oversight

The Lafayette Parish Housing Authority, Lafayette, LA, Violated HUD Procurement Requirements and Executed Unreasonable and Unnecessary Contracts

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-06-22.

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

                                                                Issue Date
                                                                        June 22, 2011
                                                                
                                                                Audit Report Number
                                                                       2011-AO-0001




TO:        Donald J. Lavoy, Acting Deputy Assistant Secretary for Field Operations, PQ
           Craig Clemmensen, Director of Departmental Enforcement Center, CACB

           //signed//
FROM:      Nikita N. Irons, Regional Inspector General for Audit, Gulf Coast Region, 11
               AGA

SUBJECT: The Lafayette Parish Housing Authority, Lafayette, LA, Violated HUD
           Procurement Requirements and Executed Unreasonable and Unnecessary
           Contracts


                                  HIGHLIGHTS

 What We Audited and Why

            In response to a congressional and U.S. Department of Housing and Urban
            Development (HUD) request to review allegations of corruption and
            mismanagement, we audited the Lafayette Parish Housing Authority’s (Authority)
            operations of its (1) public housing program and (2) Disaster Housing Assistance
            Program (DHAP). Our objective was to determine whether the Authority
            operated in accordance with HUD’s and other requirements. Specifically, we
            wanted to determine whether the Authority (1) complied with requirements in the
            procurement and monitoring of its contracts and (2) ensured that its contracts
            were reasonable and necessary.

 What We Found


            The Authority neither properly administered its contracting activities, as it
            violated a number of HUD procurement requirements, nor ensured that its
            contracts were reasonable and necessary. The Authority also paid its contractors,
            including its DHAP contractors (1) outside of specified contract timeframes, (2)
         in excess of specified contract amounts, and (3) excessive contract increases.
         These conditions occurred because the Authority did not have adequate controls,
         as it did not maintain (1) a procurement policy that was consistent with Federal
         regulations, (2) a contract administration system to ensure that its contractors
         performed according to contract terms, (3) a written code of standards of conduct
         governing the performance of its employees engaged in the award and
         administration of contracts, (4) a contract register, and (5) written contract
         monitoring policies and procedures, or have a contract monitor. In addition, the
         Authority did not perform cost or price analyses. Further, it did not (1) have
         adequately trained staff, adequate staffing levels or oversight, and was poorly
         managed. As a result, it could not provide reasonable assurance that more than
         $2.9 million in disbursements from its operating and/or capital fund was spent
         properly; protected from fraud, waste, and abuse; or used to benefit program
         participants.

         The Authority also did not always ensure that its contracts were reasonable and
         necessary. This condition occurred because the Authority did not perform cost or
         price analyses or ensure that its procedures provided for a review of proposed
         procurements to avoid the purchase of unnecessary or duplicative items as required.
         As a result, the Authority could not provide reasonable assurance that HUD funds
         were used (1) effectively and efficiently or (2) to benefit program participants. In
         addition, HUD funds may have been exposed to fraud, waste, and abuse.


What We Recommend


         We recommend that HUD’s Deputy Assistant Secretary for Field Operations require
         the Authority to (1) support or repay from non-Federal funds the portion of the more
         than $2.9 million in operating and/or capital funds that it cannot support; (2) modify
         its procurement policy to reflect applicable State and local laws and regulations and
         applicable Federal laws; (3) implement additional internal controls related to its
         procurement and monitoring activities including, maintaining a contract
         administration and written code of standards governing the performance of its
         employees; (4) ensure that its staff attend HUD-approved procurement training,
         which includes contract administration and oversight; (5) ensure that it maintains
         adequate levels of competent staff; (6) immediately cease payments to the DHAP
         accounting specialist working without an executed contract and support or repay
         any amounts that it cannot support from non-Federal funds for funds disbursed
         after the contract expired; and (7) remain under HUD receivership for at least a
         year or until it can demonstrate to HUD that its procurement and other practices
         consistently meet Federal requirements. After the HUD receivership is lifted and
         an Executive Director is hired, HUD should place the Authority on a zero dollar
         threshold, for at least a year or until it can demonstrate to HUD that its
         procurement and other practices consistently meet Federal requirements. In
         addition, we recommend that the Director of HUD’s Departmental Enforcement

                                           2
           Center take appropriate administrative action, up to and including debarment,
           against the former deputy director.

           We also recommend that HUD’s Deputy Assistant Secretary for Field Operations
           require the Authority to (1) perform a cost or price analysis in connection with
           every procurement action and (2) review proposed procurements to avoid the
           purchase of unnecessary or duplicative items.


Auditee’s Response


           We provided a copy of the draft report to HUD on May 10, 2011. We held an exit
           conference with HUD on May 19, 2011. We asked HUD to provide written
           comments to the draft report by May 25, 2011, and it provided written comments
           dated on that day. HUD then submitted a revised response dated June 2, 2011.
           HUD generally agreed with our audit results and recommendations. The complete
           text of HUD’s response, along with our evaluation of that response, can be found
           in appendix B of this report.




