oversight

The Greensboro Housing Authority Needs To Improve Internal Controls for Administering Recovery Act Funds

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-07-21.

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

                                                                Issue Date
                                                                       July 21, 2011
                                                                Audit Report Number
                                                                       2011-AT-1013




TO:         Michael A. Williams, Director, Office of Public Housing, Greensboro, NC,
              4FPH

            //signed//
FROM:       James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA

SUBJECT: The Greensboro Housing Authority Needs To Improve Internal Controls for
           Administering Recovery Act Funds


                                   HIGHLIGHTS

 What We Audited and Why

             We audited the Greensboro Housing Authority (Authority) as part of our annual
             plan to review public housing capital funds awarded under the American
             Recovery and Reinvestment Act of 2009 (Recovery Act). The Authority received
             a $5.6 million Public Housing Capital Fund Stimulus (formula) Recovery Act
             Funded grant, the second highest in the State. It also received a Recovery Act
             funded $1.05 million capital fund competitive grant for addressing the needs of
             the elderly and persons with disabilities.

             Our overall objective was to determine whether the Authority obligated and
             disbursed capital funds received under the Recovery Act in accordance with
             applicable U.S. Department of Housing and Urban Development (HUD) rules and
             regulations. Our specific objectives were to determine whether the Authority (1)
             properly obligated funds, (2) complied with applicable procurement requirements,
             (3) properly drew down and expended funds for eligible activities, and (4)
             properly reported its Recovery Act activities.
What We Found


           Although the Authority used its Recovery Act funds for eligible activities and
           complied with most program requirements, it had several deficiencies with regard
           to obligations, procurement, expenditures, and reporting. These deficiencies
           occurred due to staff errors and insufficient internal controls for some functions.
           As a result, the Authority could not support the eligibility of $741,848 in
           obligations, contracts, and expenditures, and its reporting for Recovery Act
           activities contained errors.


What We Recommend


           We recommend that the Director of the Greensboro Office of Public Housing
           require the Authority to develop, implement, and enforce written procedures for
           its procurement, Recovery Act reporting, and obligations. The Authority must
           also provide support showing that $459,499 in contracts was awarded in
           accordance with procurement regulations and that $66,730 in obligations and
           $215,619 in expenditures met HUD’s requirements.

           For each recommendation without a management decision, please respond and
           provide status reports in accordance with HUD Handbook 2000.06, REV-3.
           Please furnish us copies of any correspondence or directives issued because of the
           audit.

Auditee’s Response


           We provided the draft report to the Authority on June 2, 2011, and discussed the
           findings with Authority officials at an exit conference on June 23, 2011. The
           Authority provided its written comments on June 15, 2011, prior to the exit
           conference. The Authority’s written comments expressed general disagreement
           with the report. However, as detailed in Appendix B, we were successful in
           resolving several areas of disagreement at the exit conference.

           The complete text of the auditee’s response, along with our evaluation of that
           response, can be found in appendix B of this report. Attachments to the
           Authority’s comments were not included in the report due to their volume, but are
           available for your review upon request.




                                            2
                            TABLE OF CONTENTS

Background and Objectives                                                    4

Results of Audit
      Finding : The Authority’s Internal Controls Had Several Deficiencies   6

Scope and Methodology                                                        11

Internal Controls                                                            13

Appendixes
   A. Schedule of Questioned Costs                                           14
   B. Auditee Comments and OIG’s Evaluation                                  15




                                             3
                           BACKGROUND AND OBJECTIVES

The Greensboro Housing Authority (Authority) was established in 1941 pursuant to the North
Carolina Housing Authorities Law. Its primary mission is to provide safe, quality, affordable
housing to low-income families, the elderly, and the disabled in the Greensboro community; to
maintain a secure community environment; and to encourage personal responsibility and upward
mobility of residents while maintaining the fiscal integrity of the agency. The Authority is
governed by a seven-member board of commissioners appointed by the mayor of Greensboro.
Its records are located at 450 North Church Street, Greensboro, NC.

On February 17, 2009, the President signed the American Recovery and Reinvestment Act of
2009 (Recovery Act) into law. The Recovery Act provided an additional $4 billion for public
housing agencies to carry out capital and management activities, including modernization and
development of public housing. It allocated $3 billion for formula grants and $1 billion for
competitive grants. The Recovery Act required public housing agencies to obligate 100 percent
of the funds within 1 year of the date on which funds became available to the agency for
obligation and expend 60 percent within 2 years and 100 percent within 3 years of such date.

In addition to an annual capital fund allocation of $4.06 million for 2009, HUD awarded the
Authority a $5.6 million Public Housing Capital Fund Stimulus (formula) Recovery Act Funded
grant on March 18, 2009, and a Recovery Act funded $1.05 million capital fund competitive
grant for addressing the needs of the elderly and persons with disabilities on September 28, 2009.
HUD approved the Authority’s planned use of the formula grant to include the modernization of
a 250-unit development, the construction of a Born Learning Trail, and the construction of a new
community center at the development. The competitive grant was awarded for the
modernization of three units to make them compliant with uniform Federal accessibility
standards, and for the construction of a community center for the residents of one of its senior
developments.

HUD required the Authority to use its Recovery Act grant on eligible activities already identified
in either its annual statement or Five-Year Action Plan (action plan). The HUD-approved
comprehensive plan1 sets forth all of the Authority’s physical and management improvement
needs for its public housing developments and must demonstrate long-term physical and social
viability of proposed projects, including cost reasonableness. If the Authority decided to
undertake work items not in its approved plans, HUD required it to amend its approved plans.

The Line of Credit Control System (LOCCS) is the system HUD uses to disburse and track the
payment of grant funds to Grant recipients. The requested payment amount is checked against
the grant's available balance in LOCCS to ensure that the request does not exceed the grant's
authorized funding limit.
Our overall objective was to determine whether the Authority obligated and disbursed capital
funds received under the Recovery Act in accordance with applicable U.S. Department of
Housing and Urban Development (HUD) rules and regulations. Our specific objectives were to
1
    The annual statement, annual plan, and action plan were all components of the Authority’s comprehensive plan.

                                                          4
determine whether the Authority (1) properly obligated funds, (2) complied with applicable
procurement requirements, (3) properly drew down and expended funds for eligible activities,
and (4) properly reported its Recovery Act activities.




                                               5
                                 RESULTS OF AUDIT

Finding: The Authority’s Internal Controls Had Several Deficiencies
The Authority needs to improve internal controls for administering Recovery Act funds.
Although the Authority used its funds for eligible activities and complied with most program
requirements, it had several deficiencies with regard to obligations, procurement, expenditures,
and reporting. These deficiencies occurred due to staff errors and the lack of adequate written
procedures for some functions. As a result, the Authority could not support the eligibility of
$741,848 in obligations, contracts, and expenditures, and its reporting for Recovery Act activities
contained inaccurate information.



 The Authority Used Grant
 Funds for Eligible Activities
 Funds Appear Eligible.

