oversight

Quincy Housing Authority, Quincy, Massachusetts, Housing Choice Voucher Program Needs to Improve Controls over Its Interprogram Fund Transactions, Procurement, and Travel

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-04-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                                  Issue Date
                                                                       April 9, 2009
                                                                  Audit Report Number
                                                                     2009-BO-1006




TO:         Donna J. Ayala, Director, Office of Public Housing, Boston Hub, 1APH


FROM:
            John A. Dvorak, Regional Inspector General for Audit, Boston Region 1,1AGA


SUBJECT: Quincy Housing Authority, Quincy, Massachusetts, Housing Choice Voucher
         Program Needs to Improve Controls over Its Interprogram Fund Transactions,
         Procurement, and Travel


                                    HIGHLIGHTS

 What We Audited and Why

             We audited the Housing Choice Voucher program (Voucher program) at the
             Quincy Housing Authority (Authority) as part of our annual audit plan. Our
             efforts focused on whether the Authority (1) ensured that its Section 8
             administrative plan met the requirements of 24 CFR (Code of Federal
             Regulations) 982.54, (2) adequately accounted for its indirect cost charges, (3)
             used Voucher program funds only for the administration of the program and
             whether interprogram fund transactions were properly accounted for and reported,
             (4) followed its procurement practices, and (5) ensured that travel incurred for the
             Voucher program was in accordance with U.S. Department of Housing and Urban
             Development (HUD) guidance.


 What We Found


             The Authority generally administered the Voucher program efficiently and
             effectively and in compliance with its annual contributions contract and HUD
           regulations. Our review disclosed (1) that the Authority’s Section 8 administrative
           plan met the requirements of 24 CFR 982.54, and (2) the Authority maintained
           proper support for its indirect allocation of administrative expenses. However, it
           did not (3) properly account for and report interprogram fund transactions
           between its federal and state programs, resulting in nearly $4.6 million in
           unsupported transactions being recorded in its program accounts; (4) provide
           support and justification for $426,052 in contracts to show that the contracts were
           properly documented; and (5) establish a reasonable travel policy to ensure that
           travelers submitted detailed travel expense vouchers.


What We Recommend


           We recommend that the Director of the Office of Public Housing, Boston hub,
           require the Authority to (1) provide support for nearly $4.6 million in interprogram
           fund transactions that are out of balance between federal and state programs and
           implement procedures for recording and reconciling interprogram transactions and
           correcting imbalances; (2) provide support and justification for $426,052 in
           contracts for financial advisory services, a fee accountant, inspection services,
           legal services, and payroll and landlord payment services or reimburse its
           operating funds from nonfederal funds for the applicable amounts; and (3) revise
           its travel policy and obtain approval of the policy from the Authority’s board of
           commissioners.

           For each recommendation without a management decision in the body of the
           report, 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 the Authority a draft report on March 24, 2009, and held an exit
           conference with officials on March 31, 2009. The Authority provided written
           comments on April 7, 2009. It generally agreed with our findings and
           recommendations and has taken some corrective actions that should eliminate the
           conditions noted in this report. The complete text of the auditee’s response, along
           with our evaluation of that response, can be found in appendix B of this report.




                                             2
                              TABLE OF CONTENTS

Background and Objectives                                                                    4

Results of Audit
        Finding 1: The Authority Did Not Reconcile Its Interprogram Fund Transactions        5
        Finding 2: The Authority Failed to Comply with HUD Procurement Regulations and Its   8
        Own Procurement Policy
        Finding 3: The Authority’s Travel Policy Did Not Ensure Valid, Necessary, and        13
        Reasonable Travel Costs

Scope and Methodology                                                                        15

Internal Controls                                                                            16


Appendixes

   A.   Schedule of Questioned Costs                                                         18
   B.   Auditee Comments and OIG’s Evaluation                                                19
   C.   Schedule of Interprogram Funds 2007                                                  23
   D.   Restrictions of the Annual Contributions Contracts                                   24




                                               3
                        BACKGROUND AND OBJECTIVES

The United States Housing Act of 1937 established the federal framework for government-
owned affordable housing. This act also authorized public housing as the nation’s primary
vehicle for providing jobs and building and providing subsidized housing through the U.S.
Department of Housing and Urban Development (HUD). HUD disperses funds to public
housing agencies under annual contributions contracts to provide subsidy payments or housing
assistance payments for participating low-income families.

