Issue Date
September 30, 2011
Audit Report Number
2011-CH-1015
TO: Shawn Sweet, Director of Public Housing Hub, 5DPH
//signed//
FROM: Kelly Anderson, Regional Inspector General for Audit, 5AGA
SUBJECT: The Springfield Metropolitan Housing Authority, Springfield, OH, Did Not
Administer Its Grant in Accordance With Recovery Act and HUD
Requirements
HIGHLIGHTS
What We Audited and Why
We audited the Springfield Metropolitan Housing Authority’s American Recovery
and Reinvestment Act of 2009 Public Housing Capital Fund Stimulus (formula)
Recovery Act Funded grant. The audit was part of the activities in our fiscal year
2011 annual audit plan. We selected the Authority for audit based on the Office of
Inspector General’s (OIG) commitment to ensure the proper use of Recovery Act
grant funds. Our objective was to determine whether the Authority administered
its capital grant in accordance with Recovery Act and U.S. Department of Housing
and Urban Development (HUD) requirements.
What We Found
The Authority did not administer its Capital Fund grant in accordance with
Recovery Act and HUD requirements. Specifically, it did not (1) properly
obligate $152,000 in Recovery Act grant funds for eligible management
improvement costs, and (2) adequately monitor its contractors for the enforcement
of labor standards. The problems occurred because the Authority lacked adequate
procedures and controls regarding the administration of its grant funds to ensure
that obligations and expenditures met HUD and the Recovery Act requirements.
Additionally, it lacked adequate procedures and controls to ensure that it complied
with HUD’s and its own requirements for the administration of contracts. As a
result, it improperly obligated $152,000 in formula grant funds contrary to HUD’s
requirements and its reporting of Recovery Act funded activities on
FederalReporting.gov was inaccurate.
What We Recommend
We recommend that the Director of HUD’s Cleveland Office of Public Housing
require the Authority to (1) implement adequate procedures and controls
regarding the administration of its Recovery Act grant funds, (2) provide
supporting documentation or reimburse HUD $110,580 for wages paid to its
contractors, (3) review all payments to its contractors’ employees to determine
whether wage restitution is owed and provide the review results to HUD for
review and approval. If wage restitution is required, the Authority should make
the restitution from non-Federal funds, and (4) implement adequate procedures
and controls regarding its contracting process to ensure that its contractors’
employees are paid the appropriate Federal prevailing wage rates. These
procedures and controls would include but not be limited to reviewing
contractors’ weekly certified payrolls, maintaining full documentation such as
weekly payrolls and copies of wage determinations, and making any applicable
changes or modifications needed to comply with Davis-Bacon Act.
We also recommend that the Director of HUD’s Cleveland Office of Public
Housing recapture $152,000 in Recovery Act capital funds that was improperly
obligated for ineligible management improvement expenses for transmission to
the U.S. Treasury. As of September 27, 2011, HUD is in the process of
recapturing the funds. Therefore, a management decision has been reached
regarding this recommendation.
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 our review results and supporting schedules to the Director of
HUD’s Cleveland Office of Public Housing and the Authority’s two acting
executive directors during the audit. We also provided our discussion draft audit
report to the Authority’s acting executive directors, its board vice-chairperson,
and HUD’s staff during the audit. We held an exit conference with the
Authority’s acting executive directors on September 22, 2011. We asked the
Authority’s acting executive directors to provide comments on our discussion
2
draft audit report by September 26, 2011. The Authority’s acting executive
directors provided written comments, dated September 23, 2011. The complete
text of the auditee’s response, along with our evaluation of that response, can be
found in appendix B of this report. A complete copy of the Authority’s comments
was provided to the Director of HUD’s Cleveland Office of Public Housing.
3
TABLE OF CONTENTS
Background and Objective 5
Results of Audit
Finding 1: The Authority Did Not Properly Obligate $152,000 in Recovery Act 6
Grant Funds for Eligible Management Improvement Costs
Finding 2: The Authority Did Not Adequately Monitor Its Contractors for the 8
Enforcement of Labor Standards
Scope and Methodology 11
Internal Controls 12
Appendixes
A. Schedule of Questioned Costs 14
B. Auditee Comments and OIG’s Evaluation 15
C. Federal Requirements 21
4
BACKGROUND AND OBJECTIVE
The Springfield Metropolitan Housing Authority is an Ohio public housing agency created by the
City of Springfield in 1965 under the laws of the State of Ohio. The Authority’s five-member
board of commissioners, with four current members, is appointed by the Springfield City
Commission, Clark County Commissioners, and Springfield Court of Common Pleas to serve a 5-
year term. The board’s responsibilities include overseeing the operations of the Authority and
reviewing and approving its policies. The board appoints the executive director; the position was
vacant as of July 31, 2011. The board has assigned two acting executive directors until the position
is filled. The executive director is responsible for general supervision over the administration of the
Authority’s business and is charged with the management of its housing projects.