               The Authority selected and funded activities for its capital fund program from its
               annual plan and 5-year capital plan. Under the Recovery Act, HUD’s Office of
               Public and Indian Housing (PIH) issued Notices PIH 2009-12 and PIH 2010-34,
               which required the Authority to use grant funds for activities identified in either
               its annual or 5 year capital plan. The Authority’s selected activities were eligible
               to be funded with its Recovery Act grants.

               As of May 5, 2011, the Authority had obligated 100 percent of the Recovery Act
               funds and spent more than $4.5 million (about 82 percent) of the formula grant
               and $696,751 (about 66 percent) of the competitive grant.

               We conducted site visits to both properties benefiting from the Recovery Act
               funds to determine whether work was conducted as contracted and
               expended. We confirmed that all work appeared reasonable with respect to
               the amount of expenditures incurred.

 Some Obligations Were Not
 Adequately Supported

               We reviewed a sample of 11 of 33 contracts and purchase orders totaling more
               than $3.2 million to determine whether obligations were eligible and supported.
               Although review of supporting documentation for the obligations determined that
               more than $3.1 million was eligible and supported, three obligations totaling
               $90,362 were not supported. During the review, the Authority worked with HUD
               and corrected one of the obligations. The remaining obligations, totaling $66,730,
               were obligated to an incorrect budget line item. For example, a pending purchase

                                                 6
                 of appliances that were to be used in dwelling units was obligated to non-dwelling
                 equipment.

                 Although the Authority obligated its funds by the Recovery Act deadlines, some
                 of its interim reporting in HUD’s Line of Credit Control System (LOCCS) either
                 overstated or understated total obligations. For example, $75,122 in obligations
                 reported in LOCCS for April 2010 for the competitive grant was overstated by
                 $21,000 due to undetected errors made by Authority staff. Although Authority
                 staff was able to describe the process for obligating funds, the process was not
                 documented with adequate written procedures such as procedures requiring the
                 retention of documentation supporting the obligations.

    The Authority Did Not Always
    Follow Procurement
    Requirements

                 We reviewed 6 of the Authority’s 11 Recovery Act contracts and purchase orders
                 to determine whether the Authority complied with applicable requirements in 24
                 CFR (Code of Federal Regulations) 85.36 and its own policies and procedures.
                 The Authority made several errors when procuring two architect and engineering
                 services contracts and did not support the cost analysis for some change orders.
                 As a result, it could not provide assurance that $459,4992 was awarded to the
                 vendor whose proposal represented the best overall value to the Authority or that
                 contract modification costs were always reasonable.

                 The Authority accomplished the procurements of two architect and engineering
                 services contracts using standard requests for proposal, which included price as an
                 evaluation factor. Although this procurement method was permitted by the
                 Authority’s Recovery Act procurement policy, the staff did not follow all
                 requirements. Authority staff did not prepare a cost estimate in accordance with
                 the regulations (24 CFR 85.36 (f)(1)) and the Authority had not established
                 procedures for carrying out evaluations of price or other competitive procurement
                 evaluation factors.

                 In addition to the required cost analysis for contracts, the procurement regulations
                 (24 CFR 85.36(f)(1)) required the Authority to perform a cost or price analysis for
                 contract modifications (change orders). Although the Authority had procedures
                 for change orders and had completed cost analyses forms for the change orders
                 we reviewed for four contracts, none of the analyses showed how the Authority
                 determined that the prices were reasonable. There was no documentation
                 showing how historical data or other means were used to verify that the costs
                 quoted by the vendor were appropriate.


2
 The contract total includes both Recovery Act and non-Recovery Act funds - $122,565 was charged to the
Authority’s annual capital fund grant.

                                                       7
    Some Fund Drawdowns
    Contained Errors

                   We reviewed 14 of 50 LOCCS drawdowns of Recovery Act funds to test
                   for eligibility and accuracy of expenditures. The drawdowns were all for
                   eligible expenses; however, three drawdowns (one formula grant and two
                   competitive grant) totaling $215,619 were drawn against the wrong budget
                   line items due to staff errors. Authority staff stated that some charges for
                   construction were not separated and charged to the correct line items due
                   to the small size of the competitive grant. Some funds were drawn against
                   site improvement for work that should have been charged to dwelling
                   structures, and the purchase of blinds and printers was charged against
                   non-dwelling structures instead of non-dwelling equipment.


    The Authority’s Quarterly
    Reports Contained Errors

                   To comply with the transparency and accountability requirements of the Recovery
                   Act, recipients of funds are required to make quarterly reports3 on the Internet
                   (FederalReporting.gov). They are to report the nature and status of their projects
                   and number of jobs created and retained. In addition, a directive from HUD’s
                   Office of Field Operations dated December 31, 2009, required housing authorities
                   to submit quarterly information to its Recovery Act Management and
                   Performance System to capture information at the project level. We reviewed the
                   Authority’s fourth quarter (October-December 2010) submissions to each of these
                   systems for accuracy, timeliness, and completeness.

                   The Authority’s quarterly reporting was generally timely and complete, but the
                   information submitted was not always accurate or sufficiently supported. For
                   example, the construction status submitted for the competitive grant stated that the
                   general contractor was 57 percent complete, although the Authority’s supporting
                   documentation showed that it was only 25 percent complete. In its comments to
                   the draft report, Authority management stated that staff had provided us incorrect
                   supporting documentation during the review. Information from the general
                   contractor submitted with the comments showed that the project was 57 percent
                   complete as the Authority reported.

                   The Authority was also unable to provide support for the “job creation” numbers
                   reported. OMB (Office of Management and Budget) Memorandum M-10-08
                   outlined how “jobs created” should be calculated. The formula was intended to
                   prevent over counting of short-term or part-time jobs. Authority staff informed us
                   that the 50 jobs reported for the competitive grant were provided to them verbally
                   by the contractor and that there was no supporting documentation. The Authority
3
    American Recovery and Reinvestment Act of 2009, Section 1512 (c)

                                                        8
             had limited documentation for formula grant jobs created, but it did not support
             the 47 jobs reported. Although the OMB guidance did not establish specific
             requirements for supporting reported estimates for jobs created or retained,
             recipients should be prepared to justify their estimates.

Conclusion


             The Authority could not provide assurance that $459,499 in contracts was
             awarded in accordance with procurement regulations or that $66,730 in
             obligations and $215,619 in expenditures met HUD’s requirements. In addition,
             the required Recovery Act reporting contained errors. These deficiencies
             occurred due to staff errors and a lack of sufficient written policies and
             procedures. HUD must ensure that the Authority develops and implements
             adequate written policies and procedures to ensure that it will meet all
             requirements outlined by HUD and the Recovery Act.

Recommendations



             We recommend that the Director of HUD’s Greensboro, NC, Office of Public
             Housing require the Authority to

             1A. Develop, implement, and enforce adequate written grant policies, which
                 include procedures for maintaining obligation documentation and coding of
                 obligations to the appropriate budget line item, to ensure that the Recovery Act
                 funds are properly obligated and supported.

             1B. Provide supporting documentation showing that the $66,730 in obligations
                 was charged to the appropriate budget line item on the Recovery Act annual
                 statements. Any amounts determined to be ineligible should be reimbursed to
                 the Authority’s Recovery Act account from non-Federal funds.