                                            3
                              TABLE OF CONTENTS

Background and Objective                                                                5

Results of Audit
        Finding 1: The Authority’s Contract Procurement and Monitoring Activities Did   6
        Not Comply With Federal Regulations

        Finding 2: The Authority’s Contracts Were Not Always Reasonable and             19
        Necessary

Scope and Methodology                                                                   21

Internal Controls                                                                       22

Appendixes
   A.   Schedule of Questioned Costs                                                    24
   B.   Auditee Comments and OIG’s Evaluation                                           25
   C.   Authority Contractors (January 2007 to September 2010)                          27
   D.   Contractor Disbursement Review Results                                          28
   E.   Contractor Overpayment Review Results
                                                                                        30




                                              4
                                 BACKGROUND AND OBJECTIVE

The Lafayette Parish Housing Authority (Authority) is a public corporation located at 115 Kattie
Drive, Lafayette, LA. The Authority’s mission is to provide (1) safe, decent, and affordable
housing to low-income families and (2) self-sufficiency programs to promote education, health,
home ownership, and social programs for residents of public housing and participants of the
Section 8 program. The Authority manages six developments in the Lafayette area. Of the six
developments, two are elderly and disabled developments, and four are family developments.
The Authority manages 572 public housing units and more than 1,600 Section 8 vouchers.
Under normal operations, the Authority is governed by a five-member board of commissioners,
and an executive director is responsible for providing oversight and administrative supervision of
the Authority’s daily activities. However, amid allegations of corruption and mismanagement
with extensive media coverage regarding its operations, the Authority’s executive director, along
with the deputy director, resigned in October of 2010.

In the absence of the executive director, the U.S. Department of Housing and Urban
Development (HUD) placed the Authority on a zero dollar threshold1 and managed the Authority
with the intention of restoring it to an acceptable state without a HUD takeover. However,
effective March 28, 2011, as a last resort, HUD placed the Authority under administrative
receivership.2 HUD’s administrative receiver replaced the Authority’s executive director to
control the day-to-day operations of the Authority, and HUD’s one-member board of
commissioners replaced the Authority’s board of commissioners to provide additional oversight.
Our objective was to determine whether the Authority operated in accordance with HUD’s and
other requirements. Specifically, we wanted to determine whether the Authority (1) complied
with requirements in the procurement and monitoring of its contracts and (2) ensured that its
contracts were reasonable and necessary.




1
 According to HUD, being on a zero dollar threshold required the Authority to submit all payment requests to HUD for prior approval.
2
 Administrative receivership is a process whereby HUD declares a public housing authority in substantial default of its annual contributions
contract and takes control of the authority under the powers granted to the HUD Secretary under the Housing Act of 1937 as amended.

                                                                       5
                                  RESULTS OF AUDIT

Finding 1: The Authority’s Contract Procurement and Monitoring
Activities Did Not Comply With Federal Regulations
The Authority did not procure or monitor its contracts in accordance with Federal regulations.
Specifically, it did not maintain procurement records sufficient to detail the history of its
procurement actions, including cost or price analyses. In cases in which there were no
procurement records, the Authority could not support that its procurement transactions were
conducted in a manner providing full and open competition. In addition, the Authority (1)
disbursed funds to contractors without fully executed contracts; (2) executed contracts that did
not contain all required provisions; (3) entered into a contract that created a conflict of interest;
(4) paid contractors outside of specified contract timeframes; (5) paid contractors in excess of
specified contract amounts; (6) appeared to obtain services using bid splitting, which is
prohibited, to avoid the competitive procurement process; and (7) failed to ensure that
contractors completed work in accordance with contract terms.

Further, under its Disaster Housing Assistance Program (DHAP), the Authority (1) did not
include ceiling prices in its contracts as required; (2) paid contractors both before the contracts
were executed and after the contracts expired; and (3) authorized unsubstantiated, excessive pay
increases. Moreover, the former executive director’s employment contract (1) contained
unjustified pay increases, overlapping contract periods, a gap in the contract period, and terms
which conflicted with another housing authority’s contract and (2) was not properly terminated.

These conditions occurred because the Authority did not have adequate internal controls.
Specifically, it did not maintain (1) a procurement policy consistent with Federal regulations, (2)
an adequate contract administration system, (3) a written code of standards of conduct governing
its employees engaged in the contract award and administration process, (4) a contract register,
and (5) written contract monitoring policies and procedures or have a contract monitor. In
addition, the Authority did not perform cost or price analyses. Further, it did not have
adequately trained staff, adequate staffing levels or oversight, and was poorly managed. As a
result, the Authority could not provide reasonable assurance that more than $2.9 million was
spent properly or used to benefit program participants.


 No Procurement Records and
 Unsigned Contracts


               The Authority did not maintain procurement records sufficient to detail the history
               of its procurement actions, including documentation to support its rationale for the
               method of procurement selected, selection of contract type, contractor selection or
               rejection, and basis for the contract price as required by 24 CFR (Code of Federal
               Regulations) 85.36(b)(9). Between January 2007 and September 2010, the
               Authority made payments related to at least 48 contracts associated with 31

                                                   6
                      contractors1 with disbursements totaling more than $2.5 million. Of the $2.5 million,
                      $1,568,245 was disbursed from the Authority’s operating fund and $973,126 was
                      disbursed from the Authority’s capital fund.2 A review of the 48 contract files
                      determined that none included sufficient procurement records to support the
                      Authority’s procurement activities. Specifically,

                            1. For three contract files with disbursements totaling $67,983,3 the Authority
                               could not locate the contracts and related documentation;

                            2. For four contract files with disbursements totaling $290,943,4 the file did not
                               include an actual contract but, rather, an invoice or contractor proposal; and

                            3. For the remaining 41 contract files with contracts and disbursements totaling
                               more than $2.18 million,5 30 did not have associated procurement records,
                               and 11 had insufficient procurement records.6

                      In addition, 7 of the 41 contract files discussed in number 3 above contained
                      contracts that were not properly executed, as the contracts did not include the
                      signatures of the contractor and/or the Authority7.


