oversight

The Harrisburg, PA, Housing Authority Generally Administered Its Recovery Act Capital Fund Grant in Accordance With Applicable Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-05-13.

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

                                                                Issue Date
                                                                       May 13, 2010
                                                                Audit Report Number
                                                                       2010-PH-1009




TO:        Dennis G. Bellingtier, Director, Office of Public Housing, Pennsylvania State
            Office, 3APH

           //signed//
FROM:      John P. Buck, Regional Inspector General for Audit, Philadelphia Region,
             3AGA

SUBJECT:   The Harrisburg, PA, Housing Authority Generally Administered Its Recovery
           Act Capital Fund Grant in Accordance With Applicable Requirements

                                  HIGHLIGHTS

 What We Audited and Why

           We audited the Harrisburg Housing Authority’s (Authority) administration of its
           Public Housing Capital Fund grant that it received under the American Recovery
           and Reinvestment Act of 2009 (Recovery Act). We selected the Authority for
           audit because it received a $4.4 million formula grant. Our objective was to
           determine whether the Authority administered the grant funds provided under the
           Recovery Act according to Recovery Act requirements and applicable U.S.
           Department of Housing and Urban Development (HUD) rules and regulations.

 What We Found


           The Authority generally administered its grant according to Recovery Act
           requirements and applicable HUD rules and regulations. However, it did not
           accurately enter job creation information into the appropriate Federal reporting
           Web site.
What We Recommend


           We recommend that HUD require the Authority to develop and implement controls
           to ensure that Recovery Act job creation data it enters into the Federal reporting
           Web site are accurate.

           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 discussed the report with the Authority during the audit and at an exit
           conference on April 27, 2010. The Authority provided written comments to our
           draft report on May 3, 2010. It agreed with the conclusion and recommendation
           in the report. The complete text of the Authority’s response can be found in
           appendix A of this report.




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                           TABLE OF CONTENTS

Background and Objective                                                        4

Results of Audit
      Finding: The Authority Generally Administered Grant Funds in Accordance   6
      With Applicable Requirements

Scope and Methodology                                                           11

Internal Controls                                                               12

Appendixes
   A. Auditee Comments                                                          14




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                        BACKGROUND AND OBJECTIVE

The Harrisburg Housing Authority (Authority) was established in 1938 under the Housing
Authority Law of the Commonwealth of Pennsylvania to serve the needs of low-income, very
low-income, and extremely low-income families in Harrisburg, PA, and to (1) increase the
availability of decent, safe and affordable housing in its communities; (2) ensure equal
opportunity in housing; (3) promote self-sufficiency and asset development of families and
individuals; and (4) improve community quality of life and economic viability. A five-member
board of commissioners governs the Authority. The commissioners serve 5-year terms on the
board. The executive director of the Authority during the audit was Mr. Senghor Manns. The
Authority’s main administrative office is located at 351 Chestnut Street, Harrisburg, PA. During
our audit period, the Authority owned and operated 1,728 public housing units under an annual
contributions contract with the U.S. Department of Housing and Urban Development (HUD).

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 $4.4
million formula grant. On September 24, 2009, HUD awarded the Authority a $3.4 million
competitive grant.

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 were critical priorities in the
funding and implementation of the Recovery Act.

The Authority allocated its formula grant to the rehabilitation of public housing units, parking lot
improvements, replacement of boilers, and administrative expenses. Grant funds can be used to
address deferred maintenance needs, including but not limited to

       Replacement of obsolete systems and equipment with energy-efficient systems and
       equipment that reduce consumption;

       Work items related to code compliance, including abatement of lead-based paint and
       implementation of accessibility standards;

       Correction of environmental issues; and

       Rehabilitation and modernization activities that have been delayed or not undertaken
       because of insufficient funds.


                                                   4
Our objective was to determine whether the Authority administered grant funds provided under
the Recovery Act according to Recovery Act requirements and applicable HUD rules and
regulations.




                                              5
                                RESULTS OF AUDIT

Finding: The Authority Generally Administered Grant Funds in
Accordance With Applicable Requirements
The Authority generally administered its grant funds in accordance with the requirements of the
Recovery Act and HUD rules and regulations. The Authority used grant funds for eligible
activities included in its annual plan or 5-year action plan, obligated grant funds within the
established deadline, received and disbursed grant funds in a timely manner, and complied with
applicable procurement requirements. However, it did not enter accurate job creation
information into the appropriate Federal reporting Web site.