             1C. Develop, implement, and enforce written procedures to ensure effective
                 performance and compliance with Federal procurement regulations and to
                 ensure proper use of all Recovery Act funds.

             1D. Provide supporting documentation to support that $459,499 or the current
                 contract amounts were awarded to the proposal that represented the best
                 overall value to the Authority. Any expended amounts determined to be
                 ineligible should be reimbursed to the appropriate account from non-Federal
                 funds.

             1E. Provide supporting documentation such as revised Recovery Act annual
                 statements and financial system adjusting entries to show that the $215,619 in

                                              9
     expenses was adjusted as necessary and charged against the correct budget line
     items. The HUD Greensboro Office of Public Housing will use the supporting
     documents to make the needed corrections in LOCCS. Any amounts
     determined to be ineligible should be reimbursed to the Authority’s Recovery
     Act account from non-Federal funds.

1F. Certify that appropriate staff is aware of procedures established for reporting
    the quarterly updates as required by the Recovery Act and HUD to ensure that
    accurate and supported information is submitted.




                                 10
                        SCOPE AND METHODOLOGY

Our overall objective was to determine whether the Authority obligated and disbursed capital
funds received under the Recovery Act in accordance with applicable HUD rules and
regulations. Our specific objectives were to determine whether the Authority (1) properly
obligated funds, (2) complied with applicable procurement requirements, (3) properly drew
down and expended funds for eligible activities, and (4) properly reported its Recovery Act
activities.

To accomplish our objectives, we reviewed

           The Recovery Act, Federal financial management and procurement regulations at 24
           CFR 85.20 and 85.36, capital fund program regulations at 24 CFR 85.905, OMB
           Memorandum M-10-08, the notice of funding availability for the capital fund
           recovery competition grants, the Comprehensive Grant Guidebook on capital fund
           grants, HUD guidance on the use of capital funds authorized by the Recovery Act,
           HUD’s amended annual contributions contract with the Authority, and HUD’s
           Greensboro Office of Public Housing’s correspondence and files pertaining to the
           Authority.

           The Authority’s policies and procedures manuals, planned use of the capital funds
           authorized by the Recovery Act, Recovery Act budgets, obligations, and
           reimbursements from LOCCS, contracts that the Authority identified as awarded for
           Recovery Act capital funds grants, and organizational charts.

We interviewed Authority employees and HUD’s Greensboro staff involved with oversight of
the Authority’s program. We selected several nonstatistical samples as described below. The
results from these samples pertain only to the items sampled and can not be projected to the
universe as a whole.

We conducted site visits to both properties benefitting from Recovery Act funds to
determine whether work was conducted as contracted and whether all work appeared
reasonable with respect to the amount of expenditures incurred.

We selected a nonstatistical sample of 11 contracts and purchase orders totaling $3,236,741 from
a universe of 33 contracts totaling $6,637,183 obligated with Recovery Act formula or
competitive funds. We selected the contracts and purchase orders in a manner that ensured that
each budget line item was represented. We evaluated the obligations to determine whether they
were appropriate, prudent, eligible, and supported.

We selected 6 Recovery Act procurements totaling $5,666,826 from a universe of 11totaling
$5,953,450 to determine whether the Authority complied with applicable Federal requirements in
24 CFR 85.36 and the Authority’s own policies and procedures. The nonstatistical sample was
selected to ensure that procurements from each category (small purchase, sealed bids,
competitive proposal) were chosen.

                                              11
Using a random number generator, we selected a random sample of 14 LOCCS drawdowns
totaling $932,595from a universe of 50 totaling $4,720,998 in order to test for eligibility and
accuracy of the expenditures paid.

We reviewed the Authority’s fourth quarter reports and all supporting documentation submitted
to FederalReporting.gov and HUD’s Recovery Act Management and Performance System to
determine whether information reported was timely, accurate, and complete.

All electronic data relied upon during the review were tested during the performance of the
various review steps. We conducted tests and procedures to ensure the integrity of computer-
processed data that were relevant to the audit objectives. The tests included, but were not limited
to, comparisons of computer-processed data to invoices and other supporting documentation.
We found the electronic data to be reliable.

We performed our onsite work from February through April 2011 at the Authority’s office
located at 450 North Church Street, Greensboro, NC. The audit covered the period March 2009
through January 2011 and was expanded as determined necessary.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                                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
               objectives:

                  Controls over program operations
                  Controls over compliance with laws and regulations

               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’s controls over the obligation, procurement, expenditure, and
                  reporting process did not ensure that the Recovery Act funds were used as
                  required (finding 1).



                                                 13
                                   APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

                         Recommendation
                                number              Unsupported 1/

                                 1B                       $ 66,730
                                 1D                        459,499
                                 1E                        215,619
                                 Total                    $741,848


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.




                                             14
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                              Auditee Comments




                 June 15, 2011


                 Mr. James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA
                 U.S. Department of Housing and Urban Development
                 Office of Audit, Box 42
                 Richard B. Russell Federal Building
                 75 Spring Street, SW, Room 330
                 Atlanta, GA 30303-3388

                 Dear Mr. McKay,

                 This letter is in response to your request for Greensboro Housing Authority’s comments on the draft
                 audit report of the funds awarded under the American Recovery and Reinvestment Act of 2009
                 (Recovery Act); i.e. the Public Housing Capital Fund Stimulus (formula) Recovery Act Funded Grant
                 and the Capital Fund Competitive Grant for addressing the needs of the elderly and persons with
                 disabilities which was a result of an onsite audit conducted February 2011 through April 2011.

                 The U.S. Department of Housing and Urban Development/Office of the Inspector General reviewed
Comment 1        both grants simultaneously and combined their responses for each grant into one final report, not
                 specifying to which specific grant the comments or dollar amounts apply. We understand that some
                 general comments were specific to both grants, but the combined responses made it difficult for our
                 agency to determine whether the comments and amounts in question are relating to the Public Housing
                 Capital Fund Stimulus or the Capital Fund Competitive Grant. We hope that our comments will assist
                 in your review of multiple grants for other agencies.

                 Attached are the detailed Audit Response and supporting documentation to the draft conclusions
                 outlined in the report.

                 Please contact me if there are any questions. I can be reached at 336-303-3116.




                 Tina Akers Brown
                 Chief Executive Officer




                                                      15
                        GREENSBORO HOUSING AUTHORITY




Response to the U.S. Department of Housing and Urban Development Office of the Inspector
General's Audit of the Capital Funds Received from the American Recovery and Reinvestment
Act of 2009

  • Public Housing Capital Fund Stimulus (formula) Recovery Act Funded Grant - $5.6 Million

  • Capital Fund Competitive Grant for Addressing the Needs of the Elderly and Persons with
    Disabilities - $1.05 million




                                       16
            OIG Assertion: The Authority used grant funds for eligible activities.

            Greensboro Housing Authority (Authority) concurs and agrees that the selected and funded
            activities for which the grant funds were used were eligible activities to be funded with Recovery
            Act grants.

            OIG Assertion: Some obligations were not adequately supported.

