oversight

The Manchester Housing Authority in Manchester, CT, Obligated Its Recovery Act Grant Funds in a Timely Manner for Eligible Projects and Properly Suported Expenditures

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-21.

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

                                                               Issue Date
                                                                   September 21, 2010
                                                               
                                                               Audit Report Number
                                                                     2010 BO 1009




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


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


SUBJECT: The Manchester Housing Authority in Manchester, CT, Obligated Its Recovery
           Act Grant Funds in a Timely Manner for Eligible Projects and Properly
           Supported Expenditures


                                    HIGHLIGHTS

 What We Audited and Why

             We audited the Manchester Housing Authority (Authority) in Manchester, CT,
             because it obligated the majority of its $520,654 Public Housing Capital Fund
             Stimulus (Formula) Recovery Act Funded grant awarded under the American
             Recovery and Reinvestment Act of 2009 (Recovery Act) just before the required
             obligation deadline. Our objectives were to determine whether the Authority (1)
             obligated its grant funds in a timely manner for eligible projects, (2) maintained
             support for its obligations and expenditures, and (3) had adequate management
             controls over its obligation process.

 What We Found


             The Authority obligated its Recovery Act funds in a timely manner for eligible
             projects and maintained the proper support for its obligations and expenditures.
             Its management controls over its obligation process were adequate and allowed
             the Authority to obligate $459,996 of the $520,654 grant for nine separate
           projects, with the remaining funds being obligated for administration and other
           fees.

What We Recommend


           We did not identify any deficiencies, and, therefore, there are no
           recommendations in this report.

Auditee’s Response


           We provided our discussion draft audit report to the Authority on September 17,
           2010. This report did not require a response from the auditee and no formal
           comments were received.




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                           TABLE OF CONTENTS



Background and Objectives                                                           4

Results of Audit
   Finding 1: The Authority Obligated Recovery Act Grant Funds in a Timely Manner   5
   for Eligible Projects and Obligations and Expenditures Were Properly Supported

Scope and Methodology                                                               7

Internal Controls
                                                                                    8




                                           3
                      BACKGROUND AND OBJECTIVES

The Manchester Housing Authority (Authority), Manchester, CT, is incorporated under the laws
of the State of Connecticut and operates under a board of commissioners. The Authority has
contracted with the Federal Government, acting through the U.S. Department of Housing and
Urban Development (HUD), for financial assistance for low-income public housing pursuant to
the United States Housing Act of 1937 as amended. The Authority owns and operates more than
300 Federal public housing units under an annual contributions contract with HUD. It also
manages more than 100 State housing units.

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act
of 2009 (Recovery Act). This legislation included a $4 billion appropriation of capital funds to
carry out capital and management activities for public housing agencies, as authorized under
Section 9 of the United States Housing Act of 1937. The Recovery Act required that $3 billion
of these funds be distributed as formula funds and the remaining $1 billion be distributed through
a competitive process. On March 18, 2009, HUD awarded the Authority a formula grant of
$520,654.

The Recovery Act imposed additional reporting requirements and more stringent obligation and
expenditure requirements on the grant recipients than those applicable to the ongoing Public
Housing Capital Fund Stimulus (Formula) Recovery Act Funded grants. Recovery Act funds
must be used for capital fund-eligible activities identified in either the recipient’s annual
statement or 5-year action plan. Recovery Act funds can be used to address deferred
maintenance needs, including but not limited to (1) replacement of obsolete systems and
equipment with energy-efficient systems and equipment that reduce consumption, (2) work items
related to code compliance including abatement of lead-based paint and implementation of
accessibility standards, (3) correction of environmental issues, and (4) rehabilitation and
modernization activities that have been delayed or not undertaken because of insufficient funds.

As of September 1, 2010, the Authority had allocated its Recovery Act funds for nine projects,
eight of which are fully complete. The Authority used its Recovery Act funds primarily to
replace boilers and water heaters and also to provide upgrades to existing fire and boiler doors in
one project.

Our objectives were to determine whether the Authority (1) obligated its grant funds in a timely
manner for eligible projects, (2) maintained support for its obligations and expenditures, and (3)
had adequate management controls over its obligation process.




                                                 4
                                RESULTS OF AUDIT

Finding 1: The Authority Obligated Recovery Act Grant Funds in a
 Timely Manner for Eligible Projects and Obligations and Expenditures
                      Were Properly Supported

HUD awarded a $520,654 Public Housing Capital Fund grant under the Recovery Act to the
Authority to carry out capital and management activities. We reviewed all of the Authority’s
Recovery Act obligations, totaling $520,654, and found that the Authority obligated $459,996
Recovery Act funds in a timely manner for eligible projects and the remaining funds for grant
administration, properly supported its obligations and expenditures, and had adequate
management controls governing its obligation process.


