oversight

The Rochester Housing Authority, Rochester, NY, Had Financial Control Weaknesses That Could Affect Its Capacity to Administer Recovery Act Funds

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-06-04.

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

                                                        U. S. Department of Housing and Urban Development
                                                                                 Office of Inspector General
                                                                                 New York/New Jersey Office
                                                                               26 Federal Plaza – Room 3430
                                                                                  New York, NY 10278-0068



                                                                MEMORANDUM NO. 2010-NY-1804

June 4, 2010

MEMORANDUM FOR: Joan Spilman, Director, Office of Public Housing, Buffalo Field
                Office, 2CPH
                //signed//
FROM:           Edgar Moore, Regional Inspector General for Audit, New York/New Jersey, 2AGA

SUBJECT:        The Rochester Housing Authority, Rochester, NY, Had Financial Control
                Weaknesses That Could Affect Its Capacity to Administer Recovery Act Funds


                                            INTRODUCTION

We conducted a review of the Rochester Housing Authority’s (Authority) administration of its
capital funding program. We selected this Authority based upon indicators identified in a risk
assessment of housing authorities that were allocated capital funds under the American Recovery
and Reinvestment Act of 2009 (Recovery Act). The primary objective of our review was to
evaluate the Authority’s capacity in the areas of internal controls, eligibility, financial controls,
procurement, and output/outcomes in administering its Recovery Act funds. The Authority had
weaknesses in its financial controls that if left unaddressed could lead to its having a diminished
capacity to effectively administer its $5.9 million in supplemental capital funds received under the
Recovery Act. Except for these issues, Authority officials demonstrated a positive attitude toward
establishing and implementing additional financial controls, their procurement controls comply with
regulations and their capital program outputs are in accordance with their established plans. Thus,
overall, the Authority had the capacity to effectively administer its capital fund program
supplemental funds provided under the Recovery Act according to applicable requirements.

For each recommendation without a management decision, please respond and provide status
reports in accordance with U.S. Department of Housing and Urban Development (HUD)
Handbook 2000.06, REV-3. Please furnish us copies of any correspondence or directives issued
because of the review.




    Visit the Office of Inspector General on the World Wide Web at http://www.hud.gov/oig/oigindex.html
                               METHODOLOGY AND SCOPE

To gain an understanding of the Authority’s administration of the capital fund program, we
reviewed applicable laws, regulations, and HUD program requirements. In addition, we
reviewed the Authority’s procurement policy, conducted interviews with Authority personnel to
gain an understanding of the internal controls, and tested the system of controls to determine
whether the controls were functioning as intended. Also, we analyzed contract files and
disbursement records for the review period October 2008 through September 2009. The review
period was extended as necessary.

For the grant years 2005 through 2008, the Authority received more than $18.5 million in capital
funds to carry out capital and management activities. Effective March 18, 2009, the Authority
received $5.9 million in supplemental capital funds under the Recovery Act. The Authority
obligated all of its Recovery funds by the prescribed March 17, 2010 deadline.

We performed our on-site work from September 2009 through February 2010 at the Authority’s
office located in Rochester, NY. Our work was not conducted in accordance with generally
accepted government auditing standards. Under the Recovery Act, inspectors general are
expected to be proactive and focus on prevention; thus, this report is significantly reduced in
scope.

                                        BACKGROUND

On February 17, 2009, the President signed the Recovery Act. This legislation includes 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, as
amended. The Recovery Act requires that $3 billion of these funds be distributed as formula
funds and the remaining $1 billion be distributed through a competitive process.

The Office of Management and Budget provided guidance establishing requirements for various
aspects of Recovery Act planning and implementation. These requirements are intended to meet
crucial accountability objectives. Specifically,

   •   Funds are to be awarded and distributed in a prompt, fair, and reasonable manner;
   •   The recipients and uses of all funds are to be transparent to the public, and the public
       benefits of these funds are to be reported clearly, accurately, and in a timely manner;
   •   Funds shall be used for authorized purposes, and instances of fraud, waste, error, and
       abuse are to be mitigated;
   •   Projects funded under the Recovery Act should avoid unnecessary delays and cost
       overruns;
   •   Program goals are to be achieved, including specific program outcomes and improved
       results on broader economic indicators.




