oversight

The Omaha, Nebraska Housing Authority Did Not Comply With Recovery Act Requirements When Reporting on Recovery Act Capital Funds

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-30.

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

                                                              Issue Date
                                                                       September 30, 2010
                                                              
                                                              Audit Report Number
                                                                           2010-KC-1009




TO:        Debra L. Lingwall, Coordinator, Omaha Public Housing
                                Program Center, 7DPHO

           //signed//
FROM:      Ronald J. Hosking, Regional Inspector General for Audit, 7AGA

SUBJECT: The Omaha, Nebraska Housing Authority Did Not Comply With Recovery Act
           Requirements When Reporting on Recovery Act Capital Funds


                                 HIGHLIGHTS

 What We Audited and Why

            We selected the Omaha, NE, Public Housing Authority (Authority) capital fund
            grant awarded under the American Recovery and Reinvestment Act of 2009
            (Recovery Act) for review because it received a formula grant of more than $5
            million. Our audit objectives were to determine whether the Authority (1)
            obligated Recovery Act grant funds in accordance with Recovery Act
            requirements and applicable U.S. Department of Housing and Urban
            Development (HUD) rules, (2) expended Recovery Act grant funds in accordance
            with Recovery Act requirements and applicable HUD rules, and (3) accurately
            and completely reported the Recovery Act grant information to Recovery.gov.


 What We Found


            The Authority generally obligated and expended Recovery Act grant funds in
            accordance with Recovery Act requirements, but it did not accurately or
            completely report Recovery Act grant information to Recovery.gov.
What We Recommend


           We recommend that HUD require the Authority to obtain training for its staff and
           management on requirements for reporting to Recovery.gov.

           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 the initial draft report to the Authority on September 13, 2010 and
           provided a revised draft for comment on September 24, 2010. We requested a
           response by September 27, 2010 and the Authority provided written comments on
           September 28, 2010. The Authority took exception with one portion of the
           finding, but agreed with the rest of the finding and the recommendation.

           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: The Authority Did Not Accurately or Completely Report Recovery Act 5
                  Grant Information to Recovery.gov

Scope and Methodology                                                            9

Internal Controls                                                                10

Appendixes
   A. Auditee Comments and OIG’s Evaluation                                      12
   B. Criteria                                                                   15




                                          3
                     BACKGROUND AND OBJECTIVES

The Omaha Housing Authority (Authority) began operations in 1935 following the Nebraska
Legislature’s passage of the Metropolitan Cities Housing Authorities Law. The Authority
receives funding from the U.S. Department of Housing and Urban Development (HUD) to
furnish rental assistance to low- and moderate-income individuals for safe and sanitary housing.
A seven-member board of commissioners governs the Authority, and an executive director
manages its daily operations. The Authority’s administrative offices are located at 540 South
27th Street, Omaha, NE.

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 requires that $3 billion
of these funds be distributed as formula grants and the remaining $1 billion be distributed
through a competitive grant process. On March 18, 2009, HUD awarded the Authority a $5
million Public Housing Capital Fund stimulus (formula) grant that was Recovery Act funded.
During the 2007 and 2008 fiscal years, the Authority received annual capital fund grants totaling
nearly $3.9 million and more than $4 million, respectively.

The Recovery Act imposed additional reporting requirements and more stringent obligation and
expenditure requirements on the grant recipients beyond those applicable to the ongoing Public
Housing Capital Fund program grants. For example, the Authority was required to obligate 100
percent of its formula grant funds by March 18, 2010. It is required to expend 100 percent of the
grant funds by March 18, 2012. Transparency and accountability are critical priorities in the
funding and implementation of the Recovery Act.

Our audit objectives were to determine whether the Authority

   (1) Obligated Recovery Act grant funds in accordance with Recovery Act requirements and
       applicable HUD rules,
   (2) Expended Recovery Act grant funds in accordance with Recovery Act requirements and
       applicable HUD rules, and
   (3) Accurately and completely reported the Recovery Act grant information to Recovery.gov.




                                                4
                                RESULTS OF AUDIT

Finding: The Authority Did Not Accurately or Completely Report
            Recovery Act Grant Information to Recovery.gov
The Authority did not accurately or completely report Recovery Act grant information to
Recovery.gov. This deficiency occurred because the Authority did not have adequate controls
over employee supervision or training. As a result, the general public did not have access to
accurate information related to the Authority’s Recovery Act grant.



