oversight

The Housing Authority of the City of South Bend, IN, Generally Administered Its Public Housing Capital Fund Stimulus Formula Grant (Recovery Act Funded) in Accordance With Applicable Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-06-17.

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

                                                              Issue Date
                                                                       June 17, 2011
                                                                
                                                              Audit Report Number
                                                                       2011-CH-1009




TO:         Shawn Sweet, Director of Public Housing Hub, 5DPH

             //signed//
FROM:       Kelly Anderson, Regional Inspector General for Audit, Chicago Region, 5AGA

SUBJECT: The Housing Authority of the City of South Bend, IN, Generally Administered
         Its Public Housing Capital Fund Stimulus Formula Grant (Recovery Act
         Funded) in Accordance With Applicable Requirements

                                  HIGHLIGHTS

 What We Audited and Why

            We audited the Housing Authority of the City of South Bend, IN’s (Authority)
            American Recovery and Reinvestment Act of 2009 (Recovery Act) Public
            Housing Capital Fund Stimulus Formula grant. Our objective was to determine
            whether the Authority obligated, disbursed, and expended funds in accordance
            with Recovery Act and U.S. Department of Housing and Urban Development
            (HUD) requirements.

 What We Found


            The Authority generally obligated, disbursed, and expended funds in accordance
            with Recovery Act and applicable HUD requirements. Additionally, it maintained
            adequate documentation to support its disbursements, generally complied with
            HUD’s and its own procurement requirements, and accurately reported its
            obligations and expenditures.
What We Recommend


          Since the report does not contain findings, there are no recommendations.
          However, we informed the Authority’s executive director and the Director of
          HUD’s Cleveland Office of Public Housing of minor deficiencies through a
          memorandum, dated, June 17, 2011.

Auditee’s Response


          We provided a copy of the discussion draft audit report to the Authority on June 8,
          2011. The Authority did not request an exit conference.

          We asked the Authority to provide written comments to the draft report by June
          14, 2011. The Authority provided written comments dated June 13, 2011, that
          agreed with the report. The complete text of the Authority’s response can be found
          in appendix A of this report.




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                           TABLE OF CONTENTS

Background and Objective                                                    4

Result of Audit

      The Authority Generally Administered Grant Funds in Accordance With
      Applicable Requirements                                               5

Scope and Methodology                                                       7

Internal Controls                                                           8

Appendix
   A. Auditee Comments                                                      10




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                        BACKGROUND AND OBJECTIVES

The Housing Authority of the City of South Bend, IN, is a governmental entity established under
Indiana State Code 36-7-18-4, with a mission to develop and manage affordable housing for the
residents of South Bend, IN. The Authority’s board of commissioners is appointed by the
mayor. The commissioners govern the Authority and delegate direct responsibility for the
administration of the Authority’s day-to-day operations to the executive director.

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act
of 2009 (Recovery Act), which included $4 billion in capital funds to carry out activities of HUD
programs, as authorized under Section 9 of the United States Housing Act of 1937. The
Recovery Act required that $3 billion of these funds be distributed as Public Housing Capital
Fund formula grants and the remainder be distributed through a competitive grant process.

On March 5, 2009, HUD executed an amendment to the Authority’s annual contributions
contract to provide more than $2 million in formula grant funds. The Recovery Act required
public housing authorities to obligate 100 percent of the funds within 1 year of the date on which
the funds became available to the agency for obligation and expend 60 percent within 2 years
and 100 percent within 3 years of such date. The Authority obligated the funds within the
required timeframe and as of March 2011, had expended 100 percent of the funds.

HUD also required the Authority to use its formula grant on eligible activities that were already
identified in either its annual or 5-year plan.1 According to the Authority’s fiscal year 2009, 5-
year and annual plan, it intended to use the funds to make capital improvements to three of its
public housing developments.

Our objective was to determine whether the Authority obligated, disbursed, and expended funds
in accordance with Recovery Act and U.S. Department of Housing and Urban Development
(HUD) requirements.




1
 The annual plan and 5-year plan are all components of the Authority’s comprehensive plan. The HUD- approved
comprehensive plan sets forth all of the Authority’s physical and management improvement needs for its public
housing developments.


                                                      4
                                RESULT OF AUDIT

The Authority Generally Administered Grant Funds in Accordance With
                      Applicable Requirements
The Authority generally obligated, disbursed, and expended funds in accordance with Recovery
Act and applicable HUD requirements. Additionally, it maintained adequate documentation to
support its disbursements, complied with HUD’s and its own procurement requirements, and
accurately reported its obligations and expenditures.


 The Authority Appropriately
 Obligated and Expended Funds


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

              The Recovery Act required the Authority to obligate 100 percent of its Recovery
              Act funds by March 17, 2010, and expend 100 percent by March 17, 2012. The
              Authority obligated 100 percent of the funds by the required date and as of March
              2011, had expended all of the funds.

              The Authority drew down grant funds from HUD’s automated Line of Credit
              Control System when the payments were due to pay for eligible activities. It also
              maintained adequate documentation to support disbursements, such as executed
              contracts, cancelled checks, and approved requests for periodic partial payments.