    Contracts Missing Required
    Provisions

                      The Authority did not ensure that its contracts contained all provisions required
                      by HUD. Of the 41 contract files discussed in number 3 above, none contained
                      all applicable provisions required by 24 CFR 85.36(i). For instance, one contract
                      that exceeded the small purchase threshold8 did not contain the following sections
                      required for contracts with contract amounts exceeding the small purchase
                      threshold9:

                                  1. Administrative, contractual, or legal remedies in instances in which
                                     contractors violate or breach contract terms;

                                  2. Termination requirements for cause and for convenience, including the
                                     manner by which it will be effected and the basis for settlement; and

1
  See appendix C.
2
  See totals in appendix D.
3
  See contracts 36, 39, and 41 in appendix D.
4
  See contracts 2, 3, 21, and 35 in appendix D.
5
  See contracts 1, 5 through 20, 22 through 34, 37, 38, 40, and 42 through 48 in appendix D.
6
  The contract files with insufficient procurement records included the contract and proposal submission only for the selected contractor in most
instances. Other procurement records, such as solicitations and proposal or bid submissions for competing contractors, were not included.
7
  See contracts 18, 19, 22, 26, 29, 37 and 40.
8
  According to HUD, public housing authorities should establish a dollar threshold for individual small purchases that may not exceed the Federal
small purchase threshold (currently $100,000) or any lower dollar value set by the State or locality having jurisdiction over the housing authority.
The State’s threshold was set at $25,000. Therefore, the Authority was required to comply with the State’s small purchase threshold in the
amount of $25,000, as it was more stringent than the Federal requirement.
9
  See contract 44 in appendix D.

                                                                         7
                                      3. 3-year record retention requirements upon final payment and the
                                         closure of all other pending matters.

                        In another instance, a construction contract did not include provisions for
                        compliance with (1) equal employment opportunity, (2) the Anti-Kickback Act,
                        and (3) the Davis-Bacon Act as required10.

                        In addition, the Authority did not ensure that its time and materials contracts
                        included ceiling prices. Of the 41 contract files reviewed with contracts discussed
                        above, 13 were labor hour contracts. For these 13 contracts, the Authority did not
                        include a ceiling price in the executed contracts as required by 24 CFR
                        85.36(b)(10).



 Conflict of Interest and
 Duplicate Services


                        The Authority created a conflict of interest and violated 24 CFR 85.36(b)(3) when
                        it entered into a contract with the former deputy director while he was employed
                        with the Authority. The former deputy director resigned in October 2010. Before
                        his resignation, the Authority entered into a contract with the deputy director,
                        effective December 1, 2008, to perform DHAP inspections. The deputy director
                        was also responsible for overseeing the Authority’s DHAP inspection process
                        during the contract period. Under this contract, the Authority paid the former
                        deputy director a total of $535.11 In addition to creating this conflict of interest,
                        the Authority (1) began paying the former deputy director on January 15, 2008,
                        more than 10 months before the effective date of this DHAP contract, and (2) did
                        not sign the contract until March 1, 2010, more than 2 years after the Authority
                        disbursed the initial payment.

                        Further, the Authority was paying another contractor to perform the same
                        services. This contract had an effective date of February 17, 2007, but was not
                        signed by the Authority. According to the Authority, it contracted with the
                        former deputy director after it terminated the other contractor’s contract due to
                        health concerns. However, a review of the Authority’s accounts payable data
                        determined that the Authority made payments to both contractors under DHAP
                        between January 15 and June 20, 2008.




10
     See contract 25 in appendix D.
11
     See contract 34 in appendix D.

                                                              8
     Undue Contract Payments


                      The Authority made payments (1) outside of specified contract timeframes12 and
                      (2) in excess of fixed contract amounts.

                      Payments Outside of Specified Contract Timeframes

                      Of the 48 contracts reviewed, the Authority required one contractor to provide
                      consultative services as a contract controller/fee accountant at a rate of $90 per
                      hour. The contract was effective October 30, 2007, and the contract period
                      covered fiscal years ending September 30, 2007, through September 30, 2010.
                      However, the contractor continued to perform services for the Authority at least
                      through February 2011, an additional 5 months after the September 30, 2010,
                      contract expiration date. Although not included in our review, using the
                      contracted hourly rate at 40 hours per week, we estimate that the Authority paid
                      this contractor at least $78,000 after the contract expired. According to the
                      contractor, she and the Authority established an informal agreement to continue
                      the contracted services until the Authority’s board was able to review proposal
                      submissions for a fee accountant. The contractor provided a copy of an e-mail,
                      dated October 1, 2010, to the former executive director, requesting to continue the
                      contracted services. However, neither the contractor nor the Authority provided
                      documentation showing the Authority’s agreement.

                      In another instance, the Authority executed two contracts with the same contractor
                      to provide services related to the Authority’s capital fund program. One contract
                      was effective August 11, 2009, and the other was effective March 9, 2010.
                      However, under both contracts, the Authority required the contractor to begin
                      providing services before the contract execution date. Specifically, the Authority
                      required the contractor to begin providing services on July 27 and October 1,
                      2009, respectively. In addition, between May and July 2009, the Authority paid
                      this contractor at least $6,000 before the August 11, 2009, execution date of the
                      initial contract.

                      Payments in Excess of Fixed Contract Amounts

                      Of the 31 contractors related to the 48 contracts reviewed, 7 contractors received
                      payments in excess of the executed contract amounts with no contract
                      amendments. As of September 30, 2010, the Authority overpaid these seven
                      contractors more than $350,000.13 In one instance, 1 contractor had 11 contracts
                      with executed contract amounts totaling $76,354. However, the Authority paid
                      this contractor at least $229,231,14 resulting in overpayments totaling $152,877.

12
   This includes payments that were made before contract execution and payments made after contract termination dates.
13
   See appendix E.
14
   See the third contractor in appendix E.