Comment 2   The Authority disagrees that three obligations totaling $144,908 were not adequately supported.
            All dollar amounts reported as obligated either through LOCCS or on quarterly reports submitted
            by the Authority were adequately supported by existing contracts or purchase orders entered in to
            by the Authority. It is not clear to the Authority what specifically makes up the $66,730
            referenced as being obligated to the incorrect budget line item or even which grant these
            obligations concern since this information has not been provided by OIG, but it is assumed that
            these were amounts contained within the general contractor’s invoices. On the invoices for the
            competitive grant (exhibit 1), the general contractor did not separate his costs into line items that
            could be easily placed into site improvements, dwelling structures and non dwelling structures,
            but rather included line items that were descriptive of the type of work performed, i.e. masonry,
            plumbing, electrical, etc. The general contractor’s invoices for the formula grant (exhibit 2) were
            broken out by the corresponding ARRA line items. As a result, at the time of obligation, an
            estimate was made based on information provided by the contractor as to the division among the
            ARRA budget line items.

            24 CFR 85.3 States that “obligations means the amounts of orders placed, contracts and
            subgrants awarded, goods and services received, and similar transactions during a given time
            period that will require payment by the grantee during the same or a future period.” The intent
            for requiring the reporting of obligations is so that HUD can monitor the grantees progress and
            ensure that the funds will be obligated and expended in compliance with the timeframes defined
            in PIH 2010-34. The obligations reported by the Authority relative to the construction contract
            with the general contractor were correctly stated in total and meet the definition of “obligation”
            as defined by the statute. The Authority concurs that the various line items that the obligations
            are charged to may not be one hundred percent correct throughout the construction period but by
            the time the final payments are made the actual application of costs will be analyzed and any
            necessary adjustments between line items made. Regardless of which line item the obligation
            relates to the authority correctly reported its obligations in a manner that allowed HUD to ensure
            the grantee’s compliance with the timelines required. Nonetheless, at no time did or will this
            process result in the Authority obligating or requesting payment for ineligible, unsupported or
            inadequately supported expenditures as asserted by OIG.

            The OIG referenced one other expenditure, appliances for dwelling units, as being obligated to
            the incorrect line item. The Authority had issued one purchase order relating to the competitive
            grant for approximately $4,000 for four refrigerators and four ranges (exhibit 3). This obligation




                                               17
            was applied to the budget line item for non-dwelling equipment. The Authority agrees that a
            portion of this purchases order should have been obligated under dwelling equipment. But, due
            to the immaterial amount, the Authority obligated the entire purchase as non dwelling equipment.
            Once the expenditure is actually made and before the funds are requested from HUD, the
            Authority will adjust the amounts spent on dwelling equipment to the appropriate budget line
            item. The Authority maintains that this practice at no time did or will result in the Authority
            obligating or requesting payment for ineligible, unsupported or inadequately supported
            expenditures as asserted by OIG.

            OIG stated that some of the Authority’s interim reporting in HUD’s Line of Credit Control
            System (LOCCS) either overstated or understated obligations. The example provided states that
            in May 2010 there were obligations reported of $92,132 (exhibit 4) for the competitive grant and
            that this amount was overstated by $38,000 due to undetected errors made by Authority staff.
            This is incorrect. The amount referred to is for architectural services. In fact the contract for
            architectural services totaled $92,676 (exhibit 5) as of May 31, 2010. OIG looked at internal
            reports prepared by staff for management review and analysis to determine what should have
            been obligated at various points in time. These internal reports serve various internal purposes
Comment 3   and were not necessarily meant to represent what should be reported to HUD at any given time.
            OIG erroneously looked at backup for HUD drawdowns at a given date to determine obligations.
            For example, the architect’s invoice paid in May 2010 (exhibit 6), and subsequently drawn down
            in LOCCS in May, was for work performed mostly in March 2010 and did not contain change
            orders agreed to by May 31, 2010. Requests for payments through LOCCS are generally in
            arrears therefore backup may not show current status as of the date of the actual drawdown and
            should not have been used by OIG to determine obligations as of the drawdown dates. It is
            possible obligations may have been immaterially understated or overstated at the end of several
            of the months in the beginning of the grant period as this is a fluid process with obligations
            frequently changing until the majority of the contracts can be put in place.

            The Authority has a very stringent and thorough process for obligating any of its funds. Based
            on the Authority’s written procurement policy (exhibit 7) all contracts must be reviewed and
            approved by various levels of staff and management before the Authority encumbers its funds.
            The Authority’s accounting software also allows for contracts to be set up in the accounting
            system at the time they are entered into and subsequently all paper work is sent to accounting to
            process the contract. All payments made against any contracts must be sufficiently set up in the
            accounting system and funds are verified as to availability. Additionally, the Authority retains
            written documentation for all purchase orders, contract obligations and payments, expenditures
            and procurement sources as required by 31 U.S.C. 1501. There may be timing differences where
            contracts and change orders are in route at month end, therefore, obligation numbers reported by
            accounting may be immaterially understated or overstated at any given month end date.
            Nonetheless, this process assures that no improper payments are made or funds improperly
            encumbered by the Authority. Therefore, this practice at no time did or will result in the




                                              18
            Authority obligating or requesting payment for ineligible, unsupported or inadequately supported
            expenditures as asserted by OIG.

            OIG Assertion: The Authority did not always follow procurement requirements.

            The Authority adamantly disagrees with the statement that the agency “could not provide
Comment 4   assurance that $459,499 was awarded to the most qualified applicant or that contract
            modification costs were always reasonable.” All proposals, evaluation sheets and staff were
            readily available to justify the most qualified architectural services were obtained though HUD
            procurement regulations. In the findings on page 8, OIG states “the Authority had procedures for
            change orders and had completed cost analysis for the change orders reviewed” which clearly
            indicates adherence to regulations. Changes orders and/or contract modifications are reviewed
            and approved for cost analysis and reasonableness by the AIA’s, and Authority staff including,
            but not limited to Capital Improvements Staff, Business Manager, Contracting Officer (Chief
            Operating Officer), Chief Financial Officer, Vice President of Operations, Vice President of
Comment 5   Administration and the Chief Executive Officer before approval of changes or contract
            modifications.

            The Authority obtained architectural and engineering services through the Competitive Proposal
            Method, in accordance with the requirements set forth in the Department of Housing and Urban
            Development (HUD) regulations 24 CFR 85.36:

                Grantees and Sub-grantees may use competitive procedures for qualifications-based
                procurement of architectural/engineering (A/E) professional services whereby competitors’
                qualifications are evaluated and the most qualified competitor is selected, subject to
                negotiation of fair and reasonable compensation.

            The Authority did fully comply with its own procurement policy (exhibit 7) and HUD
            procurement regulations for the two architectural and engineering services as set forth on 24 CFR
Comment 6   85.36 and Section G, Capital Fund Stimulus Grant Procurement Policy, of the GHA Procurement
            and Disposition form Low-Rent Public Housing and Housing Choice Voucher Programs states:
                             The following policy shall be used only for procurements related to Capital
                            Fund Stimulus Grant (CFSG) as provided by the American Recovery and
                            Reinvestment Act of 2009 (ARRA).