In addition, the United States Housing Act of 1937, as amended by the Quality Housing and
Work Responsibility Act of 1998, created the Section 8 Housing Choice Voucher tenant-based
program (Voucher program). The Voucher program is funded by HUD and allows public
housing authorities to pay HUD subsidies directly to housing owners on behalf of the assisted
family.

The Voucher program is administered by the Quincy Housing Authority (Authority) for the City
of Quincy, Massachusetts. HUD contracts with the Authority to administer 945 housing choice
voucher units through annual contributions contracts.1 The Authority received $27.7 million in
Voucher program funds during the period July 1, 2006, through June 30, 2008, and earned
administrative fees of approximately $2.4 million during the same period. The annual
contributions contracts require the Authority to follow appropriation laws, HUD requirements
including public housing notices, and the Authority’s administrative plan.

The principal staff member of the Authority is the executive director, who is hired and appointed
by the Authority’s board of commissioners (board). The executive director is directly
responsible for carrying out the policies established by the board and is delegated the
responsibility for hiring, training, and supervising the remainder of the Authority’s staff to
manage the day-to-day operations of the Authority and to ensure compliance with federal and
state laws and directives for the programs managed.

Our overall audit objective was to determine whether the Authority effectively and efficiently
administered its Voucher program in compliance with its annual contributions contracts and
HUD regulations. Our specific audit objectives were to determine whether the Authority (1)
ensured that its Section 8 administrative plan met the requirements at 24 CFR (Code of Federal
Regulations) 982.54, (2) adequately accounted for its indirect cost charges, (3) used Voucher
program funds only for the administration of the program and whether interprogram fund
transactions were properly accounted for and reported, (4) followed its procurement practices,
and (5) ensured that travel incurred for the Voucher program was in accordance with HUD
guidance.




1
 As of September 1, 2008, the Authority had 737 tenant-based vouchers, 51 enhanced vouchers, 57 project-based
vouchers, and 100 designated housing vouchers.

                                                       4
                                     RESULTS OF AUDIT

Finding 1: The Authority Did Not Reconcile Its Interprogram Fund
Transactions
The Authority’s interprogram fund transactions had not been reconciled. The Authority used its
Voucher program account as a revolving fund to make all of its vendor payments. All other federal
and state programs made monthly advances of funds based on budgeted allocations to the revolving
fund to make the vendor payments. These other programs also reimbursed the revolving fund
monthly in arrears for a share of the monthly expenditures. However, this practice resulted in a
buildup of due from/due to amounts because the expenditures and revenues were not reconciled
back to the other program accounts. The Authority had not reconciled these accounts because it
had not established written procedures for such reconciliations or procedures to analyze and
correct any resultant imbalances. As a result, it could not support approximately $4.6 million in
transactions recorded in the interprogram accounts as of June 30, 2007, between its federal and
state programs. This deficiency could result in a misstatement of program revenues or expenses.


    The Authority Had Ongoing
    Issue with Interprogram
    Accounts


                 The Authority had not balanced its interprogram receivables and payables
                 between its federal and state programs.2 Prior to our audit, the Authority had not
                 made any effort to reconcile the interprogram fund accounts, and the Authority’s
                 accounting procedures did not always readily identify whether the Authority used
                 its Voucher program funds only for the administration of the program because it
                 did not properly account for and report interprogram fund transactions. The
                 Authority’s interprogram receivables and payables accounts for the various
                 programs administered by the Authority were routinely out of balance.

                 The Authority used its Voucher program account as a revolving fund to make its
                 vendor payments. All other federal and state programs made monthly advances of
                 funds based on budgeted allocations to the revolving fund to make the vendor
                 payments. These other programs also reimbursed the revolving fund monthly in
                 arrears for a share of the monthly expenditures. However, this practice resulted in a

2
 Federal programs—Supportive Housing for Persons with Disabilities, Section 8 New Construction/Substantial
Rehabilitation, Shelter Plus Care, Public Housing, Housing Choice Voucher—and state and local programs.