                                                                      9
 Possible Bid Splitting


                        HUD Handbook 7460.8 Rev 2, Chapter 5, Section 5.3 prohibits bid splitting,
                        which is the process of executing multiple small purchase contracts for similar
                        services to permit the use of the small purchase procedures and avoid more
                        stringent competitive procurement requirements. However, our review
                        determined that the Authority may have engaged in bid splitting for 2 of its 31
                        contractors reviewed.

                        In one instance, within 1 year, the Authority executed at least 11 contracts with
                        the same contractor,15 of which 8 contracts involved storm damage and/or roof
                        repair. Had the Authority executed one contract for these services, the total
                        would have exceeded the small purchase threshold of $25,000, and more stringent
                        procurement requirements would have applied, including inviting sealed bids or
                        requesting competitive proposals.

                        In the other instance, the Authority executed two contracts within 6 months for
                        the same services with the same contractor.16 The Authority executed these
                        contracts on August 11, 2009, and March 9, 2010, with contract amounts of
                        $23,780 and $24,950, respectively. These contract amounts were just slightly
                        below the $25,000 small purchase threshold.

                        The Authority’s procurement policy did not reflect the applicable State and local
                        laws and regulations and applicable Federal laws, including competition
                        requirements as required by 24 CFR 85.36(b)(1) and (c)(1).


 Substandard or No Work
 Performed


                        Site visits related to 5 of the 48 contracts reviewed determined that

                                  In three instances, the contractor completed the work required by the
                                   contract specifications.

                                  In one instance, the contract required the contractor to install and/or repair
                                   handicap ramps. When asked, the Authority stated that it was not aware
                                   of any handicap ramp work completed by the contractor. However, the
                                   contractor submitted an invoice to the Authority totaling $4,050 on the
                                   same date that the contract was effective. The Authority paid this


15
     See contractor 4 in appendix C.
16
     See contractor 30 in appendix C.

                                                             10
                        contractor less than 3 weeks later. Therefore, the Authority may have paid
                        this and other contractors for work that was not performed.

                       In one instance, the Authority required the contractor to complete work
                        such as installing handrails and placing signage and paint to identify
                        accessible parking spaces on the exterior of the unit. However, our site
                        visit determined that the contractor did not always ensure that the exterior
                        of handicap units included handrails. As shown in exhibit A below, this
                        area outside the unit at the Authority’s Martin Luther King public housing
                        site did not have handicap rails along the walkway. However, we noted
                        that the parking lot outside of the unit contained handicap signage and
                        parking striping.

              Exhibit A




                                              No handicap railings

              The Authority did not maintain a contract administration system to ensure that its
              contractors performed in accordance with the terms, conditions, and specifications
              of its contracts or purchase orders as required by 24 CFR 85.36(b)(2).


Internal Controls Not
Adequate


              The Authority lacked several internal controls which would have aided it in the
              procurement and monitoring of its contracts. Specifically, the Authority’s
              procurement policy did not adequately reflect applicable State and local laws and
              was not consistent with Federal regulations, including 24 CFR 85.36 and HUD
              Handbook 7460.8, as it

                  1. Did not include guidelines for selecting the appropriate procurement method
                     or performing cost or price analyses as required by 24 CFR 85.36(d) and 24
                     CFR 85.36(f), respectively. These guidelines would have assisted the
                     Authority in ensuring that it complied with Federal procurement regulations
                     when procuring goods and services.



                                                  11
   2. Did not detail procurement procedures related to records retention
      requirements outlined in 24 CFR 85.36(b)(1) and (b)(9). Because the
      Authority did not retain sufficient procurement records, it could not support
      that its procurement transactions were conducted in a manner providing full
      and open competition as required by 24 CFR 85.36(c)(1). In addition,
      without sufficient procurement records, the Authority could not support that
      it (1) made awards only to responsible contractors as required by 24 CFR
      (b)(8) and (2) ensured that selected contractors were not suspended,
      debarred, or otherwise ineligible as required by 24 CFR 941.205(d).

   3. Did not reference contract provision requirements outlined in 24 CFR
      85.36(i). Since the Authority’s contracts did not include and/or meet all
      applicable provisions, it was unable to ensure that its contractors were aware
      of and complied with HUD requirements.

According to the Authority, it primarily used HUD Handbook 7460.8 as its
procurement policy. However, HUD did not agree with this method and stated
that the Authority should have only used the handbook as a guide and developed
its own procurement policy to reflect applicable requirements.

In addition, the Authority did not maintain a

       1. Contract administration system which ensured that its contractors
          performed in accordance with terms, conditions, and specifications of
          its contracts or purchase orders as required by 24 CFR 85.36(b)(2);

       2. Written code of standards of conduct governing the performance of its
          employees engaged in the award and administration of contracts as
          required by 24 CFR 85.36(b)(3); and

       3. Contract log or organized contract files. To conduct our review, we
          had to create a contract log using the Authority’s accounts payable
          data, board meeting minutes, and other sources. Without the contract
          log, the Authority could not ensure that it avoided the purchase of
          unnecessary or duplicate items as required by 24 CFR 85.36(b)(4). As
          related to the contract files, in some instances, files were placed into
          boxes with no clear method of organization, as shown in exhibit B on
          the following page.




                                 12
                   Exhibit B




            Not maintaining a contract log and organized files likely precluded the Authority
            from periodically reviewing its record of prior purchases, as well as future needs,
            to find patterns of procurement actions that could be performed more efficiently
            or economically, a general procurement planning requirement outlined in HUD’s
            procurement handbook 7460.8.