                            It is the policy of the Greensboro Housing Authority (GHA) to make all CFSG
                            purchases, procurements, construction and professional contracts in accordance
                            with the requirements set forth in the Department of Housing and Urban
                            Development (HUD) Regulation 24 CFR 85.36, or ARRA. Any requirements
                            relating to the procurement of goods and services arising under state and local
                            laws and regulations shall not apply. HUD’s Procurement Handbook for Public




                                             19
                            Housing Agencies may be used for guidance as well as HUD’s PIH Notice
                            2009-12.

                            Requirements regarding conflicts of interest, contract cost and price will follow
                            Regulation 24 CFR 85.36.

                            GHA will continue to follow its current policies and procedures for protests,
                            codes of standards for employees engaged in the award and administration of
                            contracts which don not conflict with Regulation 24 CFR 85.36.

                            GHA will abide by the “buy American” requirement and use only iron, steel and
                            manufactured goods produced in the United States for its projects.

            The decision to go forth with the issuance of the Request for Proposal (RFP) allowed cost and
            price analysis and a competitive range determined as seen on the evaluation forms. The contracts
            were awarded to the most responsible firm whose qualification, price and other factors
            considered, proved the most advantageous to the Authority.

            OIG Assertion: Some fund drawdowns contained errors.

            The Authority disagrees that some fund drawdowns contained errors of any material nature. OIG
Comment 7   begins this comment by stating that all drawdowns were for eligible expenses. OIG states that
            funds were drawn against wrong budget line items due to staff errors, further referencing that
            funds were drawn against site improvements that should have been against dwelling structures.
            Information detailing the $215,619 referenced as being drawn against wrong budget line items
            was not provided to the Authority by OIG. The authority assumes that these were mostly
            amounts contained within the general contractor’s invoices for the formula grant (exhibit 8). The
            contractor’s invoices for the formula grant (exhibit 2) were broken out by the corresponding
            ARRA line items.

            However, materials were billed for when purchased by the contractor and not separated on the
            invoice between site improvements, dwelling structures and non dwelling structures until a
            subsequent invoice when they were actually used in construction. Therefore, at the time of
            payment for materials the allocation was estimated. For example, the January invoice may
            include $50,000 for materials that will be used in site improvements, dwelling structures and non
            dwelling structures. The Authority will be billed for and pay the $50,000 in January. The
            Authority may charge the site improvements line item $10,000, the dwelling structure line item
            $20,000and the non dwelling structure line item $20,000. Further assume that the March invoice
            shows that $30,000 in materials is actually used for dwelling structures and $20,000 is used for
            non dwelling structure. This will result in a $10,000 adjustment between the site improvements
            and dwelling structures budget line items, but does not indicate that the Authority allocated the
            costs in error in January.




                                              20
             Also, there were change orders which were not broken out on the invoices into the ARRA line
             items. As a result, interim payments were charged to the various line items on an estimated basis
             but by the time the final payments are made the allocation of costs will be correct. At no time did
             or will this process result in the Authority requesting payment for ineligible or unsupported
             expenditures or drawdowns containing errors as the use of estimates does not necessarily
             translate into errors.

             OIG further states that blinds and printers purchased through the formula grant were charged
             incorrectly against non dwelling structures and should have been charged to non dwelling
             equipment. The Authority agrees that the invoices, $900 for blinds (exhibit 9) and $821 for one
Comment 8    printer (exhibit 10) should have been charged to a line item for non dwelling equipment. The
             amounts are immaterial to the $5,000,000 grant and as such do not constitute a material error.
             However, the Authority will reclass these expenditures as non dwelling equipment. Nonetheless,
             the Authority maintains that at no time did the Authority request payment for ineligible or
             unsupported expenditures or process drawdowns which contained material errors.

             OIG Assertion: The Authority’s quarterly reports contained errors.

             The Authority disagrees that its quarterly reports contained errors. OIG first references the
             Authority’s competitive grant report for the quarter ending 12/31/10 (exhibit 11) which stated
             that the general contractor was 57% complete. OIG asserts that this figure is incorrect based on
Comment 9
             the Authority’s supporting documentation which showed it was only 25% complete. In fact, the
             supporting documentation that was shown to OIG by Authority staff was for the third quarter
             report (exhibit 12) which actually reports that the contractor is 25% complete. However, the
             contractor’s invoice (exhibit 13) for work completed through December 21, 2010 shows that 53%
             of the work had been completed as of that date. Based on actual completed work as of December
             21, 2010, and given the holidays between the invoiced date and the end of the quarter the
             Authority maintains that it reasonably estimated that 57% was complete by December 31, 2010.
             Therefore, the information reported in the quarterly report was not in error, although the
             authority did erroneously provide documentation to OIG for the wrong quarter.

             OIG further states that the Authority was unable to provide support for the “job creation”
             numbers reported. OMB (Office of Management and Budget) Memorandum M-10-08 did not
Comment 10   establish specific requirements for supporting reported estimates for jobs created or retained. In
             fact, the built in mechanism that HUD uses itself simply divides the total number of hours
             worked and funded by Recovery Act within the reporting quarter by the number of quarterly
             hours in a full time schedule to estimate that number. The Authority relied on timesheets and
             information (exhibit 14) provided by the contractor, payroll records, section 3 reports, etc., to
             determine the number reported. This process was refined for the Authority’s subsequent
             quarterly reports by incorporating HUD’s own reasonable test and suggested formula (exhibit
             15). Based on the additional guidance provided by OMB Memorandum M-10-08, the authority
             agrees the number provided for jobs created included in the report for the quarter ending




                                               21
             December 31, 2010 does not estimate full time equivalent jobs but rather counts individuals
             regardless of the number of hours worked. The Authority has improved its process as indicated
             in the next quarter’s report (exhibit 16) which was filed prior to the completion date of OIG’s
             audit of the Authority but not reviewed by OIG. Therefore, the Authority maintains that this
             information was reported as an estimate based on available information and did not contain an
             intentional or negligent error but rather one that resulted from misunderstanding the calculation.
             The Authority understands the process and has corrected its method of recording the number of
             jobs created.

             OIG’s Conclusion: The Authority could not provide assurance that $459,499 in contracts
Comment 11   was awarded in accordance with procurement regulations or that $66,730 in obligations
             and $215,619 in expenditures met HUD’s requirements. In addition, the required Recovery
             Act reporting contained errors. These deficiencies occurred due to staff errors and a lack
             of sufficient written policies and procedures.

             The Authority disagrees with all assertions stated in OIG’s conclusion. The Authority obtained
             architectural and engineering services through the Competitive Proposal Method, in accordance
             with the requirements set forth in the Department of Housing and Urban Development (HUD)
             regulations 24 CFR 85.36 and fully complied with its own procurement policy (exhibit 7)
             Section G. The contracts totaling $459,499 were awarded to the most responsible firm whose
             qualification, price and other factors considered, proved the most advantageous to the Authority.
             The $66,730 in obligations and $215,619 in expenditures met HUD’s requirements based on
             information previously delineated in this response.

