oversight

The Housing Authority of the City of New Haven, CT, Could Not Show That It Always Complied With Environmental and Labor Standards Enforcement Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-06-10.

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

                                                                      Issue Date
                                                                             June 10, 2011
                                                                      Audit Report Number
                                                                           2011- BO-1008




TO:              Jennifer Gottlieb-Elazhari, Program Center Coordinator, Office of Public
                    Housing, Hartford Field Office, 1EPHP


FROM:



                 For John A. Dvorak, Regional Inspector General for Audit, Region 1, 1AGA


SUBJECT:         The Housing Authority of the City of New Haven, CT, Could Not Show That It
                 Always Complied With Environmental and Labor Standards Enforcement
                 Requirements



                                             HIGHLIGHTS

    What We Audited and Why

                  We audited the Housing Authority of the City of New Haven’s (Authority) Public
                  Housing Capital Fund (Capital Fund) and American Reinvestment and Recovery
                  Act of 2009 Capital Fund (Recovery Act Capital Fund) projects for compliance
                  with environmental and labor law requirements. We initiated this assignment
                  because a previous Office of Inspector General (OIG) audit of the Authority’s
                  Recovery Act Capital Fund 1 activities identified a significant risk of
                  noncompliance with environmental and labor law requirements that could impact
                  all of the Authority’s Capital Fund projects. Our objectives were to determine
                  whether the Authority (1) funded Capital Fund projects for eligible activities in

1
    2011-BO-1003, issued December 17, 2010
                   accordance with U.S. Department of Housing and Urban Development (HUD)
                   requirements, (2) complied with environmental requirements for proper removal
                   and disposal of asbestos waste for its Capital Fund and Recovery Act Capital
                   Fund projects, and (3) complied with labor standards enforcement requirements.

    What We Found
                   The Authority funded Capital Fund projects for eligible activities in accordance
                   with HUD requirements. However, it did not always comply with environmental
                   law requirements. Specifically, the Authority did not ensure that its abatement
                   contractors complied with contract requirements for the proper disposal of
                   asbestos waste removed from its Federal housing projects in accordance with its
                   contracts. We reviewed nine 2 abatement contracts with the Authority and found
                   that seven of the contractors could not support proper disposal of asbestos waste
                   removed from the projects in accordance with contract requirements. This
                   condition occurred because the Authority relied on its environmental monitoring
                   contractor to ensure compliance with environmental requirements with no
                   apparent follow-up or oversight of its contractor. As a result, the Authority could
                   not support disposal costs associated with more than $2 million in abatement costs
                   paid on these contracts.

                   The Authority also did not always comply with labor standards enforcement
                   requirements. Specifically, it did not

                   o Complete the required enforcement reports for at least seven contractors, in
                     which at least six violations appeared to have been willful noncompliance; 3
                   o Ensure that all required information reported to HUD in its semiannual
                     enforcement reports was complete and accurate;
                   o Always document that it performed a review of certified payrolls and
                     followed up on payroll falsification indicators;
                   o Require contractors to sign a statement of future compliance when
                     underpayment violations were identified;
                   o Establish an account to hold restitution collected for workers owed restitution
                     but who were not found or for appeals by the contractor; or
                   o Ensure that its enforcement file system was complete.

                   This condition occurred in part because the Authority did not have written
                   policies and procedures for labor standards compliance. Additionally, the
                   Authority’s contract with a city agency (agency) responsible for identifying
                   noncompliance of labor standards violations was too general and did not detail the
                   Authority’s and agency’s responsibilities in the area of labor standards
                   administration and enforcement. Lastly, the Authority did not adequately track
                   noncompliance violations of its contractors and resolutions, including restitution
                   amounts determined and collected. As a result, HUD did not have assurance that

2
    One of the contractors had two different abatement companies perform the abatement.
3
    In four of the seven instances, contractors used undocumented workers.


                                                          2
           the Authority met its labor standards enforcement requirements. Additionally,
           there is a risk that the Authority may continue to use contractors that willfully
           violate labor standards requirements and continue to hire undocumented workers
           to work on federally funded projects, including Recovery Act-funded projects.
           Further, if the Authority does not provide complete and accurate enforcement
           reports to HUD, HUD cannot comply with its requirements to provide this
           information to the U.S. Department of Labor as required.

What We Recommend


            We recommend that the Program Center Coordinator of HUD’s Hartford Office
            of Public Housing ensure the Authority’s written policies and procedures comply
            with requirements for ensuring that hazardous waste is properly disposed of and
            accounted for. We also recommend that the Program Center Coordinator of
            HUD’s Hartford Office of Public Housing require the Authority to (1) ensure
            that its staff is trained in environmental monitoring requirements, (2) adequately
            monitor its environmental monitoring contractors to ensure that they meet the
            requirements of their contracts, and (3) support that asbestos waste removed
            from Federal projects was properly accounted for and disposed of or repay from
            non-Federal funds the disposal costs it cannot support from the more than $2
            million in abatement costs for the projects reviewed.

            We also recommend that the Program Center Coordinator of HUD’s Hartford
            Office of Public Housing ensure that (1) the Authority’s written policies and
            procedures comply with requirements and include reporting responsibilities and
            sufficient management controls and incorporate Davis-Bacon Act streamlining
            guidance and (2) Authority staff is trained in labor standards compliance. We
            further recommend that the Program Center Coordinator of HUD’s Hartford
            Office of Public Housing require the Authority to (1) revise its contract with the
            agency to ensure that it is more specific as to Authority and contractor
            responsibilities for labor standards administration and enforcement and (2) report
            cases in which willful intent is apparent and/or in which restitution for a single
            employer was $1,000 or more, including those reviewed, and make any needed
            corrections to its semiannual enforcement reports.

