oversight

The Lafayette Parish Housing Authority, LA, Generally Followed Requirements When Obligating and Expending Its Public Housing Capital Fund Stimulus Recovery Act funds But Did Not Always Comply With Recovery Act Procurement and Reporting

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-08-26.

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

                                                                  Issue Date
                                                                       August 26, 2011
                                                                  
                                                                  Audit Report Number
                                                                       2011-AO-0002




TO:        Donald J. Lavoy, Acting Deputy Assistant Secretary for Field Operations, PQ

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

SUBJECT: The Lafayette Parish Housing Authority, Lafayette, LA, Generally
         Followed Requirements When Obligating and Expending Its Public Housing
         Capital Fund Stimulus Recovery Act funds But Did Not Always Comply With
         Recovery Act Procurement and Reporting Requirements


                                    HIGHLIGHTS

 What We Audited and Why

             As a spinoff of a prior assignment and as part of our annual audit plan, we audited
             the Lafayette Parish Housing Authority’s Public Housing Capital Fund Stimulus
             Recovery Act funded grant. Our objective was to determine whether the
             Authority followed U.S. Department of Housing and Urban Development (HUD)
             and American Recovery and Reinvestment Act of 2009 requirements.
             Specifically, we wanted to determine whether the Authority (1) properly obligated
             and expended its Recovery Act capital funds, (2) accurately reported its Recovery
             Act activities, and (3) followed Recovery Act requirements when procuring
             contracts for goods or services.


 What We Found

             The Authority generally followed Recovery Act requirements when obligating
             and expending its Public Housing Capital Fund Stimulus Recovery Act funded
             grant. However, it did not always (1) enter its Recovery Act activities into the
           Recovery Act Management and Performance System (RAMPS), (2) report its
           Recovery Act activities by specified deadlines in neither RAMPS nor
           federalreporting.gov, or (3) enter accurate Recovery Act expenditure information
           into federalreporting.gov, as required. In addition, the Authority could not justify
           its reported estimates of jobs created or retained. These conditions occurred
           because the Authority did not have (1) adequate or experienced staff to perform
           the reporting function after its deputy director resigned or (2) adequate record-
           keeping practices. As a result, the Authority provided minimal transparency of
           and accountability for its Recovery Act activities.

           The Authority generally procured its Recovery Act contract in accordance with
           Federal regulations. However, it did not (1) amend and label its written
           procurement policy for use with only Recovery Act grant procurements, as
           required, or (2) include HUD-required provisions in its Recovery Act-funded
           contract. These conditions occurred because the Authority ignored HUD’s
           recommendations to correct the procurement policy and did not have adequately
           trained staff. As a result, it was at risk, during the Recovery Act funding period,
           of exposure to disputes over contract selections. Further, by not having the proper
           contract provisions, the Authority may not have been able to enforce those
           regulatory provisions with its contractors.

What We Recommend


           We recommend that HUD’s Deputy Assistant Secretary for Field Operations require
           the Authority to (1) correct inaccurate Recovery Act expenditure amounts reported
           in federalreporting.gov for the second and fourth quarters of 2010 and (2) provide
           justification for its estimates of jobs created or retained in federalreporting.gov for
           the second, third, and fourth quarters of 2010 and the first quarter of 2011. Since
           the Authority had completed its Recovery Act program, we did not provide a
           recommendation regarding the procurement violation.

Auditee’s Response


           We provided a copy of the draft report to HUD on August 5, 2011, and held an
           exit conference with HUD on August 9, 2011. During the exit conference, HUD
           generally agreed with our findings and recommendations. We asked HUD to
           provide written comments to the draft report by August 12, 2011. On August 11,
           2011, HUD informed us that it generally agreed with our audit results and
           recommendations and elected not to provide formal written comments.