 The Authority Used Grant
 Funds for Eligible Activities
 Included in Its Annual Plan or
 5-Year Action Plan


              The Authority selected and funded eligible activities from its annual plan and
              5-year action plan. Under the Recovery Act, HUD’s Office of Public and Indian
              Housing (PIH) issued Notice PIH 2009-12, which required the Authority to use
              grant funds for activities currently identified in either its annual plan or 5-year
              action plan. All of the activities that the Authority selected were on either its
              annual plan or 5-year action plan. The Authority selected activities that were
              eligible to be funded with its Recovery Act grant. It allocated its grant to the
              rehabilitation of public housing units, parking lot improvements, replacement of
              boilers, and administrative expenses. Recovery Act funds can be used to pay
              administrative expenses, but they are limited to 10 percent of the total grant.
              Recovery Act funds are available to address deferred maintenance needs
              including

                      Replacement of obsolete systems and equipment with energy-efficient
                      systems and equipment that reduce consumption;

                      Work items related to code compliance, including abatement of lead-based
                      paint and implementation of accessibility standards;

                      Correction of environmental issues; and

                      Rehabilitation and modernization activities that have been delayed or not
                      undertaken because of insufficient funds.


                                                6
           The following pictures show some of the work items that the Authority funded with
           its Recovery Act grant.




                         Repaving of parking lot at Lick Towers (completed)




                         Rehabilitation of units at Howard Day Homes (ongoing)


The Authority Met the
Required Obligation Deadline


           Under the Recovery Act and HUD Notice PIH 2009-12, the Authority was
           required to obligate 100 percent of its formula grant by March 18, 2010. As of
           February 2010, the Authority had obligated 100 percent of its grant. The Recovery
           Act and HUD Notice PIH 2009-12 also required the Authority to expend at least
           60 percent of the grant by March 18, 2011. The Authority had expended
           $738,000, or 17 percent, of its grant as of February 2010.



                                               7
The Authority Received and
Disbursed Grant Funds in a
Timely Manner



           The Authority drew down grant funds from HUD’s automated Line of Credit
           Control System when the payments were due and after it had inspected and
           accepted the work. HUD Notice PIH 2009-12 requires the Authority to
           requisition funds only when payment is due and after inspection and acceptance
           of the work and to disburse the funds within 3 working days of receipt of the
           funds. The Authority generally disbursed the funds within 3 working days as
           required. It maintained adequate documentation to support the disbursements
           such as invoices and approved requests for periodic partial payments.

The Authority Generally
Procured Goods and Services in
Accordance With Applicable
HUD Requirements


           The Authority generally followed HUD procurement regulations and guidance.
           For example, it

                  Amended its procurement policy as required by HUD Notice PIH 2009-12
                  to expedite and facilitate the use of grant funds by making State and local
                  laws and regulations inapplicable for Recovery Act grants.

                  Received an adequate number of bids to ensure that it awarded contracts
                  competitively as required by 24 CFR (Code of Federal Regulations) 85.36
                  and HUD Handbook 7460.8, REV-2. The Authority advertised and
                  competitively awarded each contract and had sufficient documentation to
                  support the procurement.

                  Ensured that contractors complied with Davis-Bacon Act requirements.
                  The Recovery Act required that all laborers and mechanics be paid in
                  accordance with the prevailing wage rates in accordance with the Davis-
                  Bacon Act. HUD Handbook 1344.1, REV-1, required the Authority to
                  perform wage interviews, review contractors’ weekly payrolls, and ensure
                  that the required Davis-Bacon Act poster and pertinent wage rates were
                  posted in a common area at the job site.

                  Generally complied with HUD guidance for implementing the “buy
                  American” requirement of the Recovery Act in HUD Notice PIH 2009-31.
                  The Authority did not include the provision in a paving contract totaling
                  $107,300. However, due to the nature of the work there was no impact on

                                           8
                            the Authority’s compliance with the requirement. The Authority stated
                            that the paving contract was one of the first contracts funded with
                            Recovery Act funds and that the omission was due to oversight.


    The Authority Did Not Report
    Accurate Job Information

                    Although the Authority complied with all the reporting requirements by the required
                    deadlines, it did not accurately report the number of jobs created or retained as a
                    result of its Recovery Act activities. Guidance issued in Office of Management and
                    Budget (OMB) Memorandum 10-08, dated December 18, 2009, defines a job
                    created or retained as jobs funded during the quarter by the Recovery Act. The
                    memorandum also provides guidance on how to calculate full-time equivalents.
                    Full-time equivalents were to be estimated by dividing the total number of hours
                    worked and funded by the Recovery Act within the reporting period by the quarterly
                    hours in a full-time schedule (520 hours1).