 The Authority Did Not
 Accurately Report Jobs


              The Authority generally obligated and expended Recovery Act grant funds in
              accordance with Recovery Act requirements, but it did not accurately or
              completely report Recovery Act grant information to Recovery.gov. The
              Recovery Act grant recipients are required to report the following information to
              Recovery.gov:

                     Amount of the Recovery Act grant award
                     Project information for use of the grant funds
                     Number of jobs created or retained with the Recovery Act grant
                     Funds invoiced
                     Funds received
                     Expenditure amounts
                     Listing of vendors receiving Recovery Act funds
                     Vendor transactions/payments

              The Authority did not use staff hours to calculate full-time job equivalents. The
              Recovery act requires full-time-equivalent jobs to be calculated using staff hours
              worked per quarter. Authority staff members who reported the jobs estimated the
              number of jobs by observing how many people worked on the Recovery Act
              projects per day for the first reporting quarter. Authority staff members told us
              that they estimated 18 full-time equivalents for contractors, 1.5 for engineers, and
              1.5 for Authority employees working on Recovery Act-related projects for a total
              of 21. Authority staff was unable to explain why an extra .5 full-time equivalent
              was reported for the first quarter.




                                                5
           The Authority reported

                 21.5 jobs created or retained for the quarter ending September 30, 2009;
                 21 jobs created or retained for the quarter ending December 31, 2009; and
                 21 jobs created or retained for the quarter ending March 31, 2010.

           After the first reporting quarter, the Authority reported about the same number of
           jobs for the next two quarters because Authority staff estimated that the project
           activity was approximately the same. Our calculations show that the number of
           created or retained jobs reported should have been about 17 for contractors and
           zero for the Authority’s staff.

           The Authority included 1.5 full-time equivalents of its own staff in its reported
           estimate; however, it did not use staff hours to calculate the number. The finance
           director told us that Authority staff did not track its hours spent working on the
           Recovery Act grant, and, therefore, the Authority was unable to calculate full-
           time equivalents for its staff. The Authority should not have reported the
           engineers. The reporting requirements state that indirect grant recipients, such as
           architects and engineers who are considered to be service providers, should not be
           counted.

The Authority Did Not
Accurately Report
Expenditures

           The Authority overreported expenditures for the quarter ending December 31,
           2009, and underreported expenditures for the quarter ending March 31, 2010. In
           addition, it only reported two vendors that received funds in the quarter ending
           March 31, 2010. However, four vendors were paid with Recovery Act funds.
           The Authority is required to report vendors that receive Recovery Act funds, and
           the Authority omitted two vendors because the staff person doing the reporting
           did not know how to add vendors to the Authority’s profile on Recovery.gov. In
           this case, the Authority was one of the missing vendors because it paid itself for
           administrative expenses related to the Recovery Act grant.




                                            6
           The following table lists what was reported to Recovery.gov, what the actual
           expenditures were, and the difference between the two numbers.

                    Type of expenditure           Reported to     Actual           Reporting
                 Quarter ending 12/31/2009        Recovery.gov expenditures        differences
            Construction contract                    $1,372,180   $1,240,362           $131,818
            Demolition contract                         $95,000      $74,493            $20,507
            Total amount of payments to vendors
            over $25,000                             $1,467,180       $1,314,855          $152,325

                  Quarter ending 3/31/2010
            Construction contract                    $1,372,180       $1,240,362       $131,818
            Demolition contract                         $95,000          $95,785          ($785)
            Architecture & engineering contract              $0          $50,374       ($50,374)
            Administrative expenses                          $0        $150,998       ($150,998)
            Expenditure total                        $1,537,512       $1,537,520            ($8)
            Total amount of payments to vendors
            over $25,000                             $1,467,180       $1,537,520          ($70,340)



Authority Staff Was Not
Adequately Trained

           The Authority did not have adequate controls over employee supervision or
           training. The only staff person trained on reporting requirements no longer works
           at the Authority. The staff person currently reporting Recovery Act information
           had not been trained on reporting requirements, and he told us that he had not read
           any of the guidance on the subject. He said that he did not know he was supposed
           to use staff hours to calculate full-time-equivalent jobs and that he did not know
           how to add vendors to Recovery.gov for reporting purposes. Management at the
           Authority was unaware that the jobs, expenditures, and vendors were incorrectly
           reported to Recovery.gov.