            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 Authority the report on May 10, 2011, and held an exit
           conference with officials on May12, 2011. The complete text of the auditee’s



                                            3
response, along with our evaluation of that response, can be found in appendix B
of this report. We did not include in the report the attachments provided with the
Authority’s response due to the volume of documents provided, however, it is
available upon request. The Authority agreed, in part, with our findings and
recommendations and has begun implementing some of our recommendations.




                                 4
                           TABLE OF CONTENTS

Background and Objectives                                                      6

Results of Audit
      Finding 1: The Authority Could Not Support Proper Disposal of Asbestos   8
                 Waste
      Finding 2: The Authority Did Not Always Comply With Labor Standards      12
                 Enforcement Requirements

Scope and Methodology                                                          18

Internal Controls                                                              19

Appendixes
   A. Schedule of Questioned Costs                                             20
   B. Auditee Comments and OIG’s Evaluation                                    21
   C. Violations That Appeared To Have Been Willful Noncompliance              40




                                            5
                                  BACKGROUND AND OBJECTIVES


The Housing Authority of the City of New Haven, CT (Authority), was incorporated under the
laws of the State of Connecticut. The Authority operates under a five-member board of
commissioners, appointed by the mayor, and an executive director to provide safe and decent
housing to low- and moderate-income families and elderly individuals.

In 2001, the Authority was awarded “moving to work” status as part of the Federal Moving to
Work Demonstration program (MTW). As an MTW grantee, the Authority is required to
submit annual MTW annual plans to the U.S. Department of Housing and Urban Development
(HUD) that articulate its policies, objectives, and strategies for administering its Federal housing
programs. During our audit period, the Authority owned and operated 2,422 public housing
units.

President Obama signed the American Recovery and Reinvestment Act of 2009 (Recovery Act)
on February 17, 2009. This legislation included a $4 billion appropriation of capital funds, with
$3 billion distributed as formula grants and $1 billion distributed through a competitive grant
process. On March 18, 2009, HUD awarded the Authority a $6 million formula grant. 4

The Authority also received more than $14.9 million in Public Housing Capital Fund (Capital
Fund) grants from 2007 to 2010 and had expended more than $7.9 million as of February 1,
2011. 5

                                   Year         Awarded         Expended
                                   2007        $3,905,501       $3,845,574
                                   2008        $3,727,135       $3,727,135
                                   2009        $3,702,981        $370,298
                                   2010        $3,568,717           $0
                                   Total      $14,904,334       $7,943,007

The Authority contracted with a city agency (agency) to conduct preconstruction meetings with
the prime and second-tier contractors regarding enforcement of Federal labor standards laws and
Davis-Bacon Act laws. The agency also was responsible for reporting to the Authority any
contractors that did not comply with all labor standards and other regulations. 6 The agency
recommended enforcement actions to be taken by the Authority.

Our objectives were to determine whether the Authority (1) funded eligible Capital Fund
activities in accordance with HUD requirements, (2) complied with environmental requirements


4
  HUD also awarded the Authority $22.2 million in Recovery Act competitive Capital Fund grants; however, we
limited this review to formula grant funds.
5
  Only administrative expenses were paid from the 2009 grant.
6
  The requirements shown relate to our audit objectives; however, the agency was also contracted for enforcement of
Section 3 requirements.


                                                        6
for proper removal and disposal of asbestos waste for its Capital Fund and Recovery Act Capital
Fund projects, and (3) complied with labor standards enforcement requirements.




                                               7
                                              RESULTS OF AUDIT

Finding 1: The Authority Could Not Support Proper Disposal of
Asbestos Waste
The Authority did not ensure that its abatement contractors complied with contract requirements
for the proper disposal of asbestos waste removed from its Federal housing projects. It could not
account for at least 30 cubic yards of asbestos waste removed from a construction site and could
not readily account for asbestos waste removed from other construction sites. This condition
occurred because the Authority relied on its environmental monitoring contractor to ensure that
its abatement contractors complied with contract requirements for removal and disposal of
asbestos waste with no apparent follow-up or oversight. As a result, the Authority could not
support disposal costs associated with more than $2 million in abatement costs paid on these
contracts.


    Contractors Did Not Comply
    With Contract Requirements

                   The Authority did not ensure that its abatement contractors complied with
                   contract requirements for the proper disposal of hazardous waste removed from
                   its Federal housing projects. We reviewed nine 7 abatement contracts with the
                   Authority and found that seven of the contractors could not support proper
                   disposal of asbestos waste removed from the projects in accordance with contract
                   requirements. In one instance, the waste shipment record, dated January 30,
                   2010, had been changed from 40 cubic yards to 10 cubic yards of waste with no
                   explanation of why the change was made or where the additional 30 cubic yards
                   were disposed of. Neither the Authority nor its environmental monitoring
                   contractor performed follow-up to determine what happened until we brought it to
                   the Authority’s attention. According to the Authority’s environmental monitoring
                   contractor, approximately 40 cubic yards of asbestos waste were generated during
                   this abatement project. The waste shipment record was not provided to the
                   Authority until after the project was completed and final payment was made so it
                   was not able to retain payment until the issue was resolved. We obtained a copy
                   of the waste shipment record from the landfill, that showed 10 cubic yards of
                   waster was removed from the project, but it did not show how much was received
                   by the landfill and disposed.

                   After our request, the Authority’s environmental monitoring contractor followed
                   up but was not able to determine why the amount was changed and what
                   happened to the additional 30 cubic yards of waste. Although the Office of
                   Inspector General (OIG) pointed out this discrepancy to the Authority in


7
    One of the contractors had two different abatement companies perform the abatement.


                                                          8
           September 2010 during a previous audit, the Authority did not report the missing
           30 cubic yards to the required State and/or Federal agencies until April 29, 2011.