            Further, the Authority did not implement written contract monitoring policies and
            procedures, hire a contract monitor, ensure that its staff was adequately trained or
            maintain adequate staffing levels. According to former and current Authority
            staff, the majority of the Authority’s staff did not receive any procurement
            training and the Authority’s staffing levels were not sufficient, which precipitated
            the need for contracted services. We agreed that staffing levels were not
            sufficient, as a review of the organizational chart determined that all accounting
            positions were not filled. In addition, a review of the Authority’s accounting
            procedures determined that the Authority lacked adequate segregation of duties
            related to its accounts payable function, as the same employee prepared checks,
            recorded general entries, and maintained custody of vouchers. Without the
            written procedures and adequately trained staff, the Authority could not ensure
            that contractors complied with and were paid according to the terms of the
            contracts.

Review of Seven DHAP
Contracts


            During the review, we initially identified the 48 contracts discussed above.
            However, we later determined that the Authority had at least seven additional
            individual DHAP-related labor hour contracts that it had not provided. Upon
            request, the Authority provided those contracts, and we performed a limited
            review of the contracts, including the contract amounts and associated payments.
            The seven individual contracts included five for DHAP case managers, one for a
            DHAP intake specialist, and one for a DHAP accounting specialist. The limited
            review as related to the seven contracts determined that


                                             13
                            1. None of the contracts included ceiling prices as required by 24 CFR
                               85.36(b)(10);

                            2. The DHAP accounting specialist and two of the DHAP case managers
                               worked outside of the specified contract timeframes, both before the
                               contract execution and after the contract expiration dates. As related to the
                               DHAP accounting specialist, the contract term was from November 24,
                               2008, through July 31, 2010. However, as of March 14, 2011, the
                               Authority stated that it continued to pay the contractor as a DHAP
                               consultant without an executed contract. Assuming a 40-hour work week
                               and using the contracted hourly pay rate in the amount of $15.60,
                               estimated payments made to this contractor after the contract expired on
                               July 31, 2010, through the end of February 2011 would equal at least
                               $18,92817. In addition, a review of the Authority’s accounts payable data
                               determined that it paid one DHAP case manager $41,33918 between
                               December 28, 2007, and November 30, 2008, and another $37,99419
                               between February 1 and November 30, 2008, to perform DHAP case
                               management services without a contract in place; and

                            3. Each of the five case managers received unsubstantiated, excessive pay
                               increases ranging from a 23 to 233 percent increase. As related to the pay
                               increases, the Authority executed one to three contracts after the original
                               contracts with all DHAP case managers for the purpose of increasing the
                               rate of pay. A review determined that the pay increases ranged from 23 to
                               233 percent of the hourly rates under the initial contracts. However, the
                               file did not include documentation, such as a cost or price analysis, to
                               substantiate the excessive pay increases as required by 24 CFR 85.36(f).
                               In addition, the scopes of work for the subsequent contracts did not require
                               more work than required by the initial contracts. Payments made under
                               the subsequent contracts totaled $356,109.20

Review of the Former
Executive Director’s
Employment Contract File


                       In addition to the procurement and DHAP contracts review, we reviewed the
                       employment contract file and associated disbursement data of the former
                       executive director; he resigned in October 2010. The review determined that, due
                       to the Authority’s inadequate oversight and poor management, the former
                       executive director

 17
    This amount is estimated and therefore, not included in questioned costs. See recommendation 1I.
 18
    See contract 2A under the DHAP review in appendix D.
 19
    See contract 5A under the DHAP review in appendix D.
 20
    See unsubstantiated contract increase totals relative to contracts 1A through 5A in appendix D.

                                                                       14
   1. Received unjustified pay increases. The Authority’s disbursement data
      showed that over approximately years, the former executive director’s
      hourly pay ranged from $58 to $89, a $32 per hour increase. The contract
      allowed for an 8.5 percent increment increase in pay upon annual
      satisfactory evaluation and approval by the Authority’s board. However,
      the Authority did not have documentation to support the completion of
      performance evaluations for the executive director or the basis for the
      increases.

   2. Had a gap and overlapping contract periods. As shown in the table below,
      the three contracts covered the following periods:

                                      Table 1
           Contract number                     Contract effective dates
                  1                   October 10, 2002, through October 10, 2007
                  2                    August 7, 2008, through August 7, 2013
                  3                 November 16, 2009, through November 16, 2014

       As shown in table 1 above, from October 11, 2007, to August 6, 2008, the
       Authority did not have an executed employment contract with the former
       executive director. In addition, the employment contracts with effective
       dates of August 7, 2008, to August 7, 2013, and November 16, 2009, to
       November 16, 2014, overlapped. Further, although the contract specified
       that the contract period could be renewed with the consent of both the
       former executive director and the board, the file did not include
       documentation to support the need for change or renewal of the contract.
       Also, the contracts did not include a clause to state that subsequent
       contracts superseded previous contracts.

   3. Had contract periods that conflicted with his contract with another housing
      authority, the Opelousas Housing Authority (Opelousas). Specifically, the
      employment file included copies of contracts between the former
      executive director and Opelousas for consultant/executive director
      services. A comparison of Authority and Opelousas contracts determined
      that the duties outlined under both were the same and/or closely related.
      In addition, the August 11, 2008, effective date for one of Opelousas’s
      contracts was within 3 days of the August 7, 2008, effective date for
      contract number two, shown in table 1 above. Therefore, the former
      executive director was performing the same duties for both housing
      authorities during the same period. Further, the Authority’s payroll data
      showed that the Authority paid the former executive director for 80-hour
      biweekly pay periods at both the Authority and Opelousas from January 7,
      2007, through November 20, 2009.