                                                      5
                     buildup of due from/due to amounts because the expenditures and revenues were not
                     reconciled back to the other program accounts. The Authority’s accounting
                     procedures did not ensure that it used its Voucher program funds only for the
                     administration of the program because the procedures did not require
                     reconciliation or reporting of the interprogram fund transactions or ensure that
                     costs were charged to the appropriate programs. Also, the annual contributions
                     contracts for the Voucher program restricts the use of program funds for payment
                     of expenses associated with those programs (see Appendix D).



The Authority’s Management
and Fee Accountant
Acknowledge Interprogram
Account Transactions of
Approximately $4.6 Million


                     The Authority’s management and its fee accountant contractor acknowledged that
                     the Authority had sizeable interprogram due from/due to balances as of June 30,
                     2006, and June 30, 2007, of $1.8 million and approximately $4.6 million,
                     respectively.3 The imbalances in the interprogram accounts occurred because the
                     Authority had not initially understood the necessity for reconciling these accounts
                     and did not reconcile the accounts accordingly. Therefore, it did not have written
                     procedures in place to reconcile the interprogram accounts or analyze and correct
                     imbalances. As a result, the Authority did not have support for approximately $4.6
                     million in interprogram account balances that were out of balance between its
                     federal and state programs (see Appendix C). These imbalances could result in a
                     misstatement of program revenues or expenses.

                     The fee accountant stated that the interprogram balances in each of the accounts
                     had accumulated over the years and fluctuate monthly based on operational
                     activity. However, the fee accountant also stated that these interprogram accounts
                     between programs had never been reconciled or reduced to zero. The Authority’s
                     management and the fee accountant realize that each of the programs participating
                     in the revolving fund account must reimburse the revolving fund for the
                     expenditures it has paid out on behalf of the program. The Authority admitted
                     that there was no process in place to reconcile its interprogram accounts, which
                     contain both funding for state and federal programs.




3
    As of June 30, 2008, the Authority had been unable to determine the interprogram fund balances for fiscal year 2008, and
Authority management had stated the need for additional time to reconcile these accounts between state and federal programs.


                                                                 6
Conclusion


             The Authority did not conduct monthly reconciliations of the interprogram fund
             accounts to ensure that program revenue and expenses were charged to the
             applicable programs. When routinely performed, the reconciliations will help to
             ensure that the Authority properly accounts for all of its federal funds and assure
             HUD that the Authority has appropriately allocated all of its costs to its federal
             programs. The Authority must establish adequate procedures and controls
             regarding interprogram fund transfer transactions that occur between its federal
             and state accounts to properly account for all of its federal funds.


Recommendations



     We recommend that the Director of the Office of Public Housing require the Authority to

     1A. Provide support for $4,599,160 in interprogram transactions that were out of
         balance between its federal and state programs.

     1B. Implement procedures and internal controls for recording and reconciling
         interprogram transactions monthly, correct any imbalances and make proper
         payments to accounts.


     We recommend that the Director of the Office of Public Housing

     1C. Conduct follow-up reviews of the Authority periodically to ensure that monthly
         reconciliations are performed as needed.




                                               7
                                     RESULTS OF AUDIT

Finding 2: The Authority Failed to Comply with HUD Procurement
Regulations and Its Own Procurement Policy
The audit identified several instances in which the Authority’s procurement practices did not
comply with HUD regulations and its own procurement policy. Specifically, the Authority failed
to
   • Award contracts competitively,
   • Execute or update service contracts and/or written agreements,
   • Document the source selection process, and
   • Maintain a detailed history of all procurements.

These conditions occurred because the executive director, as chief procurement officer, did not
fulfill his responsibility to establish effective management controls over the procurement
process. As a result, HUD had no assurance that $426,052 in legal, financial, and inspection
services procured from September 2000 through December 2008 were at a fair and equitable
price and resulted in the best quality and/or pricing for goods and services obtained. In addition,
without formal contract documents, the Authority was at risk for overbilling and paying for
unauthorized or substandard goods and services.