                    For the reporting period February 17 through September 30, 2009, before the
                    issuance of OMB Memorandum 10-08, the Authority incorrectly reported that a total
                    of 43 jobs were retained and/or created. The Authority stated that it reported a full-
                    time equivalent for every individual who worked at least 1 hour at the worksite. The
                    Government Accountability Office noted this problem during its review of the
                    Authority’s reporting and informed the Authority that this was not the correct way to
                    calculate jobs created and/or retained.

                    For the reporting period October 1 through December 31, 2009, the Authority used
                    the calculation in OMB Memorandum 10-08 and reported that its Recovery Act
                    activities created 15.33 jobs. However, this number was not accurate. We reviewed
                    payroll timesheets for the Authority’s Recovery Act activities and determined that
                    the Authority understated the number of hours reported by one contractor by a total
                    of 644 hours. We used the OMB calculation and determined that the Authority
                    understated the number of full-time equivalents by 1.24. The correct job number
                    that the Authority should have reported was 16.57. This error occurred because the
                    Authority entered the data it received from the contractors directly into the Federal
                    reporting Web site without first reviewing the data for accuracy. The Authority
                    needs to develop and implement controls to ensure that job creation data it enters
                    into the Federal reporting Web site are accurate.

    Conclusion


                    The Authority generally administered its grant funds in accordance with the
                    requirements of the Recovery Act and HUD rules and regulations. However, it did
                    not enter accurate job information into the appropriate Federal reporting Web site.
1
    520 hours = 40 hours per week multiplied by 13 weeks per quarter.

                                                          9
          The Authority needs to develop and implement controls to ensure that job creation
          data it enters into the Federal reporting Web site are accurate.


Recommendations


          We recommend that the Director of HUD’s Pennsylvania State Office of Public
          Housing require the Authority to

          1A.     Develop and implement controls to ensure that Recovery Act job creation
                  data it enters into the Federal reporting Web site are accurate.




                                          10
                         SCOPE AND METHODOLOGY

We conducted the audit from October 2009 through April 2010 at the Authority’s offices located at
351 Chestnut Street, Harrisburg, PA, and our offices located in Baltimore, MD, and Pittsburgh, PA.
The audit covered the period February 2009 through January 2010 but was expanded when
necessary to include other periods. We performed limited work on the Authority’s competitive
grant because as of March 1, 2010, the Authority had obligated only $324,000 (9 percent) of the
grant. The related work order was for architectural and engineering services. We reviewed the
Authority’s contract with the architectural and engineering services company as part of our
review of the formula grant and determined that the Authority complied with applicable HUD
procurement requirements. Therefore, our review focused on the Authority’s formula grant.

To complete our audit, we

       Obtained relevant background information;

       Reviewed the Recovery Act;

       Reviewed applicable HUD rules, regulations, and guidance;

       Reviewed policies and procedures related to procurement, monitoring/reporting of grant
       funds, expenditures, and disbursements;

       Reviewed the Authority’s fiscal years 2007 and 2008 audited financial statements;

       Conducted interviews with the Authority’s staff;

       Conducted interviews with officials from HUD’s Pennsylvania State Office of Public
       Housing and an estimator employed by the Authority’s design architect;

       Reviewed relevant monitoring/reporting records, financial records, and procurement
       records; and

       Conducted onsite reviews of work items completed or to be completed by the Authority at
       its Lick Towers, Morrison Towers, and Howard Day Homes developments where the grant
       funds were being used.

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
objective. We believe that the evidence obtained provides a reasonable basis for our audit results
and conclusions based on our audit objective.




                                               11
                              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
              objective:

                      Program operations – Policies and procedures that were implemented to
                      reasonably ensure that procurement activities were conducted in accordance
                      with applicable requirements.

                      Compliance with laws and regulations – Policies and procedures that were
                      implemented to reasonably ensure that resource use was consistent with laws
                      and regulations.

                      Validity and reliability of data – Policies and procedures that were
                      implemented to reasonably ensure that payments to contractors/vendors were
                      made in accordance with applicable requirements.

              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.




                                               12
Significant Weaknesses


           Based on our review, we did not identify any significant weaknesses in the
           Authority’s internal controls that would affect its ability to manage and administer
           Recovery Act-funded activities.




                                             13
Appendix A

             AUDITEE COMMENTS




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