           In another instance, the waste shipment record was changed from 19 cubic yards
           to 2 cubic yards. According to an executive project manager at the Authority,
           there were 19 bags of waste. There was no reconciliation to the scope of work or
           the actual amount of waste removed, so the Authority could not be sure that all of
           the waste was properly disposed of.

           In the remaining five instances, although some waste shipment records were
           complete, the amount of waste on other waste shipment records was either not
           listed or not reconciled to the amount of asbestos removed from the project to
           ensure that all of the waste was properly accounted for and disposed of.
           Additionally, some of the waste shipment records were not properly executed by
           all required parties. As a result, the Authority could not support the disposal costs
           associated with more than $2 million in abatement costs. During our audit, one of
           the environmental monitoring contractors began including a statement in its final
           summary report stating that the amount of waste disposed of according to the
           waste shipment records was consistent with the amount of waste removed from
           the project.

Inadequate Monitoring of
Environmental Monitoring
Contractors
           We reviewed two firms that the Authority had under contract to perform
           environmental monitoring services. These firms monitored abatement work
           performed by the Authority’s abatement contractors working on Authority
           projects. The Authority relied on the environmental monitoring contractors to
           ensure that its abatement contractors complied with local, State, and Federal
           environmental requirements and that the asbestos waste was properly accounted
           for. However, the Authority did not adequately monitor or oversee its
           environmental monitoring contractors. The environmental monitoring contractors
           ensured that asbestos waste was properly removed from the projects. However,
           after that, there was no accountability of the waste other than the waste shipment
           record. The waste shipment record tracked the waste from pickup to final
           disposal at the landfill. Therefore, the waste shipment records needed to be
           properly completed, executed, and available to the Authority before final payment
           to the contractor to ensure the proper disposal of the waste.

           The Authority did not always receive the waste shipment record in a timely
           manner; however, it did not report this problem as required. When the Authority
           does not obtain a copy of the waste shipment record signed by the owner or
           operator of the designated disposal site within 35 days of the date the waste was
           accepted by the initial transporter, it is required to either contact the transporter or
           the owner of the designated disposal site or both to determine the status of the



                                              9
             waste shipment. If the Authority does not receive the waste shipment record
             within 45 days, it is required to report this matter in writing to the appropriate
             local, State, or Federal agency responsible. During our audit, the Authority began
             to maintain a schedule to track the receipt of the waste shipment records. The
             Authority planned to hold its environmental monitoring contractor responsible for
             ensuring that it received the waste shipment record from the abatement
             contractors in a timely manner. If was is not received in a timely manner, the
             Authority planned to withhold payments to its environmental monitoring
             contractors and its abatement contractor for the abatement portion of the contract
             until the waste shipment record was received.

             The Authority was also not able to readily support that all of the abatement
             workers were properly licensed and trained and had the proper medical clearance.
             The Authority’s environmental monitoring contractors were required to obtain
             this documentation at the beginning of the project and provide it to the Authority
             once the project was completed. However, when we requested this information,
             the Authority did not have the required information for 4 of the 10 abatement
             contractors. The Authority did not adequately monitor its environmental
             monitoring contractors to ensure that they complied with contract requirements
             and provided all of the required documents to the Authority in a timely manner.


Conclusion


             The Authority did not ensure that its abatement contractors complied with all
             local, State, and Federal environmental requirements before paying for abatement
             costs with HUD capital funds. As a result, disposal costs associated with more
             than $2 million in capital funds may have been paid for abatement projects that
             were not properly completed. Additionally, the Authority could be at risk for
             fines by the local, State, or Federal agency responsible if it cannot show proper
             disposal of hazardous waste. During the audit, the Authority developed policies
             and procedures for hazardous waste removal and has taken steps to implement
             this new policy, including the manifest tracking form developed in response to
             our audit.


Recommendations



             We recommend that the Program Center Coordinator of HUD’s Hartford Office
             of Public Housing ensure

             1A. The Authority’s written policies and procedures comply with requirements
                 and include sufficient management controls for ensuring that hazardous



                                             10
                        waste is properly disposed of and accounted for .

                 We also recommend that the Program Center Coordinator of HUD’s Hartford
                 Office of Public Housing require the Authority to

                 1B. Adequately monitor its environmental consultants to ensure that they meet
                     contract requirements, including reporting to the required State and Federal
                     agencies any hazardous waste for which disposal documentation cannot be
                     produced.

                 1C. Support that hazardous waste removed from Federal projects was properly
                     accounted for and disposed of in accordance with contract requirements or
                     repay from non-Federal funds the disposal costs it cannot support from the
                     $1,574,998 8 in abatement costs for the non-Recovery Act Capital Fund
                     projects reviewed.

                 We recommend that the Program Center Coordinator of HUD’s Hartford Office
                 of Public Housing require the Authority to

                 1D. Support that hazardous waste removed from Federal projects was properly
                     accounted for and disposed of in accordance with contract requirements or
                     repay from non-Federal funds the disposal costs it cannot support from the
                     $452,658 9 in abatement costs for the Recovery Act Capital Fund projects
                     reviewed.




8
  This amount includes $16,950 in abatement costs from contract number DC-09-C-0003, $107,933in abatement
costs from contract number DC-09-C-0019, and $1,450,115 in abatement costs from contract number 100408.
9
  Includes vacancy reduction contracts for two contractors that used three different abatement contractors under
contract number DC-09-C-0016, totaling $274,358, and $178,300 from contract number DC-09-C-0023.