    The Authority Did Not Comply
    with Procurement Regulations


                 The Authority did not comply with its requirements when procuring legal and
                 financial services including advisory, fee accountant, and disbursement services.
                 The Authority’s procurement policy stated that the Authority would comply with
                 HUD’s annual contributions contract and the procurement standards at 24 CFR
                 85.36. Section 5(A) of the annual contributions contract further required the
                 Authority to comply with all provisions of the contract and all applicable
                 regulations issued by HUD. Procurement regulations at 24 CFR 85.36 required
                 the Authority to

                         •    Conduct all procurement4 in a manner that provides full and open
                              competition and
                         •    Maintain sufficient records to show the history of the procurement.




4
 The term “procurement” includes both contracts and modifications–including change orders–for construction or
services as well as purchase, lease, or rental of supplies and equipment.

                                                       8
           The records should include the rationale and justification for the method of
           procurement, the type of contract, the selection of the contractor, and the basis for
           the contract price.

           However, the Authority’s process for procurement and contracting showed
           deficiencies in its own procurement policy and/or noncompliance with the HUD
           regulations cited above. Our review of financial advisory services, a fee
           accountant, inspection services, legal services, and payroll and landlord payment
           services disclosed that the Authority could not produce records sufficient to detail
           the significant history of each procurement action. The files lacked
           documentation or rationale for the method of procurement, contract pricing
           arrangements, accepting or rejecting bids or offers, or basis for the contract price.
           In addition, the files did not contain copies of the contract documents awarded or
           issued and signed by the contracting officer and related contract administration.

           In addition, the Authority’s executive director (designated as the chief contracting
           officer) had failed to update the file documents that indicated the delegation of
           authority and responsibilities for procurements and contracts. At the time of our
           review, the persons to whom procurement and contracting responsibilities had been
           delegated had either left the employment of the Authority or moved on to other
           positions within the Authority.

           The executive director agreed that the Authority’s procurement policy and
           procedures did not reflect the requirements of applicable state and local laws and
           regulations and applicable federal laws and standards. At the Authority’s January
           2009 board meeting, the executive director presented a revised procurement
           policy, reflecting procedures incorporating the requirements of applicable federal,
           state, and local laws and regulations, to the Authority’s board of commissioners
           for approval. The policy was unanimously passed by the board.


The Authority Obtained Legal
Services without Contracts


           The Authority did not document the history of the procurement and did not follow
           its own procurement policy when it obtained legal services. It had failed to
           properly procure, document, and competitively bid for these services. The legal
           services obtained were from three attorneys for representation in eviction
           proceedings, labor contracts, and an ongoing retirement litigation case, and the
           Authority had not obtained a signed contract for services.

           According to the Authority’s December 2005 board meeting minutes, the
           executive director informed the board that legal service for a local attorney had
           been acquired to provide representation in eviction proceedings according to
           HUD regulations. However, the Authority could not provide a signed contract for

                                             9
            the $13,157 paid for legal services provided from January 2007 through
            December 2008. It also did not obtain a signed contract for services provided by
            an attorney who represented it regarding labor contract issues. HUD approved the
            procurement of these services; however, there was no evidence of a signed
            contract for the services. From January 2007 through December 2008, the
            Authority paid $18,692 for these legal services. In addition, it had engaged
            another attorney to represent it in an ongoing retirement litigation case. The
            executive director had informed the board that legal services for this engagement
            could cost $6,000. The Authority’s fee agreement was not signed by either party,
            but the Authority had not yet incurred any cost for these services; however, these
            are potential costs that the Authority failed to properly procure, document, and
            competitively bid.