 The Authority Obligated Its
 Recovery Act Funds in a Timely
 Manner

              The Recovery Act provided the Authority with $520,654 for capital
              improvements on March 18, 2009, and required that the funds be obligated within
              1 year to stimulate the economy. To meet the March 17, 2010, obligation
              deadline, the Authority obligated Recovery Act funds for the following nine work
              items, totaling $459,996, with the remaining funds set aside for administration
              and other fees.

               Project      Description of           Contract      Contract      Status
               name         work                     date          amount
               Westhill     Pipe modification &      3-16-10       $152,600      Complete
                            boiler replacement
               Westhill     Water heater             2-22-10       $142,085      Complete
                            replacement
               Westhill     Parking lot topping      3-16-10       $44,360       Complete
               Mayfair      Electrical service       3-16-10       $29,887       Ongoing
                            upgrade
               Wilfred      Vinyl window             3-16-10       $6,781        Complete
                            replacement
               Westhill     Vinyl railing            3-16-10       $47,340       Complete
                            replacement
               Westhill     Fire door upgrade        3-16-10       $8,514        Complete
               Westhill     Boiler door upgrade      3-16-10       $14,100       Complete
               Mayfair      Smoke detector           3-16-10       $14,329       Complete
                            relocation
               Total                                               $459,996


                                               5
The Authority Funded Eligible
Projects and Maintained
Adequate Support for
Obligations and Expenditures


             The Authority implemented sufficient management controls to ensure that it
             obligated all funds in a timely manner, that funded projects were eligible, and that
             all obligations and expenditures were properly supported. No exceptions were
             noted.

             All purchase orders and contracts were

                    Obligated in a timely manner. All contracts were executed before the
                     deadline and properly supported with executed written contracts or
                     purchase orders.

                    For eligible activities.

                    Procured using an appropriate procurement method.

                    Adequately competed, advertised, evaluated, and awarded to the lowest
                     responsible bidder.

                    Supported by a cost or price estimate or other acceptable method
                     completed before soliciting bids to establish the basis for the contract
                     price.

             Additionally, the contracts contained the required contract provisions and clauses,
             and the contractors were adequately bonded and insured.

             Finally, the Authority’s accounting department maintained proper support for the
             expenditures reviewed totaling $359,394. It also adequately tracked and reported
             to HUD the expenditures of Recovery Act capital funds it had obligated.



Conclusion


             The Authority implemented sufficient management controls to ensure that it
             obligated all funds in a timely manner, that funded projects were eligible, and that all
             obligations and expenditures were properly supported. No exceptions were noted.

             Based on the results of the audit, this report contains no recommendations.

                                                6
                        SCOPE AND METHODOLOGY

We conducted our review between June and September 2010. Our review generally covered the
period March 18, 2009, through June 30, 2010, and was expanded as necessary to meet our audit
objectives.

To accomplish our audit objectives, we

      Obtained an understanding of the controls related to and significant to the audit
       objectives and reviewed relevant laws and regulations, including

                     The Recovery Act, Public Law 111-05.
                     Office of Public and Indian Housing (PIH) Notice PIH 2009-12 (HA) –
                      Information and Procedures for Processing Recovery Act Capital Fund
                      Formula Grants.
                     Notice PIH 2009-31 (HA) – PIH Implementation Guidance for the Buy
                      American Requirement of the Recovery Act Including Process for
                      Applying Exceptions.
                     24 CFR (Code of Federal Regulations) Part 905 – The Public Housing
                      Capital Fund Program.
                     24 CFR 85.36 – Procurement.

      Interviewed the Authority’s staff to determine what controls were in place to ensure
       compliance with the Recovery Act and HUD’s requirements.

      Obtained and reviewed independently audited financial reports for findings that may have
       impacted our audit objectives.

      Identified and summarized the Recovery Act funds awarded to the Authority and the
       obligations made by the Authority.

      Reviewed all Recovery Act-funded projects to determine whether the Authority obligated
       Recovery Act funds in a timely manner for eligible projects and whether the
       obligations/expenditures were properly supported. We reviewed nine projects totaling
       $459,996.

      Reviewed controls over the tracking, verifying, and reporting of Recovery Act
       administrative expenses

 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.


                                                7
                              INTERNAL CONTROLS

Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

        Effectiveness and efficiency of operations,
        Reliability of financial reporting, and
        Compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls 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 staff experience, training, and workload
                     Controls over selecting and approving eligible activities
                     Controls over the tracking, verifying, and reporting of Recovery Act
                      administrative expenses
                     Controls over the timely obligation of Recovery Act funds
                     Controls over contracting for activities in accordance with the Recovery Act

               We assessed the relevant controls identified above.

               A deficiency in internal control exists when the design or operation of a control does
               not allow management or employees, in the normal course of performing their
               assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
               impairments to effectiveness or efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws and regulations on a
               timely basis.

 Significant Deficiencies


               We evaluated internal controls related to the audit objectives in accordance with
               generally accepted government auditing standards. Our evaluation of internal
               controls was not designed to provide assurance regarding the effectiveness of the
               internal control structure as a whole. Accordingly, we do not express an opinion on
               the effectiveness of the Authority’s internal controls.
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