                                              2
                            TABLE OF CONTENTS

Background and Objective                                                             4

Results of Audit
      Finding 1: The Authority Did Not Properly Report or Support Its Recovery Act   6
      Activities

      Finding 2: The Authority Did Not Amend Its Procurement Policy or Include       9
      HUD-Required Provisions in Its Recovery Act Contract

Scope and Methodology                                                                11

Internal Controls                                                                    13

Follow-up on Prior Audits                                                            14




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                                  BACKGROUND AND OBJECTIVE
The Lafayette Parish Housing 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. Effective March 28,
2011, the U.S. Department of Housing Urban Development (HUD) placed the Authority under
administrative receivership.1 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.

The American Recovery and Reinvestment Act of 2009 became Public Law 111-5 on February
17, 2009. It appropriated $4 billion for the Public Housing Capital Fund Stimulus Recovery Act
funded grant to carry out capital and management activities for public housing agencies. It
allocated $3 billion for formula grants and $1 billion for competitive grants. On March 18, 2009,
HUD and the Authority executed amendment number 20 to the Authority’s annual contributions
contract, in which HUD agreed to provide Recovery Act assistance to the Authority in the
amount of more than $1 million.

The Recovery Act funds support three themes that align with the broader goals of the Recovery
Act: (1) promoting energy efficiency and creating green jobs, (2) unlocking the credit markets
and supporting shovel-ready projects, and (3) mitigating the effects of the economic crisis and
preventing community decline. HUD’s overriding objective in support of these goals is the
creation and preservation of jobs.

The Recovery Act required the Authority to (1) obligate 100 percent of the funds within 1 year
of the date on which funds became available to the agency for obligation, (2) expend 60 percent
of the funds within 2 years, and (3) expend 100 percent of the funds within 3 years of the date on
which funds became available to the agency. HUD made Recovery Act formula grants available
on March 18, 2009, resulting in an obligation deadline of March 17, 2010.

In addition, HUD required the Authority to use its formula grant for eligible activities already
identified in either its annual statement or 5-year action plan.2 Further, HUD required the
Authority to report its obligations and expenditures in HUD’s Line of Credit Control System.
Additionally, two specific provisions in the Recovery Act required quarterly reporting on the part
of agencies and grantees. Section 1512 required recipients and subrecipients to report on
activities, job creation, and job retention, and Section 1609 required agencies to report on the
status of compliance with the National Environmental Policy Act (NEPA) for all Recovery Act-
funded projects and activities.



1
  This is a process whereby HUD declares a public housing agency in substantial default of its annual contributions contract and takes control of
the agency under the powers granted to the HUD Secretary under the Housing Act of 1937 as amended.
2
  The annual statement, annual plan, and 5-year action plan are all components of the Authority’s comprehensive plan. The HUD-approved
comprehensive plan sets forth all of the Authority’s physical and management improvement needs for its public housing developments.




                                                                        4
As of February 28, 2011, the Authority had spent its entire Public Housing Capital Fund
Stimulus Recovery Act funded grant totaling more than $1 million.

Our objective was to determine whether the Authority followed HUD and Recovery Act
requirements. Specifically, we wanted to determine whether the Authority (1) properly obligated
and expended its Recovery Act capital funds, (2) accurately reported its Recovery Act activities,
and (3) followed Recovery Act requirements when procuring contracts for goods or services.




                                               5
                                                RESULTS OF AUDIT

Finding 1: The Authority Did Not Properly Report or Support Its
Recovery Act Activities
The Authority did not always (1) enter its Recovery Act activities into the Recovery Act
Management and Performance System (RAMPS), (2) report its Recovery Act activities by
specified deadlines in neither RAMPS nor federalreporting.gov, or (3) enter accurate Recovery
Act expenditure information into federalreporting.gov, as required. In addition, the Authority
could not justify its reported estimates of jobs created or retained. These conditions occurred
because the Authority did not have (1) adequate or experienced staff to perform the reporting
function after its deputy director resigned or (2) adequate record-keeping practices. As a result,
it provided minimal transparency of and accountability for its Recovery Act activities.