Procurement Policies Were Not
Followed for Financial Services


            The Authority did not follow its procurement policy regarding the contracting for
            its fee accountant, financial advisory, and payroll and landlord payment services.
            For the fee accountant services, the Authority disbursed $77,955 from January
            2006 through June 2008 with no written contract. The Authority’s files indicated
            that a request for proposal for fee accountant services was prepared and
            advertized by the Authority. According to minutes of the Authority’s November
            2005 board meeting, a motion was made to execute a contract with the fee
            accountant for the period December 2005 through November 2006, and this
            contract was not to exceed $30,000. However, neither the Authority nor its fee
            accountant could provide a signed contract and the necessary documentation to
            show that a valid contract existed. Also, the Authority did not document the
            history of this procurement and did not follow its own procurement policy
            regarding these services. The fee accountant continued to provide services to the
            Authority without a valid contract.

            Regarding the financial advisory services, which were provided from September
            2000 through January 2006, the Authority disbursed $225,900 for these services.
            Again, the Authority could not provide a signed contract and the necessary
            documentation to show that a valid written contract existed for the period
            indicated. The Authority failed to properly procure these services as prescribed
            by HUD guidance and regulations and by the Authority’s own procurement
            policies and procedures.

            The Authority also obtained disbursement services from March 2007 through
            December 2008 for landlord payments, paying $24,950 without properly procuring
            these services or obtaining a signed contract. Additionally, the Authority failed to
            properly procure its payroll service from a related company, paying $11,560 from
            March 2007 through December 2008. Authority officials stated that they sought

                                             10
             bids from other payroll vendors; however, there were no records to support this
             claim, and there was no signed contract for these services.

The Housing Quality Standards
Inspection Contract Lacked
Specific Terms and Conditions

             The Authority awarded a one-year contract to a firm to provide housing quality
             standards inspection services for both its public and leased housing with an option
             to renew for two one-year periods. From January through December 2008, the
             Authority paid the firm a total of $47,838. However, the contract’s compensation
             clause failed to provide the total cost of the contract, potentially exposing the
             Authority to excessive billing. The clause only provided specific dollar amounts
             for each type of unit inspection. The compensation clause also did not establish a
             definite quantity based on the Authority’s public and leased housing potential, nor
             did it provide not-to-exceed provisions.

Conclusion


             The Authority failed to comply with federal procurement requirements and its
             own procurement policies for procurement activities that required full and open
             competition. In addition, it failed to develop sufficient records to show the
             history of the procurement. It also failed to adequately structure the terms for its
             contract for housing quality standards inspections to ensure that services were
             always valid, necessary, and reasonable. As a result, the Authority spent
             $426,052 for legal, financial, and inspection services without knowing whether
             the price for the contracted services was reasonable. The Authority should
             implement effective management controls over its process for procurement and
             contracting to ensure compliance with its own procurement policy and HUD
             regulations.


Recommendations

             We recommend that the Director of the Office of Public Housing require the
             Authority to

             2A. Support that the use of $426,052 in operating funds for financial advisory
                 services, a fee accountant, inspection services, legal services, and payroll
                 and landlord payment services were reasonable or reimburse its operating
                 funds from nonfederal funds for the applicable amount.



                                              11
2B. Implement procedures and controls to ensure that its contracts are awarded
    in a manner providing full and open competition as required by HUD’s
    regulations and the Authority’s procurement policy.

2C. Maintain documentation supporting the basis for contracts awarded,
    including history of procurement and appropriate analysis and signed copies
    of contracts.

2D. Maintain documentation supporting delegation of authority for those
    individuals responsible for procurements.




                               12
                                        RESULTS OF AUDIT

Finding 3: The Authority’s Travel Policy Did Not Ensure Valid,
Necessary, and Reasonable Travel Costs
The Authority’s travel policy did not adequately address some of the basic travel requirements.
The policy did not adequately address items such as travel authorizations, methods of payment,
expense reporting (including when receipts are necessary), or typical eligible travel expenses5
applicable to various travel locations. This condition occurred because the Authority did not
develop an adequate travel policy. As a result, the Authority could not ensure that travel
expenses incurred by its employees and charged to its various programs were always valid,
necessary, and reasonable.