                                                        11
                                      RESULTS OF AUDIT

Finding 2: The Authority Did Not Always Comply With Labor
Standards Enforcement Requirements
The Authority did not always comply with labor standards enforcement requirements.
Specifically, it did not

   •   Complete the required enforcement reports for at least seven contractors, the
       underpayments of which were more than $1,000 and totaled more than $244,000 and in
       which at least six violations appeared to have been willful noncompliance;
   •   Ensure that all required information reported to HUD in its semiannual enforcement
       reports were complete and accurate;
   •   Always document that it performed a review of certified payrolls and followed up on
       payroll falsification indicators;
   •   Require contractors to sign a statement of future compliance when underpayment
       violations were identified;
   •   Establish an account to hold restitution collected for workers owed restitution but who
       were not found or in instances of appeal by the contractor; and
   •   Ensure that its enforcement file system was complete.

This condition occurred in part because the Authority did not have written policies and
procedures for labor standards compliance. Additionally, the Authority’s contract with a city
agency responsible for identifying noncompliance of labor standards violations was too general
and did not detail the Authority’s and agency’s responsibilities. Lastly, the Authority did not
adequately track noncompliance violations for its contractors. As a result, HUD did not have
assurance that the Authority met its labor standards enforcement requirements. Additionally,
there is a risk that the Authority may continue to use contractors that willfully violate labor
standards requirements and continue to hire undocumented workers to work on federally funded
projects, including Recovery Act-funded projects.



 Required Enforcement Reports
 Not Completed

              The Authority did not complete the required enforcement reports for at least seven
              contractors/subcontractors, the underpayments of which were more than $1,000 and
              totaled more than $244,000. The Authority stated that it was not aware of the
              requirement to submit these reports to HUD when it did not recommend debarment
              and had obtained restitution from the contractors. In at least six of the seven
              violations, the underpayments appeared to have been willful (see appendix C for
              violations for the six contractors). The Authority stated that it did not determine that


                                                12
            the violations were willful; however, it did not document the basis for that
            determination. The agency, which was responsible for identifying and investigating
            labor standards violations, believed the violations for these contractors were willful.

            In these six violations, the agency found that contractors misclassified employees,
            did not include employees on the payrolls and later underpaid them, did not pay
            employees for work performed, and did not pay overtime to employees when
            required. In four of the six violations, the contractors underpaid undocumented
            workers.


Semiannual Enforcement
Reports Not Complete and
Accurate

            The Authority did not ensure that all required information reported to HUD in its
            semiannual enforcement reports was complete and accurate. The Authority did
            not always include contractors that had complaints and did not include all
            restitution collected. Further, liquidated damages were not always determined
            and collected, and overtime restitution collected was not broken out from straight
            time restitution collected. This condition occurred because the Authority did not
            have an adequate method of tracking contractors with complaints and the final
            resolution, including restitution paid by the contractor. The individual at the
            Authority who completed these reports sent e-mails requesting this information
            from Authority staff and reviewed monthly agency reports submitted to the
            Authority to complete these reports. The Authority put together a log of
            contractors with noncompliance violations based on our request for this
            information. The log showed contractors with violations and whether the
            violations were resolved; however, it did not identify the amount of restitution
            paid, did not show how the violations were resolved, and was not always
            complete. This type of log would be beneficial to the individual responsible for
            completing these reports.

Certified Payroll Reviews Not
Always Documented and
Follow-up Not Always
Performed

            When the agency identified violations through inspections, interviews with
            employees, or complaints, it generally performed a thorough review of
            documentation provided by contractors and did an adequate job of determining
            restitution, based on the certified payrolls and other information obtained, and
            ensuring that employees were paid. However, it was not always clear whether
            other certified payrolls were reviewed or that the agency followed up on payroll
            falsification indicators. We identified payroll falsification indicators on several



                                              13
            contractor payrolls, such as several employees’ not working 40-hour work weeks,
            and working less than-8 hour days, and the ratio of laborers to mechanics was
            disproportionate. The agency stated that it did not follow up on payrolls in which
            the hours are less than 40 hours per week or less than 8 hours per day, as the
            workers could have been working on other jobs and many of the businesses were
            small and new businesses. Many of the contractors used a form that showed total
            gross wages and gross wages for the Authority project; however, there were
            contractors that had several payrolls in which the amounts were the same for both
            total gross wages and gross wages for the Authority project, and no follow-up was
            performed.

            Our review of two contractors’ records showed that certified payrolls did not
            always agree with contractor records. Further, the contractors could not provide
            timesheets to verify the information for the period requested. Additionally, one of
            these contractors continued to show all laborers on the certified payrolls, even
            after paying restitution to several employees for misclassification. No additional
            follow-up was performed. Two other contractors also showed cash payments
            with no deductions and could not provide time sheets to verify information shown
            on the payrolls. One of these contractors issued Internal Revenue Service forms
            1099 to the workers shown on the payrolls. No additional follow-up was
            performed for these payrolls.


Statement of Future
Compliance Not Obtained

            Although the Authority required that the contractor sign a statement of
            compliance with Federal requirements, including Federal labor standards, before
            commencing work, it did not require contractors to sign a statement of future
            compliance when underpayments were identified and violations appeared willful.
            HUD streamlining guidance states that HUD has made it a priority to target labor
            standards enforcement activities on willful violators (i.e., employers that falsify
            certified payrolls) and to recommend debarment against repeat violators. In these
            cases, a first offense will require from the employer a written statement assuring
            future compliance in addition to full wage restitution for all underpaid employees.
            If the employer is found in violation of labor standards again, a recommendation
            of debarment should be made based in part upon the breach of assurance of future
            compliance secured after the prior violation.

Escrow Account Not
Established for Restitution

            The Authority did not maintain an account to hold restitution owed to workers not
            found or who did not come forward for restitution payments or in cases in which a
            contractor appealed restitution calculations. We found at least one case in which
            two workers did not come forward for restitution payments and the Authority’s


                                            14
            contractor held onto the money orders attached to the file. These money orders
            were obtained from the contractor in early 2010 and stated that they would be
            void after 90 days. The Authority is required to submit to HUD any restitution
            funds not claimed after 3 years. It is not prudent to hold bank checks or money
            orders for 3 years without depositing them into a bank account, as they could be
            lost during this time or expire.