    RAMPS Reports Were Not
    Submitted or Were Not
    Submitted in a Timely Manner

                       Section 1609 of the Recovery Act required the Authority to complete
                       environmental reviews and report on the status of its compliance with NEPA in
                       RAMPS no later than January 10, 2010. In addition, HUD required the Authority
                       to report its core activities in RAMPS for all Recovery Act-funded projects and
                       activities. HUD required submission of the core activities to RAMPS no later
                       than the twentieth day at the end of each calendar quarter,3 including information
                       on units of affordable housing developed or modernized using Recovery Act
                       funds as well as data on energy efficiency improvements included in these units.

                       However, although the Authority submitted its environmental reviews to HUD
                       and obtained environmental clearance for its Recovery Act funded project, it did
                       not report on the status of its compliance with NEPA in RAMPS, as required. In
                       addition, as shown below, of the six required core activities reports, it failed to
                       submit one and submitted the remaining five late.

                                                      RAMPS reporting for core activities
                                   Quarter period                  Due date            Submission date    Days late
                             October-December 2009 (4th)       January 20, 2010        January 27, 2010      7
                              January-March 2010 (1st)          April 20, 2010          April 30, 2010      10
                                April-June 2010 (2nd)            July 20, 2010          August 3, 2010      13
                              July-September 2010 (3rd)        October 20, 2010        October 31, 2010     11
                             October-December 2010 (4th)       January 20, 2011          Not submitted      N/A
                              January-March 2011 (1st)          April 20, 2011            May 5, 2010       15

3
    Beginning the quarter ending December 31, 2009




                                                             6
    Federalreporting.gov Reports
    Were Late, Inaccurate, and Not
    Justified

                      Section 1512 of the Recovery Act required the Authority to report on the use of
                      its Recovery Act funding, no later than the tenth day after the end of each
                      calendar quarter4 in federalreporting.gov, a nationwide data collection system.
                      Required reporting elements included estimates of jobs created or retained and
                      expenditure amounts. Of the seven required federalreporting.gov reports, the
                      Authority submitted one on time and two more than 30 days late. Four did not
                      have a submission date,5 as shown below.

                                                                      Federalreporting.gov
                             Quarter period                          Due date         Submission date                       Days late
                        July-September 2009 (3rd)                October 10, 2009 Unable to determine                   Unable to determine
                       October-December 2009 (4th)               January 10, 2010 Unable to determine                   Unable to determine
                        January-March 2010 (1st)                  April 10, 2010        May 17, 2010                            37
                          April-June 2010 (2nd)                    July 10, 2010       August 3, 2010                           33
                        July-September 2010 (3rd)                October 10, 2010     October 7, 2010                            0
                       October-December 2010 (4th)               January 10, 2011 Unable to determine                   Unable to determine
                        January-March 2011 (1st)                  April 10, 2011     Unable to determine                Unable to determine

                      In addition, the Authority did not accurately report its Recovery Act expenditures
                      for the second and fourth quarters of 2010 as shown below.

                                                                      Federalreporting.gov
                               Quarter period                         Actual         Reported expenditure                     Difference
                                                                   expenditure              amount                          (Underreported)
                                                                     amount                                                  Over reported
                       July-September 2009 (3rd)                        $0                     $0                                  $0
                      October-December 2009 (4th)                       $0                     $0                                  $0
                       January-March 2010 (1st)                         $0                     $0                                  $0
                         April-June 2010 (2nd)                       $171,000               $18,000                            ($153,000)
                       July-September 2010 (3rd)                     $342,000               $342,000                               $0
                      October-December 2010 (4th)                    $819,000               $342,000                           ($477,000)
                       January-March 2011 (1st)                     $1,012,585             $1,012,585                              $0

                      Further, although Office of Management and Budget guidance M-10-08, section
                      5.2(10), did not establish specific requirements for documentation or other written
                      proof to support reported estimates of jobs created or retained, it stated that the
                      Authority should be prepared to justify its job estimates. However, when asked,
                      the Authority could not support or explain its reported estimates of jobs created or
                      retained6 as the former deputy director, who resigned in October 2010, was
                      responsible for the required quarterly reporting7 prior to the quarter ending

4
  Beginning the quarter ending September 30, 2009
5
  These reports were either not provided by the Authority or obtained in a format that did not include submission dates.
6
  The Authority began reporting estimates of job created or retained the second quarter ending June 2010; thus, reported estimates for four of
seven quarters (quarters ending June 2010, September 2010, December 2010 and March 2011).
7
  This consisted of five quarters beginning the quarter ending September 30, 2009.