             In addition, the required Recovery Act reporting did not contain an error as to the percentage of
             construction completed, but rather the supporting documentation used was for the quarter prior to
             the one being reviewed. The reported number of jobs created did represent the accurate number
             of individuals receiving jobs as a result of the grant and were not reported in error. The only
             error was realizing that the report defined number of jobs as full time equivalents (as described
             by additional guidance provided by OMB) and not the number of actual individuals impacted.
             The Authority changed its calculation method for subsequent reports.

             At no time did the Authority obligate or request payment for ineligible, unsupported or
             inadequately supported expenditures as asserted by OIG. All funds obligated in the LOCCs
             system have supporting documentation (exhibits 17 and 18) and were for eligible expenditures.
             All funds drawn for expenditures were eligible expenses and have supporting documentation
             (exhibits 17 and 18). Variances among budget line items may exist in the interim due to the
             invoicing practice used by the general contractors resulting in individual budget line items
             varying throughout the construction phase until final allocations can be made at the completion
             of the construction. In conclusion, the Authority maintains that there are not deficiencies present
             in GHA’s operation of these grants and that the Authority has relevant, sufficient written policies
             and procedures (exhibit 7) under which to operate these grants.




                                               22
             OIG’s Recommendations: We recommend that the Director of HUD’s Greensboro, NC,
             Office of Public Housing require the Authority to


             1A. Develop, implement and enforce adequate written grant policies, which include
             procedures for maintaining obligation documentation and coding of obligations to the
             appropriate budget line item, to ensure that the Recovery Act funds are properly obligated
             and supported.

             As required by HUD, the Authority has developed, implemented and enforced written grant
             policies (exhibit 7) to insure the Recovery Act funds are properly obligated and supported. The
             audit report, on page 2, states “… the Authority used its Recovery Act funds for eligible activities
             and complied with most program requirements…”. On March 29, 2009 the Authority amended
             its procurement policy as required by the Recovery Act, which was signed into law on February
             17, 2009 requiring PHAs to established special criteria for the ARRA funds including restrictions
             on using funds for operations, and obligation and expenditure times lines. This policy change
             was submitted to the Greensboro HUD Office on September 10, 2009. The Authority has written
             policies and procedures in place to ensure that the Recovery Act funds are properly obligated and
             supported. The Authority has a very stringent and thorough process for obligating any of its
             funds. Based on the authority’s written procurement policy all contracts must be reviewed and
             approved by various levels of staff and management before the authority encumbers its funds.
             The authority’s accounting software also allows for contracts to be set up in the accounting
             system at the time they are entered into and subsequently all paper work is sent to accounting to
             process the contract. All payments made against any contracts must be sufficiently set up in the
             accounting system and funds are verified as to availability. Additionally, the authority retains
             written documentation for all purchase orders, contract obligations and payments, expenditures
             and procurement sources as required by 31 U.S.C. 1501.

             All assertions made by OIG with regards to the obligations made for Recovery Act funds have
             been refuted. Most of the concerns stated by OIG in this report were either not brought to the
             attention of management during the audit, or discussed with inappropriate level of staff who did
             not provide complete and accurate information. The Authority believes that many of these
             concerns would have been satisfied and no longer a concern if OIG had made management aware
Comment 12   of them during the time of the audit. Even at the time of this response, management is not fully
             aware of what constitutes the issues addressed in this report and is speculating based on the
             language provided in this report alone. The Authority was told at the beginning of the audit that
             OIG would update management throughout the audit with any concerns and the status of the
             audit. Very few concerns were mentioned and the ones that were mentioned resulted in
             management being able to address OIG’s concerns effectively.




                                                23
             1B. Provide supporting documentation showing that the $66,730 in obligations was
             charged to the appropriate budget line item on the Recovery Act annual statements. Any
Comment 13   amounts determined to be ineligible should be reimbursed to the Authority’s Recovery Act
             account from non-Federal funds.

              GHA has supporting documentation (exhibits 17 and 18) for all obligations on its Recovery Act
             annual statements. With regards to the questioned $66,730 in obligations that are specifically
             related to the contractor’s expenses, the Authority concurs that obligations may vary until the
             construction is complete and final allocation of actual numbers can be determined. As OIG
             stated numerous times in its report under “What We Found”, “Results of Audit, Finding”,
             opening paragraph and again in first section “THE AUTHORITY USED GRANT FUNDS FOR
             ELIGIBLE ACTIVITIES”, ALL GRANT FUNDS WERE USED FOR ELIGIBLE EXPENSES.
             Therefore, there are no amounts determined to be ineligible and requiring reimbursement. The
Comment 14   statement, “Any amounts determined to be ineligible should be reimbursed to the Authority’s
             Recovery Act account from non-Federal funds.” should not be included under OIG’s
             recommendations as it contradicts OIG’s own findings stated not once, but several times, in its
             report. The Authority agrees with OIG and asserts that all funds were spent on eligible activities.


             1C. Develop, implement, and enforce written procedures to ensure effective performance
             and compliance with federal procurement regulations and to ensure proper use of all
             Recovery Act funds.

             As required by HUD, the Authority has developed, implemented and enforced written procedures
             (exhibit 18) to ensure effective performance and compliance with Federal procurement
             regulations and to ensure proper use of all Recovery Act funds. The audit report, on page 2,
             states “… the Authority used its Recovery Act funds were used for eligible activities and
             complied with most program requirements…” On March 29, 2009 the Authority amended its
             procurement policy as required by Recovery Act signed into law on February 17, 2009 requiring
             PHAs to established special criteria for the ARRA funds including restrictions on using funds for
             operations, and obligation and expenditure times lines as follows. This policy change was
             submitted to Greensboro HUD Office on September 10, 2009.

             As required by 31 U.S.C. 1501 the Authority has written procedures and supporting
             documentation for all of its expenditures, obligations, contracts, purchase orders, etc. As OIG
             stated numerous times in its report under “What We Found”, “Results of Audit, Finding”,
             opening paragraph and again in first section “The Authority Used Grant Funds For Eligible
             Activities”, all grant funds were used for eligible expenses. This recommendation should not be
             included as it contradicts OIG’s own findings stated not once, but several times, in its report.




                                               24
1D. Provide supporting documentation to support that $459,499 or the current contract
amounts were awarded to the most qualified and responsive bidder. Any expended
amounts determined to be ineligible should be reimbursed to the appropriate account from
non-Federal funds.

The Authority adamantly disagrees with the statement that the agency “could not provide
assurance that $459,499 was awarded to the most qualified applicant or that contract
modification costs were always reasonable.” All proposals, evaluation sheets and staff were
readily available to justify the most qualified architectural services were obtained though HUD
procurement regulations. In the findings on page 8, OIG states “the Authority had procedures for
change orders and had completed cost analysis for the change orders reviewed” which clearly
indicates adherence to regulations. Change orders and/or contract modifications are reviewed
and approved for cost analysis and reasonableness by the AIA’s, and Authority staff including,
but not limited to Capital Improvements Staff, Business Manager, Contracting Officer (Chief
Operating Officer), Chief Financial Officer, Vice President of Operations, Vice President of
Administration and the Chief Executive Officer before approval of changes or contract
modifications.