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                                    RESULTS OF REVIEW

The Authority had weakness in its financial controls that if left unaddressed, could lead to its
having a diminished capacity to effectively administer its capital fund program funds.
Specifically, the Authority’s program procedures and tracking system allowed for (1) ineligible
expenses to be charged to the capital fund program, (2) capital funds to be disbursed for
unsupported expenses, (3) eligible costs to not be reimbursed from capital fund program funds,
and (4) inaccurate allocation of employee payroll expenses. Except for these issues, Authority
officials demonstrated a positive attitude toward establishing and implementing additional financial
controls, their procurement controls comply with regulations and their capital program outputs are
in accordance with their established plans. Thus, overall, the Authority had the capacity in the
areas of internal controls, eligibility, procurement, and output/outcomes to effectively administer
its capital fund program.

1. Ineligible Expenses Charged to the Capital Fund Program

The Authority’s procedures allowed for $344,460 in fiscal year 2009 payroll expenses to be
charged to the fiscal year 2008 capital fund program when there were no available funds. The
Authority incurred more than $409,000 in expenses that were charged to the capital fund
program between March and September 2009. However, because the Authority had expended its
budgeted administrative dollars from its awarded grants, these expenses had not been vouchered.
Nevertheless, the Authority recorded the above payroll expenses as being available to its 2008
capital fund program when funds were not available. The Authority’s procedures would have
allowed it to transfer the expenses to the 2009 capital fund program and withdraw 2009 capital
funds when they became available. However, the Authority’s 2009 capital fund program grant
was not awarded until September 2009; the annual contributions contract amendment provided
an effective date of September 15, 2009. Regulations at 24 CFR (Code of Federal Regulations)
905.120 provide that a public housing agency shall obligate any assistance received not later than
24 months after the date on which the funds become available. Therefore, since there were no
more 2008 capital funds available and these expenses were incurred before the 2009 capital
funds were made available, the $344,460 in payroll expenses is considered ineligible and should
not be charged to the capital fund program.

In addition, Authority officials made $35,493 in ineligible withdrawals of capital program funds.
Specifically, the Authority withdrew $11,931 in capital funds from the fiscal year 2008 grant due
to a clerical mistake. Authority officials carried forward the total from the operations budget line
item on the capital fund program expense detail sheet to the fees and costs budget line item, thus
having no expenditures to support $11,931 in withdrawals for fees and costs. Also, the Authority
withdrew $22,544 in capital funds, representing expenses from fiscal year 2007 and 2008 grants,
using the same expenses that were used to support previous voucher requests. For example, the
Authority used the same administrative expenses for two voucher requests as a result of not
properly accounting for an accrual before making the second voucher request. Further, the
Authority withdrew $1,018 in administrative expenses from fiscal year 2006 and 2008 grants,
consisting of items that were not actual employee benefits and thus were not eligible expenses
under the capital fund program. Regulations at 24 CFR 85.20 provide that fiscal control and
accounting procedures be sufficient to permit the tracing of funds to a level of expenditures

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adequate to establish that such funds have not been used in violation of the restrictions and
prohibitions of applicable statutes. Accordingly, we consider the use of $35,493 in capital funds
to be ineligible.

Lastly, Authority officials reclassified $2,811 in capital fund program expenses related to
relocation costs based on our inquiries regarding its eligibility. There was a series of purchase
orders for relocated tenants’ cable television service that were charged to the Authority’s capital
fund program dwelling structure budget line item. However, the Authority had not budgeted for
relocation expenses and did not explain how they were eligible for funding under the capital fund
program. Due to the lack of documentation, Authority officials decided to reallocate the $2,811
cost to its operating account, resulting in a realized cost savings to the capital fund program.
HUD Handbook 7585.3G provides eligible costs that can be incurred during relocation.

2.   Capital Program Funds Disbursed for Unsupported Expenses

The Authority vouchered $169,542 in capital fund program funds for multiple expenses paid
from the fiscal year 2005 and 2006 grants without the proper supporting documentation. The
majority of the withdrawals were for expenses that occurred months or years before the voucher
request. The Authority’s financial control system provided no assurance that these expenses had
not been requested in prior capital fund program vouchers. In addition, the Authority was unable
to provide adequate supporting documentation for $7,747 in payroll expenses paid from the
fiscal year 2006 grant. Consequently, we consider the use of $177,289 in capital funds to be
unsupported pending a HUD eligibility determination. Regulations at 24 CFR 85.20 provide that
fiscal control and accounting procedures be sufficient to permit the tracing of funds to a level of
expenditures adequate to establish that such funds have not been used in violation of the
restrictions and prohibitions of applicable statutes.