In addition, the Authority did not ensure that the former executive director’s
contract was properly terminated. According to the former executive director’s

                               15
             contract terms, he could terminate the employment contract by providing the
             Authority with a minimum of 45 days written notice and delivering a “notice of
             termination,” specifying the nature, extent, and effective date of termination.
             However, the file did not include a letter or notice evidencing that the Authority
             properly terminated the contract. Upon request, the Authority later provided the
             former executive director’s resignation letter, which was unsigned, only included
             two sentences, and was dated the date of his resignation.


Conclusion


             Our review determined that the Authority, which is currently on a zero dollar
             threshold and under HUD’s receivership, did not properly administer its
             contracting activities as it violated a number of HUD procurement requirements.
             In addition, the Authority paid its contractors (1) outstide of specified contract
             timeframes, (2) in excess of specified contract amounts, and (3) excessive
             contract increases.

             These conditions occurred because the Authority did not maintain (1) a
             procurement policy that was consistent with Federal regulations, (2) a contract
             administration system to ensure that its contractors performed according to
             contract terms, (3) a written code of standards of conduct governing the
             performance of its employees engaged in the award and administration of
             contracts, (4) a contract register, (5) written contract monitoring policies and
             proceduresor have a contract monitor. In addition, the Authority did not perform
             cost or price analyses. Further, it did not have adequately trained staff, adequate
             staffing levels or oversight, and was poorly managed. As a result, it could not
             provide reasonable assurance that more than $2.9 million in HUD funds was spent
             properly; protected from fraud, waste and abuse; or used to benefit the program
             participants.




                                              16
Recommendations

          We recommend that HUD’s Deputy Assistant Secretary for Field Operations,
          require the Authority to

          1A. Support or repay from non-Federal funds any amounts that it cannot support,
              including $1,568,245 to its operating fund and $973,126 to its capital fund
              paid for (1) contracts that were improperly procured, (2) contract
              overpayments, or (3) contract payments made outside of the contract effective
              dates.

          1B. Modify its procurement policy to reflect applicable State and local laws and
              regulations and applicable Federal laws as required by 24 CFR 85.36(b)(1). In
              particular, the Authority should modify its procurement policy to include but
              not be limited to procedures for

                              Procurement method selection,
                              Appropriate contract type selection,
                              Conducting price reasonableness assessments,
                              Determining contractor selection and rejection,
                              Records retention,
                              Contract administration and monitoring,
                              Contract provision requirements, and
                              Executing time and material contracts.

          1C. Maintain a contract administration system which ensures that contractors
              perform in accordance with the terms, conditions, and specifications of its
              contracts or purchase orders as required by 24 CFR 85.36(b)(2).

          1D. Maintain a written code of standards of conduct governing the performance of
              its employees engaged in the award and administration of contracts as required
              by 24 CFR 85.36(b)(3).

          1E. Maintain a contract register needed to periodically review its record of prior
              purchases, as well as future needs, to find patterns of procurement actions
              that could be performed more efficiently or economically as required by 24
              85.36(b)(4).

          1F. Implement a contract filing system that will allow easy storage and retrieval
              of contract-related documents.

          1G. Ensure that its executive director and its contracting department employees
              attend HUD-approved procurement training, which includes contract
              administration and oversight.


                                           17
1H. Ensure that it maintains adequate staffing levels and that staff possess the
    appropriate level of education and experience to perform the duties of each
    position.

1I.   Immediately cease payments to the DHAP consultant (accounting specialist)
      working without an executed contract. In addition, the Authority should
      support or repay any amounts that it cannot support from non-Federal funds
      for funds disbursed after the July 31, 2010, contract expiration date.

1J.   As related to DHAP, support or repay from non-Federal funds any amounts
      that it cannot support for a total of $435,442 to its operating fund, which
      includes (1) $140,966 and $96,525 disbursed to two DHAP case managers
      who were paid without an executed contract and for unsubstantiated,
      excessive salary increases; and (2) $197,951 disbursed to the three DHAP
      case managers for unsubstantiated, excessive salary increases.

1K. Remain under HUD receivership for at least a year or until it can
    demonstrate to HUD that its procurement and other practices consistently
    meet Federal requirements. After the HUD receivership is lifted and an
    Executive Director is hired, HUD should place the Authority on a zero
    dollar threshold, for at least a year or until it can demonstrate to HUD that
    its procurement and other practices consistently meet Federal requirements.

We also recommend that the Director of HUD’s Departmental Enforcement
Center

1L. Take appropriate administrative action, up to and including debarment,
    against the former deputy director.




                                18
Finding 2: The Authority’s Contracts Were Not Always Reasonable and
Necessary
The Authority did not always ensure that its contracts were reasonable and necessary. This
condition occurred because the Authority did not perform cost or price analyses or ensure that its
procedures provided for a review of proposed procurements to avoid the purchase of unnecessary or
duplicative items as required. As a result, the Authority could not provide reasonable assurance that
HUD funds were used (1) effectively and efficiently or (2) to benefit program participants. In
addition, HUD funds may have been exposed to fraud, waste, and abuse.



     Unreasonable and Unnecessary
     Contracts


                      The Authority executed unreasonable and unnecessary contracts. Specifically,

                           1. A review of 13 labor hour contracts,21 determined that hourly rates appeared
                              to be excessive in at least 3 instances. Specifically, the Authority executed
                              one plumbing contract at a rate of $85 per hour and two accounting contracts
                              at a rate of $90 per hour. The plumbing contract was effective February 4,
                              2009, and the accounting contracts were effective October 30, 2007, and
                              September 1, 2009,22 respectively.