The Public Housing Capital Fund Stimulus (formula) Recovery Act Funded grant is administered
by the U.S. Department of Housing and Urban Development’s (HUD) Office of Public Housing.
The grant funds are available for capital and management activities, including the development,
financing, and modernization of public housing projects.
On February 17, 2009, the President signed the American Recovery and Reinvestment Act. The
Recovery Act provided an additional $4 billion to public housing agencies to carry out capital and
management activities, including the modernization and development of public housing. The
Recovery Act required that $3 billion of these funds be distributed as formula grants and the
remaining $1 billion be distributed through a competitive process. The Recovery Act required
public housing agencies to (1) obligate 100 percent of the funds within 1 year of the date on which
funds became available to the agency for obligation, (2) expend 60 percent of the funds within 2
years, and (3) expend 100 percent of the funds within 3 years of the date on which funds became
available to the agency.
In March 2009, the Authority received a $1.5 million formula grant for its Capital Fund activities. It
had obligated 100 percent of its grant funds and expended 88 percent as of August 31, 2011. The
Authority awarded four contracts using its Recovery Act funds. The contracts were to perform
reroofing on two of its developments, modernize one building, and modernize equipment.
Our objective was to determine whether the Authority administered its capital grant in
accordance with Recovery Act and U.S. Department of Housing and Urban Development (HUD)
requirements.
5
RESULTS OF AUDIT
Finding 1: The Authority Did Not Properly Obligate $152,000 in
Recovery Act Grant Funds for Eligible Management Improvement Costs
The Authority did not properly obligate Recovery Act grant funds. Specifically, it improperly
obligated $152,000 in grant funds for management improvement costs such as a renewal contract
for police services, computer equipment for the Authority’s operations, and computer and server
contracts. This condition occurred because the Authority lacked adequate procedures and
controls to ensure that it complied with requirements under the Recovery Act. As a result, it
improperly obligated $152,000 in formula grant funds contrary to HUD’s requirements and its
reporting of Recovery Act funded activities on FederalReporting.gov was inaccurate.
The Authority Inappropriately
Obligated $152,000 for
Management Improvement
Costs
HUD approved the Authority’s plan to use $152,000 of its Recovery Act capital
grant funds for management improvement costs. According to the Authority’s
plan, it would use the funds for training, security, communication, and data
improvements. In March 2010, the Authority submitted its first voucher to draw
funds from the management improvement line item to HUD for review and
approval. HUD requested that the Authority provide supporting documentation
for the requested funds. In reviewing the Authority’s documentation, HUD
determined that it wanted to use the grant funds to obtain computer supplies,
renew its computer systems support contract, and purchase a new laptop computer
and computer supplies and parts for its server. However, these expenses were not
eligible under HUD’s and Recovery Act guidelines.
In April 2010, the Authority submitted another voucher to HUD for approval,
seeking reimbursement for a renewal contract for police services. However when
the Authority entered the voucher request into HUD’s Line of Credit Control
System, the voucher was flagged for a review by HUD. As a result, the Authority
cancelled the voucher. Notice PIH 2009-12 prohibits the use of management
improvement funds for operations or rental assistance. Further, on the Recovery
Act’s Web site under Frequently Asked Questions, it states that (1) funds not
obligated within the 1-year obligation deadline will be recaptured, (2) funds
cannot be used to cover operational expenses, and (3) a public housing authority’s
ongoing operation expenses are ineligible management improvement costs.
6
Conclusion
The Authority did not properly obligate Recovery Act grant funds. Specifically, it
improperly obligated $152,000 in grant funds for management improvement costs
such as a renewal contract for police services, computer equipment for the
Authority’s operations, and computer and server contracts. This condition
occurred because the Authority lacked adequate procedures and controls to ensure
that it complied with requirements under Recovery Act. The Authority did not
thoroughly review the Recovery Act guidance to determine eligible management
improvement activities. As a result, it improperly obligated $152,000 in formula
grant funds contrary to HUD’s requirements and its reporting of Recovery Act
funded activities on FederalReporting.gov was inaccurate. As of September 27,
2011, HUD determined that the Authority’s funds obligated for management
improvement costs should be recaptured.