3. Eligible Costs Not Reimbursed From Capital Program Funds

The Authority failed to voucher $3,264 in eligible modernization-related expenses from its
capital fund program. The Authority pays its vendors from its operating account and then
requests reimbursement from capital funds. However, a comparison of its tracking system to the
capital fund program vouchers indicated that these expenses had not been included in any capital
program funds requests. Thus, these expenses should be requested from capital funds and
reimbursed to the operating account. By reimbursing the operating account, these funds will be
put to better use.

4. Inaccurate Allocation of Employee Payroll Expenses

The Authority incorrectly charged 100 percent of the payroll expenses pertaining to the director
of property development to the capital fund program. In addition to the director’s duties
pertaining to the capital fund program, we were informed that the director was instrumental in
the conversion of low-rent housing units to Section 8. Regulations at 24 CFR 968.112(j) provide
that eligible administrative costs are those necessary for the planning, design, implementation,
and monitoring of physical and management improvements. The Authority acknowledged that
the director’s time should have been allocated over a number of programs. For fiscal year 2009,

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Authority officials explained that they plan to reallocate a percentage of the director’s time to
activities funded under the supplemental Recovery Act, the capital fund program, Section 8
conversion, and other development activities. Starting with fiscal year 2010, the director would
be charging 50 percent of his time to activities funded under the supplemental Recovery Act and
50 percent to Section 8 conversion and other development activities. Accordingly, we
recommend that HUD officials review and monitor the Authority’s allocation plan to ensure that
costs for payroll expenses are properly charged to the supplemental Recovery Act capital fund
program and the regular capital fund program.


                                         CONCLUSION

The Authority needs to correct financial control weaknesses identified to ensure HUD that the
Recovery Act funds will be disbursed in accordance with regulations. These financial control
weaknesses related to charging ineligible and unsupported costs to the capital fund program, not
reimbursing eligible expenses from the capital fund program, and the improper allocation of
employee payroll expenses. We attribute these weaknesses to the Authority’s (1) failure to
follow established procedures for charging eligible and supported expenses to the capital fund
program, (2) lack of a quality control system to ensure that expenses were properly disbursed, (3)
inadequate tracking system to ensure that eligible capital fund program expenses were vouchered
in a timely manner, and (4) lack of an accurate allocation plan. Except for these issues, Authority
officials demonstrated a positive attitude toward establishing and implementing additional financial
controls, their procurement controls comply with regulations and their capital program outputs are
in accordance with their established plans. Thus, overall, the Authority had the capacity to
administer capital funds provided under the Recovery Act.


                                    RECOMMENDATIONS

We recommend that the Director of HUD’s Buffalo Office of Public Housing

1A.    Monitor and oversee the Authority’s charges and withdrawals for capital fund program
       administrative expenses and ensure that only allocable 2009 payroll expenditures are
       charged to the Authority’s capital fund programs. This measure will assure HUD that
       capital funds, including those provided under the Recovery Act, will be disbursed in
       accordance with regulations.

We also recommend that the Director of HUD’s Buffalo Office of Public Housing, instruct the
Authority to

1B.    Ensure that $379,953 in ineligible charges and withdrawals of capital funds ($344,460 in
       ineligible payroll expenses, $11,931 for a clerical mistake, $22,544 in duplicate costs,
       and $1,018 in non-capital fund program administrative expenses) are properly accounted
       for and reimbursed to HUD from non-Federal funds.




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1C.   Provide documentation to justify the $177,289 in unsupported withdrawals ($169,542)
      and payroll expenses ($7,747) so that HUD can make an eligibility determination. Any
      unsupported costs determined to be ineligible should be reimbursed to HUD from non-
      Federal funds.

1D    Provide documentation to HUD to ensure that $2,811 in relocation expenses was
      reclassified and charged to the Authority’s operating fund and that $3,264 in eligible
      modernization-related expenses is reimbursed from capital funds, thereby ensuring that
      $6,075 is put to better use.