Recovery Act Grant Lacked
Transparency

           The general public did not have access to accurate information related to the
           Authority’s Recovery Act grant. Further, grant recipients that report inaccurate
           information hinder the Recovery Act’s goal of transparency in government
           spending.




                                            7
Recommendations

          We recommend that the Coordinator of the Omaha Public Housing Program
          Center

          1A. Require the Authority to obtain training for its staff regarding reporting to
              Recovery.gov. The training should include Authority management so that it
              can adequately supervise staff responsible for reporting.




                                           8
                        SCOPE AND METHODOLOGY

Our review generally covered the period January 2009 through April 2010 and was expanded as
necessary. We performed onsite work from May through July 2010 at the Authority’s office
located at 540 South 27th Street, Omaha, NE.

To achieve our audit objectives, we conducted interviews of the Authority’s staff and HUD staff
at the Omaha, NE, Office of Public Housing. We reviewed the Authority’s policies and
procedures, procurement files, construction contract files, records of grant obligations, and
expenditure files. We also reviewed the Authority’s capital fund budgets, annual plan,
correspondence with HUD, annual contributions contract amendments, and audited financial
statements. In addition, we reviewed Federal regulations, the Recovery Act, and HUD
requirements.

We reviewed 100 percent of the Authority’s Recovery Act obligations and expenditures. The
entire grant was obligated with six contracts plus administration and labor costs. As of July
2010, the Authority had made 11 draws on the Recovery Act grant totaling more than $1.5
million in grant expenditures.

We relied in part on HUD’s Line of Credit Control System. We did not conduct tests of the data
or controls governing the data. We did not use the data to support audit conclusions but used
only original source documents to reach our conclusions.

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.




                                               9
                              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 to ensure that the Authority obligated Recovery Act grant funds
                      in accordance with Recovery Act requirements and applicable HUD rules.
                     Controls to ensure that the Authority expended Recovery Act grant funds
                      in accordance with Recovery Act requirements and applicable HUD rules.
                     Controls to ensure that the Authority reported Recovery Act grant
                      information to Recovery.gov.

               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.




                                                 10
Significant Deficiency


            Based on our review, we believe that the following item is a significant deficiency:

                  The Authority did not have adequate controls over employee supervision
                   or training.




                                             11
                        APPENDIXES

Appendix A

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation      Auditee Comments




                            12
Comment 1




            13
                         OIG Evaluation of Auditee Comments

Comment 1   The Authority took exception to the statement that indirect jobs should not have
            been counted for reporting purposes. OMB Memorandum M-10-08, issued
            December 18, 2009 says “Recipients should not attempt to report the employment
            impact upon materials suppliers and central service providers (so called “indirect”
            jobs)”. The Authority asserts that the OMB guidance is vague regarding reporting
            requirements. Implementation of our recommendation for Authority staff to
            obtain training on Recovery Act reporting requirements should clarify any
            guidance that appears to be ambiguous.




                                            14
Appendix B

                                         CRITERIA

Office of Management and Budget (OMB) Memorandum M-09-21, issued June 22, 2009

Implementing Guidance for the Reports on Use of Funds Pursuant to the American Recovery and
Reinvestment Act of 2009

5.3   The requirement for reporting jobs is based on a simple calculation used to avoid
      overstating the number of other than full0time permanent jobs. This calculation converts
      part-time or temporary jobs into “full-time equivalent” jobs. In order to perform the
      calculation, a recipient will need the total number of hours worked that are funded by the
      Recovery Act. The recipient will also need the need the number of hours in a full-time
      schedule for a quarter.

OMB Memorandum M-10-08, issued December 18, 2009

Updated Guidance on the American Recovery and Reinvestment Act – Data Quality, Non-
Reporting Recipients, and Reporting of Job Estimates

5.    Non-compliant recipients, including those who are persistently late or negligent in their
      reporting obligations, are subject to Federal action, up to and including the termination of
      Federal funding or the ability to receive Federal funds in the future.
5.2   Key Principles:
        2. A funded job is defined as one in which the wages or salaries are either paid for or
           will be reimbursed with Recovery Act funding.
        4. The estimate of the number of jobs created or retained by the Recovery Act should be
           expressed as “full-time equivalents.” In calculating a full-time equivalent, the
           number of actual hours worked in funded jobs is divided by the number of hours
           representing a full work schedule for the kind of job being estimated.
        7. Recipients should not attempt to report the employment impact upon materials
           suppliers and central service providers (so called “indirect” jobs).




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