    The Authority’s Travel Policy
    Did Not Address Basic Travel
    Requirements


                  The Authority’s travel policy was a one-page document which was general in nature.
                  As such, it did not address in detail the responsibilities of the Authority or the
                  traveler(s). The policy also did not address items such as travel authorizations;
                  methods of payment; expense reporting (including when receipts are necessary); and
                  eligible travel expenses to include air travel, ground travel, and/or rail travel or the
                  authorized per diem rates for each given location of travel.

                  The Authority did require travelers to submit detailed local travel vouchers for
                  mileage. The majority of travel at Authority is for local travel. In these instances,
                  employees submitted a detailed day-by-day travel voucher for their travel between
                  properties. These local travel vouchers were approved by management.
                  However, management did not require employees traveling overnight to submit a
                  consolidated detailed expense travel voucher to include air, hotel, and meal
                  receipts. Without a detailed expense report upon completion of travel, the
                  Authority could not assure HUD that related travel expenses were valid and
                  necessary costs charged for administration of its programs.




5
 The policy did not identify the typical travel expenses authorized as travel expenses such as air travel, ground
travel, and/or rail travel and per diem rates.

                                                          13
Management Had Taken Steps
to Revised Its Travel Policy

             Authority management agreed that its travel policy needed revision. The
             executive director said that the revised policy would address in detail the
             responsibilities of the Authority and those of the travelers. The executive director
             also informed the Authority’s board of commissioners in January 2009 that the
             travel policy needed to be revised and indicated that he would present to the board
             the revised travel policy no later than March 2009.



Conclusion


             The Authority's travel policy did not adequately address basic travel requirements
             such as travel authorizations, methods of payment, expense reporting (including
             when receipts are necessary), typical eligible travel expenses applicable to various
             travel locations, or submission of detailed expenditure travel vouchers. Without
             an adequate travel policy, the Authority could not ensure that travel expenses
             incurred by its employees and charged to its various programs were always valid,
             necessary, and reasonable.


Recommendations



             We recommend that the Director of the Office of Public Housing require the
             Authority to

             3A. Prepare and obtain board approval of a new travel policy. The policy should
                 address the responsibilities of the Authority as well as the traveler.




                                              14
                         SCOPE AND METHODOLOGY

We conducted the audit between September 2008 and February 2009. Our fieldwork was
conducted at the Authority’s main office located at 80 Clay Street in Quincy, Massachusetts, and
at the finance office located at 85 Martensen Street in Quincy. Our audit covered the period
July 1, 2006, to June 30, 2008, and was extended when necessary to meet our objectives. To
accomplish our audit objectives, we

   •   Interviewed the Authority’s executive director, assistant director, director of modernization,
       finance director, director of leased housing , director of program management, and fee
       accountant to determine policies and procedures to be tested;

   •   Reviewed the financial statements, general ledgers, tenant files, rent reasonableness data,
       and cost allocation plans as part of our testing for control weaknesses;

   •   Reviewed program requirements including federal laws and regulations, Office of
       Management and Budget circulars, the consolidated annual contributions contracts
       between the Authority and HUD, and the Authority’s administrative plan to determine its
       compliance to applicable HUD procedures;

   •   For the period July 2006 through June 2008, using the Authority’s accounts payable
       check register, developed a spreadsheet that documented the Authority’s charges to
       general ledger line item 4190 - Sundry to determine the actual charges between its federal
       and state programs;

   •   For the period July 2006 through June 2008, using the Authority’s accounts payable
       check register, developed a spreadsheet that documented the Authority’s charges to line
       item 4150 - Travel to determine the actual charges between its federal and state
       programs;

   •   For the period July 2006 through June 2008, reviewed the Authority’s accounting
       controls over cost allocations, interprogram fund transfers, procurement, and travel to
       determine whether the Authority had accounting controls in place to safeguard its assets.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                                 15
                              INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following controls are achieved:

   •   Program operations,
   •   Relevance and reliability of information,
   •   Compliance with applicable laws and regulations, and
   •   Safeguarding of assets and resources.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.