Enforcement File System Not
Complete

            The Authority did not ensure that its enforcement file system was complete. It
            was not always clear from the documentation in the agency’s files that items were
            resolved or what the final resolution was. For example, although e-mail
            correspondence indicated that one violation should have been referred to the U.S.
            Department of Labor (DOL) for investigation, neither the Authority nor the
            agency could tell us whether it was referred to DOL. Additionally, follow-up
            inspections were not printed and included in the files, and e-mail correspondence
            among the agency, contractors, and the Authority was not always included in the
            files. Follow-up inspections are especially important in cases in which contractors
            are found using undocumented workers, as only authorized workers should be
            working on federally funded projects. Additionally, it was not always clear
            whether the Authority took the action recommended by the agency, such as
            holding payments. When we asked the Authority for its enforcement files, we
            were told that there wasn’t a specific enforcement file but that various individuals
            would have e-mails and other correspondence related to enforcement actions
            taken by the Authority. As a result of our review, the agency began including e-
            mail correspondence in its files and started including a memorandum in the file
            regarding the final resolution. The Authority should ensure that it notifies the
            agency of actions taken against contractors in response to its recommendations so
            that the enforcement file is complete or maintain its own enforcement files for
            actions it takes against contractors in response to violations identified by the
            agency.


No Written Policies or
Procedures


            These deficiencies occurred in part because the Authority did not have written
            policies and procedures for compliance with labor standards enforcement.
            Additionally, the Authority’s contract with the agency responsible for identifying
            noncompliance of labor standards was too general and did not detail agency and
            Authority responsibilities in the area of labor standards enforcement. During the
            audit, the Authority developed written policies and procedures for labor standards
            enforcement. According to the agency and the Authority, they were working on a



                                             15
             revised contract. The Authority should ensure that this revised contract is clear
             regarding the Authority’s and agency’s responsibilities for labor standards
             enforcement.


Conclusion



             The Authority had taken steps to ensure that it meets labor standards enforcement
             requirements, including developing written policies and procedures for labor
             standards enforcement and ensuring the use of documented workers by its
             contractors. The Authority needs to implement additional steps in its written
             policies and procedures to document cases of willful intent by contractors when
             underpayments are identified, especially when contractors submit false payrolls,
             and ensure that contractors sign a statement of future compliance so that the
             Authority can make the appropriate recommendation to HUD for debarment of
             repeat willful violators. The Authority also created a log to identify contractors
             with violations and the resolutions; however, it needs to take additional steps to
             ensure that this information is complete and accurate. It needs to ensure that it
             documents its reviews of certified payrolls and follows up when necessary for any
             payroll falsification indicators identified and ensure that it has a complete
             enforcement file system so that it can show that it took appropriate enforcement
             action when required.

Recommendations

             We recommend that the Program Center Coordinator of HUD’s Hartford Office
             of Public Housing ensure that

             2A. The Authority’s written policies and procedures comply with requirements
                 and include reporting responsibilities and sufficient management controls
                 and incorporate Davis-Bacon Act streamlining guidance.

             2B. The Authority’s staff is trained in labor standards compliance.

             We also recommend that the Program Center Coordinator of HUD’s Hartford
             Office of Public Housing require the Authority to

             2C. Revise its non-Recovery Act-funded contract with the agency to ensure that
                 it is more specific as to Authority and contractor responsibilities for labor
                 standards administration and enforcement.

             2D. Report non-Recovery Act violations in which either willful intent is
                 apparent or restitution for a single employer was $1,000 or more or both,



                                              16
     including those reviewed, and make any needed corrections to its
     semiannual enforcement reports.

We also recommend that the Program Center Coordinator of HUD’s Hartford
Office of Public Housing require the Authority to

2E. Report Recovery Act violations in which either willful intent is apparent or
    restitution for a single employer was $1,000 or more or both, and make any
    needed corrections to its semiannual enforcement reports.




                                17
                                   SCOPE AND METHODOLOGY

We conducted our audit between December 2010 and April 2011. We completed our fieldwork at
the Authority located at 360 Orange Street, New Haven, CT, and at various Authority contractors’
offices in Connecticut. Our audit covered the period October 1, 2008, through September 30, 2010,
and was extended when necessary to meet our audit objectives.

To accomplish our audit objectives, we

•    Reviewed applicable Recovery Act and Capital Fund regulations, notices, and guidance.

•    Reviewed management controls over eligibility, labor standards enforcement, and contract
     compliance related to proper disposal and accountability of hazardous waste.

•    Interviewed pertinent HUD, Authority, agency, and contractor staff.

•    Reviewed all seven Capital Fund activities, totaling more than $3.2 million that were started
     during our audit period to determine whether the activities were eligible in accordance with
     Capital Fund requirements.

•    Reviewed 19 violations of underpayments and undocumented workers for 17 contractors
     cited by the agency to determine whether the Authority complied with labor standards
     enforcement and other Federal requirements. 10

•    Reviewed 6 of the 17 contractors’ records to verify information provided on certified
     payrolls.

•    Determined whether 10 abatement contractors complied with contract requirements for
     proper removal and disposal of hazardous materials for all nine projects started during our
     audit period.

•    Determined what action the Authority took if contractors did not comply with contract
     requirements to submit waste shipment records within the required timeframe.

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



10
  We reviewed all violations of underpayments and undocumented workers cited in the agency’s monthly reports
from August 2008 to September 2010. We expanded our audit period to include three additional violations due to
the amount of restitution collected for one contractor shown on the semiannual enforcement report and to review
two additional violations cited for two contractors already in our sample.


                                                       18
                              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 selecting and approving eligible Capital Fund activities
                  •   Controls over contract compliance related to proper disposal and
                      accountability of hazardous waste
                  •   Controls over labor standards enforcement

               We assessed the relevant controls identified above.

