14, 2004;
Construction $11,828 $11,828 Roof installation agreements) August 19, 2004
J&G Yes (signed
Construction $11,001 $8,521 Roof installation proposals) October 14, 2005
Yes Undetermined –
Painting at Harbor (purchase purchase order
James Lee $985 $985 Towers order) not dated
Submission of
Management updated utility
Resource Group Undetermined $1,400 allowances No Undetermined
Agency plan and
submission of 2004
Management public housing
Resource Group Undetermined $995 agency plan No Undetermined
$920/initial setup
and Pest control
$435/monthly services at Harbor
Orkin service $1,355 Towers Yes May 25, 2005
Reznick Fedder Consulting services
& Silverman for HOPE VI
CPA application and November 26,
Corporation $230,000 $58,072 implementation Yes 2003
$14/hour; $16 for April 27, 1994;
holiday rate (not- June 27, 1995;
Rover Security to-exceed No (not 2000 (not signed
Guard Agency, $75,264/one- Security guard properly or completed by
Inc. year) $100,783 services executed) Commission)
Scans, Inc.
D/B/A Security Security upgrade at November 10,
Systems $67,215 $67,215 Harbor Towers Yes 2004
Not-to-exceed Consulting services
The Schiff $100,000 plus – grant writing for
Group expenses $67,139 HOPE VI No Undetermined
Wood,
Wenham,
Henderson $6,800 / $100 per
Consultants hour of face time $3,400 Consulting services No Undetermined
26
Benton Harbor Housing Commission; Benton Harbor, Michigan; The Commission Lacked Supporting Documentation and Did Not Follow Procurement Requirements Regarding Its Public Housing Capital Fund Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-05-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)