The Authority obtained architectural and engineering services through the Competitive Proposal
Method, in accordance with the requirements set forth in the Department of Housing and Urban
Development (HUD) regulations 24 CFR 85.36:

     Grantees and Sub-grantees may use competitive procedures for qualifications-based
     procurement of architectural/engineering (A/E) professional services whereby competitors’
     qualifications are evaluated and the most qualified competitor is selected, subject to
     negotiation of fair and reasonable compensation.

The Authority did fully comply with its own procurement policy and HUD procurement
regulations for the two architectural and engineering services as set forth on 24 CFR 85.36 and
Section G, Capital Fund Stimulus Grant Procurement Policy, of the GHA Procurement and
Disposition form Low-Rent Public Housing and Housing Choice Voucher Programs states:
The following policy shall be used only for procurements related to Capital Fund Stimulus Grant
                 (CFSG) as provided by the American Recovery and Reinvestment Act of 2009
                 (ARRA).

                It is the policy of the Greensboro Housing Authority (GHA) to make all CFSG
                purchases, procurements, construction and professional contracts in accordance
                with the requirements set forth in the Department of Housing and Urban
                Development (HUD) Regulation 24 CFR 85.36, or ARRA. Any requirements
                relating to the procurement of goods and services arising under state and local
                laws and regulations shall not apply. HUD’s Procurement Handbook for Public




                                 25
                             Housing Agencies may be used for guidance as well as HUD’s PIH Notice
                             2009-12.

                             Requirements regarding conflicts of interest, contract cost and price will follow
                             Regulation 24 CFR 85.36.

                             GHA will continue to follow its current policies and procedures for protests,
                             codes of standards for employees engaged in the award and administration of
                             contracts which don not conflict with Regulation 24 CFR 85.36.

                             GHA will abide by the “buy American” requirement and use only iron, steel and
                             manufactured goods produced in the United States for its projects.


             The decision to go forth with the issuance of the Request for Proposal (RFP) allowed cost and
             price analysis and a competitive range determined as seen on the evaluation forms. The contracts
             were awarded to the most responsible firm whose qualification, price and other factors
             considered, proved the most advantageous to the housing authority.

             As OIG stated numerous times in its report under “What We Found”, “Results of Audit,
             Finding”, opening paragraph and again in first section “The Authority Used Grant Funds For
             Eligible Activities”, all grant funds were used for eligible expenses. Therefore, there are no
             amounts determined to be ineligible and requiring reimbursement. The statement, “Any
             expended amounts determined to be ineligible should be reimbursed to the appropriate account
             from non-Federal funds.” should not be included under OIG’s recommendations as it contradicts
             OIG’s own findings stated not once, but several times, in its report.



             1E. Provide supporting documentation showing that the $215,619 in expenses was adjusted
             and charged against the correct budget line item on the Recovery Act annual statements.
             Any amounts determined to be ineligible should be reimbursed to the Authority’s Recovery
             Act account from non-Federal funds.

             The $215,619 in expenses referenced as being drawn against wrong budget line items were
             amounts contained within the general contractor’s invoices. As previously described within this
             response, these types of expenditures are at times estimated as to the applicable construction
             budget line item to charge at the time of payment. However, once the construction process is
Comment 15   final, more concise application of expenses to the various line items can be determined and
             reported at which time the Authority will provide supporting documentation showing that the
             expenses were adjusted and charged against the correct budget line item in the Recovery Act
             annual statement. This practice only impacts fluctuations among individual budgeted line items
             relative to construction and does not result at any time in the Authority requesting payment for




                                               26
             any expenditures that are determined to be ineligible under the Recovery Act, as confirmed by
             OIG in this report under “What We Found”, “Results of Audit, Finding”, opening paragraph and
             again in first section “The Authority Used Grant Funds For Eligible Activities”, all grant funds
             were used for eligible expenses. Therefore, there are no amounts determined to be ineligible and
             requiring reimbursement. The statement, “Any amounts determined to be ineligible should be
             reimbursed to the Authority’s Recovery Act account from non-Federal funds.” should not be
             included under OIG’s recommendations as it contradicts OIG’s own findings stated not once, but
             several times, in its report.


             1F. Establish written procedures for reporting the quarterly updates as required by the
             Recovery Act and HUD to ensure that accurate and supported information is reported.

             The Authority maintains that its quarterly report (exhibit 10) required by the Recovery Act and
             HUD contained accurate and supported information. OIG alleged two errors in the reports. The
Comment 16   first one was the percent reported as completed by the contractor as of the end of the quarter
             reported. Supporting documentation (exhibit 12) was available for OIG’s review at the time of
             the audit but was not correctly provided by Authority staff. The second alleged error was with
             the number of jobs reported. The Authority did report the actual number of jobs created.
             However, the intent of the report was to convert this information into full time equivalent jobs
             based on total hours worked by all newly hired individuals and not generated by counting the
             actual number of individuals impacted. The Authority had refined its reporting process by the
             time the next quarterly report was filed, to comply with additional guidance provided by HUD
             for defining “jobs created”. At the direction of HUD, the Authority agrees to establish written
             procedures for reporting the quarterly updates under the Recovery Act.




                                              27
             Internal Controls



             OIG’s Assertion: Significant Deficiency: Based on our review, we believe that the
             following item is a significant deficiency: The Authority’s controls over obligation,
             procurement, expenditure, and reporting process did not ensure that the Recovery Act
             funds were used as required (finding 1).

             The Authority has a very stringent and thorough process for obligating and expending any of its
             funds. Based on the Authority’s written procurement policy all contracts must be reviewed and
             approved by various levels of staff and management before the Authority encumbers its funds.
             All payments made against any contracts must be sufficiently set up in the accounting system and
             funds are verified as to availability. Additionally, the Authority retains written documentation
             for all purchase orders, contract obligations and payments, expenditures and procurement sources
             as required by 31 U.S.C. 1501.

             This significant deficiency in internal control asserted by OIG directly contradicts what OIG has
             repeatedly reported in their audit report of the Authority, beginning with the first sentence under
             “What We Found, used its Recovery Act funds for eligible activities”. OIG stated under
             “Results of Audit, Finding: …the Authority used its funds for eligible activities…and The
             Authority Used Grant Funds for Eligible Activities: The Authority selected and funded activities
             for its capital fund program from its annual plan and 5-year capital plan. Under the Recovery
             Act, HUD’s Office of Public and Indian Housing (PIH) issued Notices PIH 2009-12 and PIH
             2010-34, which required the Authority to use grant funds for activities identified in either its
             annual or 5 year capital plan. The Authority’s selected activities were eligible to be funded with
             its Recovery Act grants.”

             Therefore, there were no issues that resulted in the finding that the OIG was unable to ascertain
             that the Recovery Act funds were not used as required. In fact, the OIG made it a point to
             repeatedly state that all of the funds were in fact used as required. While there may be
Comment 17   improvements that can be made to the Authority’s internal control, as is the case with most
             entities, it is highly unlikely that OIG could repeatedly find that the Authority used these funds as
             required if there were any significant deficiencies present. Therefore, this finding is not
             supported and should be deleted from the report.