                                 In May 2008, the Bureau of Labor Statistics’ Occupational Outlook
                                 Handbook, 2010-11 Edition, stated that the median wage rate for plumbers
                                 was approximately $22 hourly and the median wage rate for accountants
                                 was approximately $29 hourly, based on a 40-hour work week. The
                                 handbook also stated that the top 10 percent of plumbers earned more than
                                 $38 hourly and the top 10 percent of accountants earned more than $49
                                 hourly, based on a 40-hour work week. Therefore, in May 2008, the
                                 Authority paid its contracted accountants approximately $40 per hour
                                 more than the highest paid accountants. In addition, the Authority may
                                 have paid its contracted plumber unreasonable hourly rates. This
                                 condition occurred because the Authority did not perform cost or price
                                 analyses as required by 24 CFR 85.36(f).

                           2. During our procurement review of the 48 contracts discussed under
                              finding 1, we identified at least 4 contracts that may have been
                              unnecessary, as the services appeared to be duplicative. This condition
                              occurred because the Authority did not ensure that its procedures provided

21
  13 of the 48 contracts discussed in finding 1
22
  This was the contract effective date; however, the Authority’s accounts payable data indicated that this contractor received payments
beginning January 10, 2007.

                                                                      19
                    for a review of proposed procurement to avoid the purchase of
                    unnecessary or duplicative items as required by 24 CFR 85.36(b)(4).

                    In one instance, the Authority executed three contracts related to security
                    services, each of which covered the same contract timeframe of October 1,
                    2009, to September 30, 2010, and involved monitoring resident activities.
                    Based on the contracts’ vague scopes of work, we could not differentiate
                    among the duties required of each contractor, indicating at least two
                    unnecessary contracts. In another instance, the Authority executed two
                    contracts for accounting services. The scope of work required the
                    contracted accountants to provide services such as reconciliation of bank
                    accounts, preparing budget analyses, processing the general ledger, and
                    general accounting transactions. Authority staff could have performed
                    these accounting services. HUD terminated the accounting contracts,
                    effective March 18, 2011, further validating that these contracts were
                    unnecessary.

Conclusion



             Because the Authority did not perform cost or price analyses or ensure that it
             avoided the purchase of unnecessary or duplicative items, it agreed to unnecessary
             and unreasonable contracts. As a result, the Authority could not provide reasonable
             assurance that HUD funds were used (1) effectively and efficiently or (2) to benefit
             program participants. In addition, HUD funds may have been exposed to fraud,
             waste, and abuse.

Recommendations



             We recommend that HUD’s Deputy Assistant Secretary for Field Operations,
             require the Authority to

             2A. Perform a cost or price analysis in connection with every procurement
                 action, as required by 24 CFR 85.36(f), for future procurements.

             2B. Review proposed procurements to avoid the purchase of unnecessary or
                 duplicative items as required by 24 CFR 85.36(b)(4).




                                              20
                         SCOPE AND METHODOLOGY

We conducted our audit at the Authority’s office in Lafayette, LA, and the HUD Office of
Inspector General (OIG) offices in New Orleans, LA, and Baton Rouge, LA, between October
2010 and April 2011.

To accomplish our audit objective, we

      Reviewed relevant laws, regulations, and HUD handbooks.
      Interviewed HUD, Authority, and Office of Louisiana Legislative Auditor staff.
      Reviewed the Authority’s board meeting minutes.
      Reviewed the Authority’s procurement policy and accounts payable procedures.
      Reviewed the Authority’s audited financial statements.
      Reviewed HUD’s monitoring reports.
      Reviewed the Authority’s annual contributions contract and related amendments, the
       annual plan and the 5-year plan.
      Reviewed the Authority’s procurement files.
      Reviewed and analyzed the Authority’s disbursements as related to its contractors.
      Conducted site visits.

We completed a 100 percent review of the 48 contracts that we initially identified with
disbursements totaling more than $2.5 million. We evaluated the contract files to determine
whether the contracts were procured and monitored in accordance with Federal regulations and
were reasonable and necessary. Through file reviews, we determined that the disbursement data
were generally reliable. In addition, we selected 5 of the 48 contracts based on contract status,
date of completion, and the ability to verify the contractor’s work. We selected construction and
repair related contracts completed less than 3 years prior to our review. We performed the site
visits to evaluate whether the contractors’ work was completed in accordance with the contract
terms.

We also performed a limited review of 7 DHAP contracts outside of the 48 contracts that we
initially identified and reviewed. We evaluated the contract amounts and associated payments
totaling $579,877 to identify overpayments and assess reasonableness. Lastly, we evaluated the
former executive director’s employment contracts and associated payroll data to assess
reasonableness. Through file reviews, we determined that the disbursement data were generally
reliable. We did not assess the reliability of the payroll data as the data was not considered in
calculating questioned costs.

Our audit scope covered January 1, 2007, through September 30, 2010. We expanded the scope
as needed to accomplish our objective. 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 findings and conclusions based on our audit objective.


                                                21
                              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
               objective:

                     Policies and procedures that were implemented to reasonably ensure that
                      procurement activities were conducted in accordance with applicable laws
                      and regulations and
                     Policies and procedures that were implemented to reasonably ensure that
                      HUD funds were effectively or efficiently spent or used to benefit
                      program participants and were safeguarded from fraud, waste, and abuse.

               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


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


                                                 22
1. The Authority lacked adequate controls to ensure that procurement and
   monitoring activities were conducted in accordance with applicable laws
   and regulations (see finding 1).

2. The Authority lacked adequate controls to ensure that its contracts were
   reasonable and necessary (see finding 2).




                            23
                                   APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

 Recommendation                           Unsupported
        number                                     1/
             1A                            $2,541,371
             1J                             $435,442

           Total                           $2,976,813



1/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.




                                             24
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation   Auditee Comments




Comment 1



Comment 1


Comment 1

Comment 1




                            25
                        OIG Evaluation of Auditee Comments

Comment 1   We agree with HUD's assessment of the recommendations. As agreed at the exit
            conference, we removed recommendation 1K and revised recommendation 1L
            (which is now recommendation 1K). We also acknowledge HUD for taking
            actions to correct the deficiencies at the Authority.