               A deficiency in internal control exists when the design or operation of a control does
               not allow management or employees, in the normal course of performing their
               assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
               impairments to effectiveness or efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws and regulations on a
               timely basis.

 Significant Deficiencies


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

                  •   The Authority did not ensure that abatement contractors complied with
                      contract requirements for proper removal and disposal of hazardous material.
                  •   The Authority did not always comply with labor standards enforcement
                      requirements.


                                                 19
                                   APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

 Recommendation       Unsupported 1/
        number
             1C.          $1,574,998
             1D.            $452,658


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.




                                             20
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         21
Ref to OIG Evaluation   Auditee Comments




Comment 2




Comment 3




Comment 4




                         22
Ref to OIG Evaluation   Auditee Comments




Comment 5




Comment 6




Comment 7




                         23
Ref to OIG Evaluation   Auditee Comments




Comment 8




Comment 9




                         24
Ref to OIG Evaluation   Auditee Comments




Comment 10




Comment 11




                         25
Ref to OIG Evaluation   Auditee Comments




Comment 12




Comment 13




                         26
Ref to OIG Evaluation   Auditee Comments




Comment 14




Comment 15




Comment 16




                         27
Ref to OIG Evaluation   Auditee Comments




Comment 17




Comment 18




Comment 19




                         28
Ref to OIG Evaluation   Auditee Comments




Comment 20




Comment 21




                         29
Ref to OIG Evaluation   Auditee Comments




Comment 22




Comment 23




                         30
Ref to OIG Evaluation   Auditee Comments




Comment 24




Comment 24




                         31
Ref to OIG Evaluation   Auditee Comments




Comment 26




Comment 27




                         32
                         OIG Evaluation of Auditee Comments

Comment 1   The Authority did not have all of the waste shipment records and did not follow
            up with the environmental monitoring contractor or the abatement contractors to
            obtain them in a timely manner, as required. According to a discussion with the
            director for capital projects & modernization, the Authority’s environmental
            monitoring contractors ensure accountability from the unit to the container; after
            that, there is no other process for ensuring accountability of materials disposed of
            besides the waste shipment record. The Authority did not provide us final
            summary reports from its licensed environmental monitoring contractors for four
            of the nine abatement contracts, either during the audit or as part of its response.
            After we requested the environmental monitoring contractor’s reports and
            supporting documentation from the Authority during our audit, the Authority’s
            executive project manager had to contact the environmental monitoring contractor
            to obtain this information for projects completed in 2010.

            Further, the Authority did not obtain complete waste shipment records in a timely
            manner for all projects. This issue was brought to the Authority’s attention during
            the first audit of the Authority in September 2010; however, when we requested
            all of the waste shipment records during this audit, the Authority was not able to
            readily provide them. We requested all of the waste shipment records and other
            supporting documentation on February 14, 2011; however, as of April 6, 2011, we
            hadn’t received all of the supporting documentation. Further, based on the
            documents that were provided during our audit, the Authority was not able to
            account for all of the asbestos waste to ensure that it was disposed of properly.
            Waste shipment records did not always list the amount of waste disposed of or
            were not properly executed by all parties involved in the chain of custody. The
            Authority did provide additional documentation in response to our findings;
            however, based on what was provided, we were not able to determine whether all
            hazardous waste were properly disposed of, therefore, no changes were made to
            the unsupported amount in the finding. HUD will need to determine whether the
            Authority can adequately support proper disposal of the asbestos waste.

Comment 2   Our finding that the abatement contractors did not comply with contract
            requirements for the proper disposal of hazardous waste relates to the abatement
            contractors that performed the abatement work, not the environmental monitoring
            contractors. The reason we state that they did not comply with contract
            requirements is that they were not able to support and account for the proper
            disposal of waste removed from the projects. The waste shipment records were
            not always complete and were not provided to the Authority in a timely manner.

Comment 3   The Authority did not monitor its environmental monitoring contractors to ensure
            that they complied with contract requirements and provided all of the required
            documents to the Authority in a timely manner. The Authority did not have all of
            the waste shipment records and did not follow up with the environmental



                                             33
            monitoring contractor or the abatement contractors to obtain them in a timely
            manner, as required (See comment 1). In response to preliminarily audit results,
            the Authority began using a manifest tracking form to ensure it receives the waste
            shipment records in a timely manner. We acknowledge the Authority efforts to
            correct this deficiency.

Comment 4   The reconciliations were requested during the audit so we could verify that the
            waste was accounted for, but it was not provided until after we presented our
            findings to the Authority. A reconciliation may not be an industry standard;
            however, unless the Authority performs a reconciliation, it will not be able to
            support that all asbestos materials removed from the project were accounted for in
            accordance with requirements. Further, since the environmental monitoring
            contractors perform the monitoring of the abatement contractors and the waste
            shipment records are sometimes provided directly to the Authority, the Authority
            needs to be aware of the amount of waste generated during the project to ensure
            that all of the waste shipment records are obtained in a timely manner to account
            for the waste. Otherwise, the Authority may only receive one waste shipment
            record when two or three are required to account for all of the waste. Currently,
            there is a disconnect between the amount of waste removed from a project and the
            amount of waste disposed of. There needs to be a procedure in place to
            adequately account for the waste.

Comment 5   See comment 1.

Comment 6   The Authority used eight different abatement contractors for the nine projects
            reviewed. Two contractors were used on 2 different projects for a total of 10
            abatement contractors. Two contractors were counted twice, but the employees
            were not always the same on each project. On one project, we weren’t able to
            determine which employees worked on the project because we weren’t provided
            with any documentation. Therefore, the Authority did not provide complete
            records to support that all of the abatement workers were properly licensed and
            trained and had the proper medical clearance.