1E.   Establish procedures that will ensure that allocation plans are reviewed annually and
      updated to ensure that allocation percentages are accurate.

1F.   Establish and implement quality control policies and procedures that require periodic
      examinations and independent reconciliations of capital fund program voucher requests
      to ensure that vouchers are supported, eligible, and in accordance with capital fund
      program policies and procedures.

1G.   Review its financial controls for tracking capital fund expenditures and revise the existing
      financial controls to ensure that capital fund program expenses are requested in a timely
      manner to better match the expenses incurred in one year with the funding for that year,
      and that all eligible expenses are included in voucher requests.




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                                   APPENDIXES


Appendix A

              SCHEDULE OF QUESTIONED COSTS
             AND FUNDS TO BE PUT TO BETTER USE

 Recommendation          Ineligible 1/    Unsupported      Funds to be put
        number                                     2/       to better use 3/
             1B             $379,953
             1C                              $177,289
             1D           _________        _________                $6,075
           Total            $379,953         $177,289               $6,075


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
     policies 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 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.

3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     that are specifically identified. If the Authority implements our recommendation to
     provide documentation to HUD to ensure that relocation expenses were reclassified and
     charged to its operating fund and that eligible modernization-related expenses are
     reimbursed from capital funds, it will ensure that $6,075 in funds is put to better use.




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Appendix B
          AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                          Auditee Comments

                                                                                Anthony P. DiBiase
                                                                               Executive Director / CEO
                                                                             Rochester Housing Authority
                                                                           675 West Main Street, Suite 100
                                                                                    Rochester, NY 14611
                                                                                            585-697-3602
                                                                                        Fax 585-697-6191
May 4, 2010
Ms. Karen A. Campbell
U.S. Department of Housing and Urban Development
Office of Inspector General
26 Federal Plaza - Room 3430
New York, NY 10278
Dear Ms. Campbell:
The Rochester Housing Authority, hereafter also referred to as ‘the Authority’, was pleased with the
Inspector General's finding that ‘the Authority had the capacity to effectively administer its capital
fund program supplemental funds provided under the Recovery Act according to applicable
requirements’. The Rochester Housing Authority wishes to acknowledge the professionalism and
thoroughness of the Office of the Inspector General's staff in conducting their audit. The Authority
welcomes such audits and uses their findings as a means to continually upgrade and tighten its
controls and procedures. COMMENT 1


Given the Audit report is a matter of public domain, the Authority feels it is important to submit the
following comments regarding the specific findings and wording within the document:

Introduction — Page 1
The Office of the Inspector General states that ‘We selected this Authority based upon indicators
identified in a risk assessment of housing authorities that were allocated capital funds under the
American Recovery and Reinvestment Act of 2009’. The Rochester Housing Authority would like
to point out that it has always received the rating of “standard performer” by the U.S. Department
of Housing and Urban Development (HUD) narrowly missing “high performer” status and would
object to the conclusion drawn from this statement that funds entrusted to the Authority are at a
higher risk than those entrusted to other comparable authorities. COMMENT 2