                                                28
             Appendixes



             OIG’s Assertion: Appendix A: Schedule of Questioned Costs

                            Recommendation Number                             Unsupported 1/

                                       1B                                      $      66,730

                                       1D                                            459,499

                                        1E                                           215,619

                                      Total                                    $     741,848


               GHA disagrees that there are any questioned costs to be reported. According to Appendix A
               these are questioned costs because they are unsupported. The definition of Unsupported Costs as
               presented by OIG in this report is as follows:

               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.

               The Schedule of Questioned Costs directly contradicts what OIG has repeatedly reported from
               this audit, beginning with the first sentence under “What We Found, used its Recovery Act funds
               for eligible activities”. OIG stated under “Results of Audit, Finding: …the Authority used its
               funds for eligible activities…and The Authority Used Grant Funds for Eligible Activities: The
               Authority selected and funded activities for its capital fund program from its annual plan and 5-
               year capital plan. Under the Recovery Act, HUD’s Office of Public and Indian Housing (PIH)
               issued Notices PIH 2009-12 and PIH 2010-34, which required the Authority to use grant funds
               for activities identified in either its annual or 5 year capital plan. The Authority’s selected
               activities were eligible to be funded with its Recovery Act grants.”

               OIG made it a point to repeatedly state that all of the costs charged and activities funded
               were in fact eligible at the time of the audit. Therefore, there were no costs or activities funded
Comment 18     that OIG could not determine eligibility at the time of the audit. There should be no questioned
               costs in existence based on OIG’s own statements and results. Appendix A: Schedule of
               Questioned Costs is not valid or supported and should be deleted from the report.




                                                 29
                         OIG Evaluation of Auditee Comments

Comment 1   We inserted the appropriate grant title (formula or competitive) within the report
            to clarify which grant we were referring to. In addition, we provided Authority
            management additional detail for the questioned costs during the exit conference.

Comment 2   We provided the Authority additional information detailing the breakdown of the
            miscoded obligations during the exit conference. The Authority agreed that some
            items were obligated to the wrong budget line items and would be corrected
            during the audit resolution process with the Greensboro Public Housing staff.

Comment 3   We disagree with the Authority’s statement that we erroneously looked at backup
            for expenditures in order to determine obligations. We assessed claimed
            obligation amounts based on contracts signed and purchase orders prepared by the
            Authority.

            However, we agree with the Authority’s claim that obligations for May were
            properly reported. We used May in our example when we should have used April
            and have revised the report accordingly. While on site, we explained this error to
            the Chief Executive Officer who acknowledged the miscalculation in the internal
            report used to determine total obligations to report in LOCCS.

Comment 4   During the exit conference, Authority management acknowledged that the
            evaluation process it used for the architect and engineering services was flawed
            and that the Authority plans to develop new procedures for future competitive
            proposal procurements. We are pleased that the Authority recognized the need
            for revised procedures. During the audit resolution process, the Authority should
            provide the Greensboro Public Housing Staff documentation to support that
            $459,499 or the current contract amounts were awarded to the proposal that
            represented the best overall value to the Authority.

Comment 5   We agree that the Authority’s review process for change orders is very extensive.
            However, some of the cost analysis forms for change orders lacked sufficient
            explanation of the methodology employed to establish cost reasonableness and/or
            lacked supporting documentation. For example, one change order stated only that
            the change was reasonable based on staff’s feelings.

Comment 6   We agree with the Authority’s contention that it properly followed its Recovery
            Act procurement policy for the architectural and engineering contracts. Although
            the Authority’s standard procurement policy did not allow the procurement
            method used, the Recovery Act policy allowed the procurement method and
            supersedes the standard procurement policy for Recovery Act procurements. As
            such, we removed the statement that the Authority did not follow its own
            procurement policy and made other changes to the section on procurement.




                                            30
Comment 7     We provided the Authority a breakdown of unsupported costs at the exit
              conference. We agree that some of the amounts charged to incorrect budget line
              items were small but believe the issue is material. Regardless of the amount, the
              Authority should only draw funds from LOCCS for eligible approved items in the
              Annual Statement using the correct budget line item.

Comment 8     During the audit resolution process, the Authority should provide the Greensboro
              Public Housing Staff documentation showing how the expenditures were
              reclassified.

Comment 9     The Authority’s comments state that the 57 percent completion reported for the
              competitive grant was correct, but that Authority staff had provided us the wrong
              supporting documentation during the audit. Documentation submitted with the
              comments supports the Authority’s claim that the project was 57 percent
              complete. We revised the report to show that although the reported information
              was not supported at the time of our review, the percentage of completion
              reported was correct.

Comment 10 The Authority acknowledged in the comments and at the exit conference that the
           “jobs created” number shown in its quarterly reports did not reflect full time
           equivalents as required. The Authority should ensure future reports include the
           numbers for jobs created using the formula established by OMB-M-10-08. It
           should also maintain supporting documentation for the numbers submitted.

Comment 11 We addressed the Authority’s comments to our conclusion with the evaluation of
           previous comments.

              Procurement - see comments 4, 5, and 6
              Reporting - see comments 9 and 10
              Obligations/Expenditures - see comments 1, 2, 3, and 7

Comment 12 We disagree that the Authority’s management was not kept informed during the
           review. During the review, we discussed our concerns with Authority staff
           including the points of contact assigned by the Chief Executive Officer at the
           entrance conference. We expected the staff to keep Authority management
           informed regarding the review results, but would have gladly discussed any
           concerns directly with management if that had been requested. We further
           discussed the review results with Chief Executive Officer Tina Akers Brown and
           Chief Operating Officer Don House at a meeting held at the end of our fieldwork
           on April 26, 2011.

Comment 13 The Authority’s comments incorrectly state that the $66,730 in miscoded
           obligations pertained to contractors expenses. They actually pertained to the
           purchase of appliances and audio equipment. During the exit conference, we
           provided Authority management additional information detailing the breakdown
           of all miscoded obligations.

                                              31
Comment 14 Our wording in recommendations regarding the reimbursement of unsupported
           costs later determined to be ineligible is standard for any recommendations with
           unsupported costs. Thus, we cannot agree with the Authority’s request to remove
           the wording.

Comment 15 As explained in Comment 4 above, during the audit resolution process the
           Greensboro Public Housing office will ask the Authority to provide the
           documentation necessary to support the $215,619 in expenses so that
           recommendation 1E may be closed.

Comment 16 During the exit conference, we agreed that the Authority not be required to
           develop written procedures in this instance due to the short time left with the
           grant, and because HUD has provided housing authorities with procedures for
           quarterly reporting. We modified the recommendation accordingly.

Comment 17 We cannot remove the Internal Control section of the Audit as the Authority
           requests because it is a standard element of our report.

Comment 18 We cannot remove Appendix A, Schedule of Questioned Costs, from the report as
           the Authority requests because it is a standard element for audit reports containing
           questioned costs.




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