Comment 7   See comment 1.

Comment 8   In response to our finding, the Authority provided additional documentation to
            support proper disposal of hazardous materials, however we were not able to
            adequately evaluate whether the Authority was able to support proper disposal of
            hazardous materials as the information provided was not complete, not
            independent, and missing pertinent information. For example, the Authority did
            not provide any additional support for one contract we questioned. In another
            example, the Authority provided certificate of disposals from one landfill,
            however, the certifications do not indicate the amount of waste received and refer
            to the “attached, certified, original copies”, which were not included in the
            package. In another example, the information from the disposal sites did not
            indicate the waste shipment record numbers or project associated with the amount



                                            34
              of waste shown as received. Additionally, the Authority provided estimates of
              waste removed from the projects by the environmental monitoring contractors
              after the findings were provided, which are not independent estimates. HUD will
              need to determine whether the Authority can adequately support proper disposal
              of the asbestos waste.

Comment 9     Documentation provided was not complete. The certificate of disposal does not
              indicate the amount of waste received and indicates that there were attached,
              original copies of waste records; however, these were not included in the
              supporting documentation provided. The copies of the waste shipment records
              that the Authority provided us during the audit were illegible. Further, the waste
              estimate provided by the Authority did not include the amount of waste removed
              (unit of measure) as required. Additionally, the waste estimate was completed by
              the environmental monitoring contractor, which is not an independent estimate.
              Therefore, HUD will need to determine whether the Authority can adequately
              support proper disposal of the asbestos waste.

Comment 10 Of the 18 waste shipment records associated with this project, 5 did not list the
           amount of waste disposed of. Also, seven waste shipment records were not
           executed by the driver (three of these also did not have amounts listed and were
           counted above). Thus, nine of the waste shipment records were not complete and
           properly executed. Therefore, the Authority was not able to properly account for
           the asbestos waste removed from this project and ensure that it was properly
           disposed of. The Authority provided additional supporting documentation it
           obtained from the disposal sites and its environmental monitoring contractor after
           we provided our findings to the Authority. The disposal site showed that 208.32
           tons was disposed of related to these waste shipment records, and the
           environmental monitoring contractor estimated 192 tons were removed. The
           estimate of waste removed, as determined by the environmental monitoring
           contractor for the Authority, was done after the findings were provided and is not
           an independent estimate. HUD will need to determine whether the Authority can
           adequately support proper disposal of the asbestos waste.

Comment 11 We did not prorate the abatement costs but questioned the entire cost of the
           abatement contract as unsupported, and the Authority needs to support the
           disposal costs associated with the contract or repay the amount of disposal costs
           that is unsupported. Disposal costs were not broken out from the total abatement
           costs. We acknowledge that a waste shipment record showed 10 CY was
           removed from the project (changed from 40CY). However, the record does not
           show the amount received by the landfill or provide an explanation why the
           amount was revised from 40 CY to 10 CY. Also, in this case, the Authority stated
           that the abatement contract was $16,950; however, we obtained a copy of the
           signed proposal for the abatement work, which was for $41,200. Additionally,
           documentation at the agency (award recommendation notice and compliance
           statements) showed that the contract amount was $31,500. Therefore, we are not




                                              35
                sure what the actual contract amount is. We used the lowest contract amount in
                the report.

Comment 12 See comment 8.

Comment 13 See comment 4. Also, the additional supporting documentation provided showed
           24.49 tons was estimated by the environmental monitoring contractor and 32.9
           tons was shown as received by the disposal site. The estimate of waste removed
           was completed by the environmental monitoring contractor after the findings were
           provided and is not an independent estimate. Additionally, the response indicates
           that “these disposals had loads from multiple waste disposal sites but the weight
           accepted includes the amounts of weight estimates”. We disagree with this
           assertion since there is no way to distinguish the waste generated attributed to the
           additional loads from waste attributed to this project (i.e. difference between 32.9
           vs. 24.49 tons). Also, one of the three disposal facility records provided did not
           indicate the waste shipment record numbers or project. Another disposal facility
           record showed a waste shipment record number that was not a waste shipment
           record provided during the audit for this project. HUD will need to determine
           whether the Authority can adequately support proper disposal of the asbestos
           waste.

Comment 14 The waste shipment records requires the generator to show the type of container
           such as bags or drums and the quantity of materials, which should be shown as a
           unit of measure, such as cubic yards or tons, as required by Federal regulations 11.
           One of the three waste shipment records showed the number of bags and did not
           list the amount (quantity) of waste disposed of. The Authority did not provide
           documentation from the disposal site showing the amount of waste received or an
           estimate of waste removed. Therefore, HUD will need to determine whether the
           Authority can adequately support proper disposal of the asbestos waste.


Comment 15 Again, this information was not provided during the audit. It was not made
           available until after the audit work was complete because the Authority did not
           have the information available at its office. The waste shipment record that was
           available at the Authority and provided to us did not list an amount of waste
           disposed of. The additional supporting documentation provided by the Authority
           in response to our report from the disposal site showed 9,480 pounds was received
           and the environmental monitoring contractor estimated 9,387 pounds. However,
           the estimate of waste removed was completed by the environmental monitoring
           contractor after the findings were provided and is not independent. Therefore,
           HUD will need to determine whether the Authority can adequately support proper
           disposal of the asbestos waste.



11
  Appendix to Title 40: Protection of Environment, Part 262—Uniform Hazardous Waste Manifest and Instructions
(EPA Forms 8700–22 and 8700–22A and Their Instructions)


                                                     36
Comment 16 We revised the finding to show that the Authority developed a hazardous waste
           policy during the audit. The written policy appears to address deficiencies
           identified during the audit; however, HUD will need to confirm that the new
           policy complies with all requirements.