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Methodology and Scope — Page 2
As a basis for judging the materiality of the numbers found in the audit report, Rochester Housing
Authority would like to mention that during the 12 month period reviewed (October 2008 through
September 2009), the Authority requisitioned $7,457,102 in capital funds. COMMENT 3
Section 1 - Ineligible le Expenses Charged to the Capital Fund Program — Page 3
Rochester Housing Authority would like to emphasize the fact that at the time of the audit,
reimbursement of the expenses in question were not drawn down from HUD LOCCs and resided in
a separate account on its Central Office Cost Center (COCC) balance sheet pending disposition.
COMMENT 4
The Authority has subsequently charged the expenses in question to its COCC (non-Federal funds)
as part of its Fiscal 2009 year end closing entries. The Authority believes the amount of the payroll
expenses in question was $340,768 versus the $344,460 stated. COMMENT 5
In the second paragraph, two charges representing $18,687 of the $22,544 were caught and
corrected through the Authority's own routine audit of its projects prior to the Inspector General's
audit. COMMENT 6
Later in the same paragraph, the $1,018 in administrative charges referred to were found to be
legitimate expenses chargeable to the capital program but were misidentified and charged to the
incorrect (Administrative) line item within the program. COMMENT 7
Section 2 — Capital Funds Disbursed for Unsupported Expenses — Page 4
The Rochester Housing Authority acknowledges the expenses in question were not processed in a
timely manner, however the Authority believes it had provided the auditors with sufficient backup
to support the charges. The Authority possesses, and forwarded copies of all the invoices which
account for the $169,542 and maintains a contract register listing all invoices charged to each of its
CFP grants. Routine Internal review of the registers eliminated the possibility that these expenses
had been previously charged to the applicable project. COMMENT 8
Regarding the $7,747 in payroll expenses, the Authority's routine internal review of its programs
determined that according to its payroll system reports, the capital grant in question was allocated a
given dollar amount of wages and after examining the project register, it was found the amount of
wages actually booked to the project was $7,747 less than the payroll system figure, at which point a
correcting entry was made. COMMENT 9
Section 4 — Improper Allocation of Employee Payroll Expenses — Page 4
Rochester housing Authority would like to take exception to the wording found in the title of this
section and make a clarification regarding this section's content.
In the title of the section itself, the use of the word ‘Improper’ may allege ‘impropriety’ which may
be interpreted by the reader to connote an intentional attempt to deceive. ‘Inaccurate’ or a word of
similar meaning would be preferred. COMMENT 10
After analyzing the time spent by the Director of Property Development, the decision has been
made to allocate 70 percent of his time to activities funded under the supplemental Recovery Act
and 30 percent to Section 8 conversion and other development activities which are costs absorbed
by the Authority's Central Office Cost Center. The audit stated that position's time would be split
50/50. COMMENT 11

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 Conclusion
 Regarding point number 2, ‘the lack of a quality control system’, the Rochester Housing Authority
would like to restate that several of the items detected during the audit were discovered and
corrected via the Authority's own internal auditing of its programs. This was completed prior to the
Inspector General's audit. COMMENT 12
The wording of point number 4 ‘lack of an established allocation plan’ implies the Authority has no
allocation plan for allocating its common charges. The Authority would like to note that as part of
its annual budgeting process, the Authority updates and uses an allocation plan (Salary allocations by
individual based on job duties, applicable Public Housing charges allocated based on units,
Information Technology charges based on the number of personal computers at its various
locations, etc). The Authority does acknowledge the need to continuously review the salary
allocations as duties and responsibilities change. COMMENT 13
In conclusion, the Rochester Housing Authority would again like to thank the Office of the
Inspector General for its due-diligence. The Authority is confident it will successfully resolve issues
identified herein during the follow up with HUD's Buffalo Office of Public Housing as
recommended at the end of the report.

Respectfully submitted,

//signed//
Mark D. Hill
Accounting Supervisor
Rochester Housing Authority

//signed//
Anthony P. DiBiase
Executive Director
Rochester Housing Authority




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                         OIG Evaluation of Auditee Comments

Comment 1   Officials for the Authority state that they are pleased with the Inspector General’s
            finding that “the Authority had the capacity to effectively administer its capital
            fund program supplemental funds provided under the Recovery Act according to
            applicable requirements”. However, although overall, the Authority had the
            capacity to effectively administer its capital fund program supplemental funds
            provided under the Recovery Act, the Authority had weaknesses in its financial
            controls that if left unaddressed could lead to its having a diminished capacity to
            effectively administer its $5.9 million in supplemental capital funds.

Comment 2   Officials for the Authority state that the Authority has always received a rating of
            “standard performer” by HUD narrowly missing “high performer” status and
            Authority officials would object to the conclusion drawn from this statement that
            funds entrusted to the Authority are at a higher risk than those entrusted to other
            comparable authorities. Our organization identified public housing capital
            funding as a high-risk funding category under the Recovery Act. As such,
            regardless of the Authority’s HUD designated performance level, our review was
            initiated based on a risk assessment of authorities receiving Recovery Act funds.
            The Authority received the second highest amount of Recovery Act funds in
            relation to the authorities administered by the HUD Buffalo Office. Further, the
            Authority, which was allocated $5.9 million in capital funds under the Recovery
            Act, owns and manages 31 housing developments with 2,495 total units, which
            makes it large enough to be high risk.