Recommendations
We recommend that the Director of HUD’s Cleveland Office of Public Housing
require the Authority to
1A. Implement adequate procedures and controls regarding the administration
of its Recovery Act grant funds.
We also recommend that the Director of HUD’s Cleveland Office of Public
Housing
1B. Recapture $152,000 in Recovery Act capital funds that was improperly
obligated for ineligible management improvement expenses for
transmission to the U.S. Treasury.
7
RESULTS OF AUDIT
Finding 2: The Authority Did Not Properly Monitor Its Contractors for
the Enforcement of Labor Standards
The Authority was unable to provide sufficient documentation to support (1) its monitoring of
contractors to ensure that they performed in accordance with their contracts and (2) that its
contractors’ employees were paid the appropriate Federal prevailing wage rates. This condition
occurred because the Authority lacked adequate procedures and controls to ensure that its
modernization contractor had proper oversight of its contractors. Additionally, the Authority
lacked an adequate contract administration system. As a result, the Authority and HUD lacked
assurance that $110,580 in Recovery Act funds was used for eligible expenses and contractors
paid employees the appropriate Federal prevailing wage rates.
The Authority Did Not Ensure
That Its Contractors Complied
With the Davis-Bacon Act
The Authority allowed contractors to submit inaccurate and incomplete certified
payroll reports for its two reroofing projects. For instance, one contractor’s
reports lacked employees’ addresses and Social Security numbers. Additionally,
based on the Authority’s modernization contractor’s record of interviews with 16
employees on site for the two contractors, we determined that
o Five employees were not included on the contractors’ submitted payroll
reports.
o One contractor’s name was illegible, thus preventing verification of its
validity.
o Seven of the employee interviews were conducted on a day on which the
contractors’ payroll reports did not show any hours worked for these seven
employees.
o Eight employees’ wage rates were identified as “contracted rate”;
however, the contractors and the Authority did not maintain complete or
supporting payroll records for the wage rates.
Additionally for one of the two contractors, the contractor’s employee payroll
records did not include all employees as required. For instance, according to an
internal email, the Authority’s modernization contractor suggested that there were
approximately 25 subcontractors on the crew. However, the Authority’s weekly
payroll report did not contain more than eight subcontractors.
8
HUD’s Contractor’s Guide to Prevailing Wage Requirements for Federally
Assisted Construction Projects, section 2, requires an employee’s payroll records
to contain the employee’s name, address, and Social Security number. Further,
for a project to comply with the Davis-Bacon Act, every contractor (including
every subcontractor) must keep a complete set of its own payroll and other basic
records, such as time cards, tax records, and evidence of fringe benefit payments,
for at least 3 years after the project is completed. The guide also states that the
contract administrator must compare the information on the interview forms to the
corresponding payrolls to ensure that workers are properly listed on the payrolls
regarding days worked, work classification, and rate of pay.
The Authority Lacked
Adequate Procedures and
Controls for Enforcement of
Labor Standards
The Authority lacked adequate procedures and controls for the enforcement of labor
standards. It used a contractor to oversee the activities under its Recovery Act
funds; however, the contractor failed to properly monitor its contractors for the
enforcement of labor standards. Additionally, the Authority did not maintain an
effective contract management system to ensure that contractors performed in
accordance with their contracts. HUD Handbook 1344.1, REV-1, Labor Standards
Enforcement Handbook, requires public housing agencies to monitor enforcement of
labor standards for the payment of prevailing wage rates in all construction contracts
over $2,000 involving Federal funds.
Conclusion
The Authority did not properly monitor its contractors for the enforcement of
labor standards. This condition occurred because the Authority lacked adequate
procedures and controls to ensure that its modernization contractor properly
monitored contractors for the enforcement of labor standards. Additionally, it did
not maintain an adequate contract administration system. Based on our analysis,
the Authority and HUD lacked assurance that $110,580 in Recovery Act funds
was used for eligible expenses and contractors paid their employees the
appropriate Federal prevailing wage rates.
Recommendations
We recommend that the Director of HUD’s Cleveland Office of Public Housing
require the Authority to
9
2A. Provide supporting documentation or reimburse HUD $110,580 from non-
Federal funds for wages paid to its contractors.