Comment 17 We agree that the Authority still needs to contract out its environmental project
           monitoring; however, Authority staff members also need to be familiar with
           environmental requirements so that they can properly monitor and oversee the
           Authority’s environmental monitoring contractors and ensure that they meet all of
           their contract requirements.

Comment 18 See comment 16.

Comment 19 See comments 1 and 8.

Comment 20 The Authority stated it has revised its practice to comply with the requirement to
           submit the required employer-specific enforcement reports to HUD.

Comment 21 The Authority’s response stated that it disputed the finding because it had
           consistently provided enforcement activity to HUD via the semiannual labor
           standard enforcement reports. However, the finding does not state that the
           Authority did not complete the semiannual enforcement reports but, rather, that
           the reports were not always complete and accurate. As stated in the finding, we
           found instances in which complaints against contractors were not included,
           restitution collected was not always reported, and overtime restitution collected
           was not broken out. We reviewed whether the Authority included the missing
           information in the next semiannual enforcement report and found that it had not.
           The Authority did not provide support showing that this finding was incorrect;
           therefore, no changes were made.

Comment 22 We did not state that 100 percent of payroll reviews were required. We agree that
           100 percent of payroll reviews are not required and that spot checks of payroll are
           adequate. As stated in the finding, we could not always determine whether
           certified payrolls were reviewed or false payroll indicators followed up on. In
           several cases, the agency also found that contractors were using undocumented
           workers. This violation by itself warrants more scrutiny of the payrolls submitted.

Comment 23 The Authority stated that we failed to mention that it reviewed many detailed
           investigations. We disagree as the first sentence of the finding specifically states,
           “When the agency identified violations through inspections, interviews with
           employees, or complaints, it generally performed a thorough review of
           documentation provided by contractors and did an adequate job of determining
           restitution, based on the certified payrolls and other information obtained, and
           ensuring that employees were paid.”




                                               37
Comment 24 The Authority agreed that it did not require contractors to sign a statement of
           future compliance. We added to the finding that the Authority requires that the
           contractor sign a statement of compliance with Federal requirements, including
           Federal labor standards, before commencing work. However, this is not the same
           as the statement of future compliance when a contractor is found to have willfully
           underpaid its employees.

Comment 25 The Authority did not agree with us that an escrow account was required.
           However, according to HUD guidance, “Making Davis Bacon Work: A
           Contractor’s Guide to Prevailing Wage Requirements for Federally-Assisted
           Construction Projects,” “Sometimes, corrective actions or disputes continue after
           completion and provisions must be made to ensure that funds are available to pay
           any wage restitution that is ultimately found due. In these cases, we allow
           projects to proceed to final closing and payments provided the prime contractor
           deposits an amount equal to the potential liability for wage restitution and
           liquidated damages, if necessary, in a special account. The deposit or escrow
           account is controlled by the contract administrator.” In this case, the contract
           administrator would be the Authority.

Comment 26 When we asked the Authority for its enforcement files for the contractors in our
           sample, we were told that the Authority did not have a specific enforcement file
           for each contractor but that several Authority staff may have e-mails or other
           documentation. We were told that information may not all be in one place. The
           agency had enforcement files; however, as stated, they were not complete, and we
           could not always determine what the final resolution was based on documentation
           in the file. The Authority’s chief legal officer stated that the Authority also
           completes an evaluation form at the end of a job for the contractor and if it has
           had problems with the contractor, this will be considered on any future contracts
           that it bids on. However, when we asked for the contractor evaluations, the
           Authority could not readily provide them, and when we did obtain them, we
           found that the evaluations were incomplete and in several cases, were dated after
           our request for this information.

Comment 27 Although the Authority stated that it disputes the finding, it developed written
           policies and procedures after we pointed out the lack of written policies and
           procedures related to labor standards enforcement at a February 10, 2011, meeting
           and in prior discussions with Authority staff. The Authority is required to comply
           with labor standards and other Federal requirements; therefore, written policies
           and procedures are a necessary internal management control, and without them,
           there is a greater risk of noncompliance with requirements. The Authority needs
           to revise its policies and procedures to submit employer specific enforcement
           reports to HUD for cases of willful intent or where restitution is $1,000 or more
           for one employer, even when restitution is collected. It also needs to implement
           additional steps in its written policies and procedures to document cases of willful
           intent by contractors when underpayments are identified, especially when
           contractors submit false payrolls, and ensure that contractors sign a statement of



                                              38
future compliance so that the Authority can make the appropriate
recommendation to HUD for debarment of repeat willful violators. HUD needs to
confirm that the Authority’s written policies and procedures comply with
requirements.




                              39
Appendix C

    VIOLATIONS THAT APPEARED TO HAVE BEEN WILLFUL
                   NONCOMPLIANCE

Contractor Restitution   Violations cited by agency
           collected
1          $51,090       Undocumented workers, nonpayment of wages, failure
                         to pay prevailing wage rates. According to the prime
                         contractor for this job, he found out that the foreman
                         for contractor 1 was a subcontractor that had an
                         agreement not to pay prevailing wage rates.
2           $39,352      Undocumented workers, complaints made by six
                         workers of underpayment of wages including
                         overtime, and misclassification of work performed.
3           $3,750       Nonpayment of wages to two undocumented workers.
                         The subcontractor was not disclosed by the contractor
                         and did not submit certified payrolls.
4           $6,669       Complaints from two workers for underpayment of
                         wages, misclassification, and overtime not paid.
5           $2,296       Certified payrolls were not submitted for an
                         undisclosed subcontractor until identified by agency,
                         and a worker was underpaid.
6           $7,284       Undocumented workers, underpayment of wages,
                         conflicting and inaccurate payrolls, including one
                         worker interviewed by the agency at site not shown on
                         the certified payroll. Payroll checks to the worker
                         were returned due to insufficient funds.




                                          40