                                                                        7
             December 31, 2010. Beginning this quarter, the administrative assistant entered
             the required reports; however, could not support the reported estimates of jobs
             created or retained. The Authority’s contractor acknowledged that the reported
             figures were not correct.

The Authority Did Not
Understand the Reporting
Requirements or Keep
Adequate Records

             The Authority did not understand how to report the grant information. Authority
             staff stated that it was not aware of the NEPA compliance reporting requirement.
             Regarding federalreporting.gov, before the administrative assistant began entering
             the required reports, the former deputy director submitted the reports. However,
             the Authority was unable to locate the prior reports and related documentation.
             Moreover, when asked for an explanation of the job estimates, the administrative
             assistant stated that she used the numbers from the previous reports and was not
             familiar with the Recovery Act reporting requirements.


Conclusion

             Since the Authority did not report its Recovery Act activities accurately or in a
             timely manner, it provided minimal transparency and accountability.


Recommendations


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

             1A. Correct inaccurate Recovery Act expenditure amounts reported in
                 federalreporting.gov for the second and fourth quarters of 2010.

             2A. Provide a justification for its estimates of jobs created or retained reported in
                 federalreporting.gov for the second, third, and fourth quarters of 2010 and
                 the first quarter of 2011.




                                               8
Finding 2: The Authority Did Not Amend Its Procurement Policy or
Include HUD-Required Provisions in Its Recovery Act Contract
Although the Authority generally procured its Recovery Act contract in accordance with HUD
and Recovery Act requirements, it neither amended its procurement policy nor included the
required contract provisions. Specifically, the Authority did not amend and label its written
procurement policy for use with only Recovery Act grant procurements. In addition, its
Recovery Act-funded contract did not include all provisions as required by 24 CFR (Code of
Federal Regulations) 85.36. These conditions occurred because the Authority ignored HUD’s
recommendations to correct the procurement policy and did not have adequately trained staff.
As a result, the Authority was at risk, during the Recovery Act funding period, of exposure to
disputes over contract selections. Further, by not having the proper contract provisions, the
Authority may not have been able to enforce those regulatory provisions with its contractors.


    The Authority Generally
    Procured Its Recovery Act
    Contract in Accordance With
    Requirements

                  The Authority executed one Recovery Act-funded contract, effective February 5,
                  2010, which required the contractor to perform heating, ventilation, and air
                  conditioning work in 190 units at its C.O. Circle public housing development.
                  When procuring the contract, the Authority generally complied with HUD and
                  Recovery Act requirements, as it (1) used the appropriate procurement method,
                  (2) maintained procurement records sufficient to detail the history of its Recovery
                  Act procurement action, and (3) obtained an independent cost estimate before
                  receiving bids or proposals.

    The Authority Did Not Have a
    Recovery Act Procurement
    Policy or Include Required
    Contract Provisions


                  The Authority did not follow the Recovery Act’s procurement requirements when
                  it did not amend and label its written procurement policy for use related to only
                  Recovery Act grant procurements as required by HUD’s Office of Public and
                  Indian Housing (PIH) Notice PIH 2009-12. Without the amended policy, HUD
                  still required the Authority to follow 24 CFR 85.36. However, the Authority did
                  not include all contract provisions as required by 24 CFR 85.36, such as the Anti-
                  Kickback8 and Contract Work Hours and Safety Standards Acts9 requirements.


8
    85.36(i)(5)
9
    85.36(i)(6)



                                                   9
The Authority Ignored HUD’s
Recommendation and Lacked
Adequately Trained Staff


             HUD identified the Authority’s lack of compliance with amending its
             procurement policy for Recovery Act Capital Fund grant procurements during its
             November 2009 monitoring review. For the corrective action, HUD required the
             Authority to amend its policy and suggested additional staff training. However,
             the Authority had not resolved the issue. In addition, the Authority’s staff had
             received no formal training on procurement or Recovery Act requirements.