Comment 3   Officials for the Authority indicate that for judging materiality of the numbers
            found in the audit report, the Authority requisitioned $7,457,102 in capital funds
            during the review period. To clarify the scope of our review, we adjusted the
            report to reflect the amount of funding the Authority received in the scope section
            of the report instead of as originally detailed in the background section.
            Nevertheless, the deficiencies reported pertain to our concerns with the
            Authority’s controls over disbursing capital program funds.

Comment 4   Officials for the Authority contend that reimbursement of the ineligible expenses
            charged to the capital fund program were not drawn down from HUD LOCCS
            and resided in a separate account on its Central Office Cost Center balance sheet
            pending disposition. However, we determined that due to the Authority’s
            financial control weaknesses, its system allowed for 2009 payroll expenses to be
            charged to the 2008 capital fund program when no such funds were available.
            Had this not been brought to the attention of officials for the Authority, the
            Authority’s procedures would have allowed it to transfer the expenses to the 2009
            capital fund program and withdraw 2009 capital funds when they became available.
            However, the Authority’s 2009 capital fund program grant was not awarded until
            September 2009, as the annual contributions contract amendment provided an
            effective date of September 15, 2009.



                                             11
Comment 5     While officials for the Authority agree that the ineligible 2009 payroll expenses
              should not have been charged to the capital fund program, and they subsequently
              charged the expenses to its COCC (non-Federal funds), they believe that the
              correct amount should be $340,768 versus the $344,460 stated. The $344,460
              represents our calculation of ineligible payroll expenses charged to the capital
              fund program between March and September 2009. The difference between the
              two calculations should be reconciled between HUD and Authority officials
              during the audit resolution process.

Comment 6     Officials for the Authority state that two charges representing $18,687 of the
              $22,544 were caught and corrected through the Authority’s own routine audit of
              its projects prior to the Inspector General’s audit. The OIG acknowledges that the
              Authority made some efforts to correct past errors. However, we are still
              concerned with the financial control weaknesses that allowed the errors to occur.

Comment 7     Officials for the Authority stated that the $1,108 turned out to be an eligible
              capital fund expense. Nevertheless, we both agree that the $1,018 in
              administrative expenses were charged to the incorrect line item within the
              program, and that needs to be adjusted.

Comment 8     Officials for the Authority acknowledge that the unsupported expenses were not
              processed in a timely manner. The officials believe that they provided the
              auditors with sufficient backup to support the charges. However, as discussed
              during the exit conference, the Authority needs to provide evidence that in fact
              none of these unsupported expenses have been vouchered in the past. This
              support will need to be provided to HUD officials during the audit resolution
              process for their eligibility determination.

Comment 9     Officials for the Authority state that the Authority’s routine internal review
              identified the $7,747 discrepancy in payroll expenses booked and that a journal
              entry was made to correct the error. However, at the time we reviewed the
              payroll expenses, there was inadequate documentation to support $7,747 in
              payroll expenses. HUD officials will need to review this documentation during
              the audit resolution process to determine if the support is adequate.

Comment 10 Officials for the Authority contend that the use of the word “Improper” pertaining
           to the allocation of employee payroll expenses may allege “impropriety”. As
           such, we have changed the word improper to inaccurate and we have included an
           additional recommendation to ensure that allocation plans are accurate and should
           be updated annually.

Comment 11 Officials for the Authority concur that they incorrectly charged 100 percent of the
           director of property development’s payroll expenses to the capital fund program.
           As a result, the Authority will be allocating 70 percent of his time to activities
           funded under the Recovery Act and 30 percent of his time to Section 8 conversion



                                               12
              and other development activities absorbed by the COCC in the future, not the
              50/50 as stated in the report.

Comment 12 Officials for the Authority state that several of the items detected during the audit
           were discovered and corrected via the Authority’s own internal auditing of its
           programs, which is true. However, the deficiencies that were subsequently
           corrected should be provided to HUD officials during the audit resolution process
           for an eligibility determination.

Comment 13 Officials for the Authority contend that the “lack of an established allocation
           plan” implies the Authority has no allocation plan for allocating its common
           charges. While the Authority does have an allocation plan, officials for the
           Authority concur that the salary allocations need to be continuously reviewed as
           duties and responsibilities change. Accordingly, we have changed the wording of
           item 4 in our conclusion to state that we attribute the weakness to the lack of an
           accurate allocation plan, and as stated earlier we added a recommendation that the
           allocation plan should be updated annually.




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