 The Authority Generally
 Complied With Applicable
 HUD Procurement
 Requirements

              The Authority generally complied with HUD’s procurement requirements. It
              amended its procurement policy to ensure compliance with the requirements of
              Notice PIH-2009-12. Additionally, for all four of the Authority’s contracts
              funded using Recovery Act funds, it maintained sufficient supporting
              documentation to detail the significant histories of the procurements as required
              by 24 CFR (Code of Federal Regulations) 85.36. Further, change orders related
              to the executed contracts included the appropriate approvals and documentation to
              support the reasons for the changes. When we performed site visits and cursory



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             visual inspections of the completed construction, we did not identify any
             exceptions.

             The Authority notified its contactors when the Davis-Bacon Act applied and
             ensured that its contractors paid their employees the appropriate Federal labor
             standards prevailing wage rates. It also monitored the contractors’ performance.


The Authority’s Federal
Reporting Met Recovery Act
Requirements


             The Authority complied with all reporting requirements within program
             guidelines. It complied with and properly reported its obligations, expenditures,
             compliance with environmental requirements, and number of jobs created in
             accordance with guidance issued by the Office of Management and Budget
             (OMB).

             Two specific provisions in the Recovery Act require the Authority to report
             quarterly. This information must be reported to FederalReporting.gov, a system
             created and managed by OMB and the Recovery Accountability and
             Transparency Board. Section 1512 requires recipients and subrecipients to report
             on the nature of projects undertaken with Recovery Act funds and the number of
             jobs created and retained. Section 1609 requires agencies to report on the status
             of compliance with the National Environmental Policy Act for all Recovery Act-
             funded projects and activities.

Conclusion


             The Authority generally obligated, disbursed, and expended funds in accordance
             with Recovery Act and applicable HUD requirements. Specifically, it (1)
             obligated its Recovery Act grant funds in a timely manner, (2) expended funds
             within the program guidelines, (3) maintained documentation to support
             procurement activities, and (4) complied with all reporting requirements.
             Therefore, no reportable deficiencies were identified.

Recommendations


             This report does not contain recommendations; therefore, no action is needed
             with respect to this report.




                                              6
                        SCOPE AND METHODOLOGY

We conducted the audit from December through April 2010. Our fieldwork was conducted at
the Authority’s main office located at 501 Alonzo Watson Drive, South Bend, IN. The audit
period was March 2009 through November 2010 but was extended when necessary.

To accomplish our audit objective, we

           Reviewed HUD’s Recovery Act requirements, applicable HUD and other Federal
            regulations, and OMB guidance.

           Reviewed the Authority’s bylaws, Public Housing Capital Fund Stimulus Formula
            Recovery Act grant amendment to the annual contributions contract, written policies
            and procedures related to procurement, monitoring/reporting of grant funds,
            expenditures, and disbursements.

           Reviewed HUD’s Line of Credit Control System drawdown reports.

           Reviewed the Authority’s procurement files, annual statement, action plans, and
            fiscal years 2008 and 2009 independent auditors’ reports.

           Reviewed and tested monitoring/reporting records and financial records.

           Reviewed the Authority’s board meeting minutes, general ledgers, payroll records,
            check registers, cancelled checks, and contractors’ timesheets.

           Selected and reviewed all four of the Authority’s procurement contracts, funded
            using Recovery Act funds, and examined the related supporting documentation.

           Performed cursory onsite inspections of the Authority’s public housing
            developments that were renovated using Recovery Act funds.

           Conducted interviews with HUD’s and the Authority’s staff.

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 objective.




                                               7
                              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:

                     Effectiveness and efficiency of operations – Policies and procedures that
                      management has implemented to reasonably ensure that a program meets its
                      objectives.

                     Reliability of financial data – Policies and procedures that management has
                      implemented to reasonably ensure that valid and reliable data are obtained,
                      maintained, and fairly disclosed in reports.

                     Compliance with laws and regulations – Policies and procedures that
                      management has implemented to reasonably ensure that resource use is
                      consistent 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


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We evaluated internal controls related to the audit objective in accordance with
generally accepted government auditing standards. Our review of internal
controls was not designed to provide assurance regarding the effectiveness of the
internal control structure as a whole. Accordingly, we do not express an opinion
on the effectiveness of the Authority’s internal control.




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Appendix A

                            AUDITEE COMMENTS




       June 13, 2011


       Kelly Anderson
       Acting Regional Inspector General for Audit
       United States Department of Housing and Urban Development
       Office of Inspector General
       77 West Jackson Blvd, Suite 2646
       Chicago, IL 60604

               Subject: Discussion Draft Audit Report

       Dear Ms. Anderson:

       We have received and carefully reviewed the Discussion Draft Audit Report
       from your office. We concur completely with the findings as stated and have
       no need to offer any additional comments. We thank you for the opportunity
       to review the Report prior to publication and await its official publication.

       Sincerely,

       //signed//
       Marva J.Leonard-Dent
       Executive Director



       cc: Rafael Morton, Chairman, Board of Commissioners




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