Conclusion


             Because the Authority did not amend its procurement policy, it was at risk, during
             the Recovery Act funding period, of exposure to disputes over contract selections.
             Further, by not having the proper contract provisions, the Authority may not have
             been able to enforce those regulatory provisions with its contractors.

Recommendations


             Since the Authority had completed its Recovery Act program, we did not provide
             recommendations for this finding.




                                             10
                         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 and Baton Rouge, LA. We performed our audit
between March and August 2011.

To accomplish our audit objective, we

      Obtained and reviewed relevant laws, regulations, and program guidance relevant to the
       Recovery Act.
      Interviewed HUD and Authority staff.
      Reviewed the Authority’s audited financial statements.
      Reviewed HUD’s monitoring reviews of the Authority’s Recovery Act activities.
      Reviewed the Authority’s annual contributions contract, annual plan, annual statement, and
       5-year plan.
      Reviewed the Authority’s board meeting minutes.
      Reviewed the Authority’s procurement and accounting policies.
      Reviewed the Authority’s procurement file regarding its Recovery Act-funded contract.
      Reviewed and analyzed the Authority’s obligation and disbursements related to its
       Recovery Act contractor.
      Conducted site visits.
      Reviewed Recovery Act reporting documentation available.

The Authority executed one Recovery Act-funded contract totaling more than $1.5 million, of
which more than $1 million was funded with Recovery Act funds. We evaluated whether the
Authority procured the contract in accordance with HUD and Recovery Act requirements. We also
assessed whether the Authority’s obligation under this contract was eligible and properly supported.

In addition, we used the representative, nonstatistical sampling method to review 10 (5 percent)
of 190 units to verify that work was underway or completed and that the Authority ensured
compliance with the “buy American” Recovery Act requirements. Through site visits, we
determined that the unit listing data were generally reliable.

Further, we obtained and reviewed all four (100 percent) payment vouchers totaling more than $1
million, which were applicable to the Recovery Act expenditures, to determine whether the
Authority’s Recovery Act disbursements were eligible and supported. Through a file review, we
determined that the disbursement data were generally reliable.
Lastly, we reviewed available documentation and the reporting Web sites to determine whether
the Authority properly reported its obligations and expenditures to HUD.

Our audit scope covered March 18, 2009, through February 28, 2011. We expanded the scope as
needed to accomplish our audit 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




                                                11
conclusions based on our audit objective(s). We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objective.




                                              12
                              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:

                     Controls implemented by the Authority to ensure that Recovery Act (1)
                      obligations and expenditures were eligible and properly supported, (2)
                      activities were accurately and reliably reported, and (3) procurement
                      requirements were followed.

               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 Deficiency


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

                     The Authority lacked sufficient controls to ensure compliance with HUD
                      and Recovery Act procurement and reporting requirements (see findings 1
                      and 2).




                                                 13
                       FOLLOW-UP ON PRIOR AUDITS


 The Lafayette Parish Housing
 Authority, Lafayette, LA,
 Violated HUD Procurement
 Requirements and Executed
 Unreasonable and Unnecessary
 Contracts, 2011-AO-0001


We issued an audit report on the Authority’s procurement and contract activities under its public
housing program and Disaster Housing Assistance Program (DHAP) in June 2011. The audit
found that 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. As a result, it could not provide reasonable assurance that (1) HUD funds
were used effectively and efficiently or (2) more than $2.9 million in disbursements from its
operating and capital funds were spent properly; protected from fraud, waste, and abuse; or used
to benefit program participants.

We recommended 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 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 system 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.

In addition, we recommended that the Director of HUD’s Departmental Enforcement Center
take appropriate administrative action, up to and including debarment, against the former
deputy director. Lastly, we recommended 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.

HUD generally agreed with our audit results and recommendations. As of August 25, 2011, all
recommendations remained in open status and in the management decision phase.



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