 Relevant Internal Controls
              We determined that the following internal controls were relevant to our audit
              objectives:

                      •   Controls over tenant eligibility, calculating housing assistance
                          payments, tenant payments, and utility allowances;
                      •   Controls over rent reasonableness;
                      •   Controls over housing quality standards inspections;
                      •   Controls over expenditures to ensure that they were eligible, necessary,
                          and reasonable;
                      •   Controls over accounting for cost allocations and interprogram
                          receivables and payables;
                      •   Controls over procurements;
                      •   Controls over travel expense vouchers;
                      •   Controls over voucher use (eligibility, waiting lists, and use); and
                      •   Controls over the Section 8 administrative plan.

              We assessed the relevant controls identified above.

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


                                                16
Significant Weaknesses


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

                  •   Accounting controls needed over interprogram funds. (See finding 1).
                  •   Management needs to strengthen procurement practices. (See finding 2).
                  • Lack of policies and procedures over payment of travel expenses. (See
                  finding 3).




                                            17
                                      APPENDIXES

Appendix A

                   SCHEDULE OF QUESTIONED COSTS

              Recommendation number                                Unsupported 1/

                      1A                                           $4,599,160

                      2A                                              426,052

                      Total                                        $5,025,212


1/ 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 the 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.




                                               18
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         19
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 1




                         20
Ref to OIG Evaluation   Auditee Comments




                         21
                        OIG Evaluation of Auditee Comments

Comment 1   The Authority agreed with our recommendations and will work with the Office of
            Public Housing to implement the required corrective action for all the
            recommendations in the report.




                                          22
           Appendix C

                                SCHEDULE OF INTERPROGRAM FUNDS 2007

 Account         Supportive     Section 8 New    Shelter     Low-rent       Residence       Housing         Public      State/local     Total
Description      Housing for    Construction/     Plus     public housing    service        Choice         Housing
                  Persons        Substantial      Care                                      Voucher      Capital Fund
                    with        Rehabilitation
                 Disabilities

Due from         $1,081,784            $1,285     $1,280        $639,105                0   $1,069,372             0       $1,806,334   $4,599,1606

Due to             $999,101              $967     $3,431        $128,647       $54,481      $1,479,461      $158,657       $1,774,415   $4,599,160




           6
               Data extracted from audited financial data schedule for the year ending June 30, 2007.

                                                                            23
Appendix D

      RESTRICTIONS OF THE ANNUAL CONTRIBUTIONS
                     CONTRACTS


The Section 8 Housing Choice Voucher program’s consolidated annual contributions
contract states:

      Paragraphs 11(a), (b), and (c): “the HA [housing agency] must use program receipts to
      provide decent, safe, and sanitary housing for eligible families in compliance with the
      U.S. Housing Act of 1937 and all HUD requirements. Program receipts may only be
      used to pay program expenditures. The HA may not make any program expenditures,
      except in accordance with the HUD-approved budget estimate and supporting data for a
      program. Interest on the investment of program receipts constitutes program receipts.”

      Paragraphs 12(a) and (b): “the HA must maintain an administrative fee reserve for a
      program and must use the funds in the administrative fee reserve to pay administrative
      expenses in excess of program receipts. If any funds remain in the administrative fee
      reserve, the HA may use the administrative reserve funds for other housing purposes if
      permitted by state and local law.”

      Paragraph 13(c): “the HA must only withdraw deposited program receipts for use in
      connection with the program in accordance with HUD requirements.”

   The Low-rent and comprehensive grant programs’ consolidated annual contributions
   contract states:

        Section 9(C): “the HA [housing authority] shall maintain records that identify the
        source and application of funds in such a manner as to allow HUD to determine that all
        funds are and have been expended in accordance with each specific program regulation
        and requirement. The HA may withdraw funds from the general fund only for: (1) the
        payment of costs of development and operations of the project under the Annual
        Contributions Contract with HUD; (2) the purchase of investment securities as
        approved by HUD; and (3) such other purposes may not be made for specific program
        in excess of funds available on deposit for that program.”

        Section 10(C): “the HA shall not withdraw from any of the funds or accounts
        authorized amounts for the projects under the Annual Contributions Contract, or for the
        other projects or enterprises in excess of the amount then on deposit in respect thereto.”




                                               24