                                          26
Appendix C

          AUTHORITY CONTRACTORS (JANUARY 2007 TO
                     SEPTEMBER 2010)


 Number                   Contractor             Number of contract files
      1    A/C Sales                                        1
      2    AK Affordable Pest Control                       1
      3    Allen, Green and Williamson                      2
      4    Anderson Iron Works                              11
      5    Assist Agency                                    2
      6    Benny Prejean Service Company                    1
      7    Big Poppa’s Fitness Gym                          1
      8    Brasseaux’s Nursery                              1
      9    Chris Electric Service Company                   1
    10     Chris Trahan                                      1
    11     Constellation Energy                              1
    12     Daryl Charles                                    1
    13     E.L. Habetz                                      4
    14     Firmin Architects LTD                             1
    15     Garnett Thomas                                    1
    16     Jamie Sarver                                      1
    17     Jessie Broussard                                 1
    18     Johnny Hector                                     1
    19     Jonathan Carmouche                                1
    20     Kingdom Alarms                                    1
    21     Lafayette Reserves LLC                            1
    22     Lafayette Sheriff’s Reserve                       1
    23     Mandi Mitchell                                    1
    24     Marcus Bruno                                      1
    25     Michael Washington                                1
    26     P J Home Improvement                              1
    27     Rachel Mouton                                    1
    28     Russell Recotta                                  1
    29     Sandra Potier                                     1
    30     Smith and Associates                             3
    31     Tenmast                                           1
Total                                                      48




                                            27
Appendix D

          CONTRACTOR DISBURSEMENT REVIEW RESULTS

                                              Procurement review
                                                   Amount disbursed from   Amount disbursed from
Contract(s)             Contractor
                                                      operating fund           capital fund
      1         A/C Sales                                $16,215
      2         AK Affordable Pest Control                $25,008                 $15,528
   3 and 4      Allen, Green and Williamson              $208,130
5 through 15    Anderson Iron Works                       $60,862                $168,369
 16 and 17      Assist Agency                             $78,785
                Benny Prejean Service
     18                                                    $15,568
                Company
     19         Big Poppa’s Fitness Gym                    $4,965                 $24,999
     20         Brasseaux’s Nursery                                                $8,334
                Chris Electric Service
     21                                                    $16,047
                Company
      22        Chris Trahan                                                      $69,450
      23        Constellation Energy                       $58,834
      24        Daryl Charles                               $923                  $1,920
25 through 28   E.L. Habetz                               $146,664               $337,089
      29        Firmin Architects LTD                                             $54,600
      30        Garnett Thomas                             $18,791                $11,329
      31        Jamie Sarver                                  $60                 $42,155
      32        Jessie Broussard                            $2,500
      33        Johnny Hector                                $923                 $1,920
      34        Jonathan Carmouche                           $535
      35        Kingdom Alarms                             $26,230
      36        Lafayette Reserves LLC                                            $15,333
      37        Lafayette Sheriff’s Reserve                                      $111,333
      38        Mandi Mitchell                             $2,700
      39        Marcus Bruno                                                      $35,450
      40        Michael Washington                         $8,700
      41        P J Home Improvement                       $17,200
      42        Rachel Mouton                               $2,240
      43        Russell Recotta                           $148,642                $29,857
      44        Sandra Potier                             $612,493
45 through 47   Smith and Associates                                              $45,460
      48        Tenmast                                    $95,230
    Totals                                                $1,568,245             $973,126




                                                     28
Appendix D (cont’d)

             CONTRACTOR DISBURSEMENT REVIEW RESULTS

                                                                           DHAP review
       Contract                Contractor                                     Disbursed from operating fund
                                                         Unsubstantiated            Unsubstantiated     Payments made outside of
                                                        contract increases         contract increases      specified contract
                                                                                                              timeframes
           1A             Linda Jefferson                    $30,640
           2A23           Beatrice Wilson                                              $55,186                 $41,339
           3A             Charlie Essie                      $26,560
           4A             Chris Williams                     $140,751
           5A24           Myra Liz Parker                                             $102,972                 $37,994
         Totals                                              $197,951                 $158,158                 $79,333




23
     Contract 2A - $96,525 ($55,186 + $41,339) disbursed from operating fund.
24
     Contract 5A - $140,966 ($102,972 + $37,944) disbursed from operating fund.


                                                                      29
Appendix E

          CONTRACTOR OVERPAYMENT REVIEW RESULTS25

                                              Total amount of                       Total amount                      Total overpayment
          Contractor
                                                contract(s)                          disbursed
A/C Sales                                            $12,285                            $16,215                                 $3,930
Allen, Green and Williamson                         $194,750                            $208,130                               $13,380
Anderson Iron Works                                  $76,354                            $229,231                              $152,877
Brasseaux’s Nursery                                  $6,375                              $8,334                                $1,959
E.L. Habetz                                         $302,631                            $483,753                              $181,122
Jessie Broussard                                     $2,000                              $2,500                                  $500
Mandi Mitchell                                        $2,550                             $2,700                                  $150
               Totals                                $596,945                            $950,863                             $353,91826




25
   We performed this analysis based on contracts provided by the Authority. However, because the Authority did not maintain a contract log or
use a systematic approach to maintain its physical contracts, there is a possibility that all contracts were not provided by the Authority. If this is
the case, there may be additional contracts applicable to the disbursement amounts referenced in the table.
26
   This table is for illustrative purposes only as this amount is included in the total questioned costs amount as reflected in the procurement review
table totals in appendix D.

                                                                         30