2B. Review all payments to its contractors’ employees to determine whether
wage restitution is owed and provide the review results to HUD for review
and approval. If wage restitution is required, the Authority should make the
restitution from non-Federal funds.
2C. Implement adequate procedures and controls regarding its contracting
process to ensure that its contractors’ employees are paid the appropriate
Federal prevailing wage rates, These procedures and controls would include
but not be limited to reviewing contractors’ weekly certified payrolls,
maintaining full documentation such as weekly payrolls and copies of wage
determinations, and making any applicable changes or modifications needed
to comply with Davis-Bacon Act.
10
SCOPE AND METHODOLOGY
We performed onsite audit work between April and July 2011 at the Authority’s office located at
101 West High Street, Springfield, OH. The audit covered the period March 18, 2009, through
February 28, 2011, but was expanded as determined necessary.
To accomplish our objectives, we reviewed
Applicable laws and regulations; HUD’s program requirements at 24 CFR (Code of Federal
Regulations) Parts 5, 85, 135, 905, and 982 and 29 CFR 3.4; HUD Notice PIH 2009-12;
HUD Handbook 1344.1, REV-1; HUD Handbook 7460.8, REV-2; Recovery Act Web site’s
Frequently Asked Questions, and HUD guidebook, Making Davis-Bacon Work, A
Practical Guide for States, Indian Tribes, and Local Agencies, June 2006.
The Authority’s accounting records, bank statements, cancelled checks, contract files,
policies and procedures, board meeting minutes for April 2009 through March 2011,
organization chart, program annual contributions contract with HUD, and 5-year and annual
plans.
Contractors’ accounting records, payroll bank statements, invoices, payroll calculations,
contracts, contract change orders, and material and supply receipts.
HUD’s files for the Authority.
Manufactured product Web sites and representatives for “buy American” compliance and
energy efficiency requirements.
We also interviewed the Authority’s employees and contractors, along with HUD staff.
We reviewed the Authority’s four Recovery Act grant contract files. The four contract file
documentation reviews included two reroofing contracts, one building modernization contract,
and one equipment modernization replacement contract. We reviewed the respective contracts,
materials, invoices, payroll invoices, and payroll reports for the four contracts reviewed.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.
11
INTERNAL CONTROLS
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to
Effectiveness and efficiency of operations,
Reliability of financial reporting, and
Compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.
Relevant Internal Controls
We determined that the following internal controls were relevant to our audit
objective:
Effectiveness and efficiency of operations – Policies and procedures that the
audited entity has implemented to provide reasonable assurance that a
program meets its objectives, while considering cost effectiveness and
efficiency.
Reliability of financial reporting – Policies and procedures that management
has implemented to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance
with generally accepted accounting principles.
Compliance with applicable 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.
12
Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:
The Authority did not properly obligate $152,000 in Recovery Act grant
funds for eligible management improvement costs (see finding 1).
The Authority did not properly monitor its contractors for enforcement of
labor standards (see finding 2).
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APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
Recommendation
number Ineligible 1/ Unsupported 2/
1B $152,000
2A $110,580
Total $152,000 $110,580
1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
that the auditor believes are not allowable by law; contract; or Federal, State, or local policies
or regulations.
2/ 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
Springfield Metropolitan Housing Authority
101 West High Street Phone: (937) 325‐7331
SMHA Springfield, Ohio 45502 FAX: (937) 325‐3657 Email: spgfldhousing@smhaohio.org
September 23, 2011
Ms. Kelly Anderson
Regional Inspector General for Audit-Region V
Ralph H. Metcalf Federal Building
77 West Jackson Blvd., Suite 2646
Chicago, IL 60604
RE: Springfield Metropolitan Housing Authority OH021 – Draft Report
Response
Dear Ms. Anderson:
This letter is in response to the Draft Audit dated September 16, 2011 relating
to your Department’s review of Springfield Metropolitan Housing Authority’s
(SMHA) American Recovery and Reinvestment Act, Public and Indian
Housing Capital Fund Stimulus (formula) grant.
On behalf of SMHA’s Board of Commissioners and staff, we would like to
thank you and your team, for the time and effort dedicated to this review. We
appreciate the collaborative approach with which the report was prepared.
We have reviewed the draft report in detail and agree that $152,000 in
Recovery Act capital funds were improperly obligated for ineligible
management improvement expenses.
15
Ref to OIG Evaluation Auditee Comments
ARRA Grant Administration and Labor Monitoring, Finding #2
The following is the response for Finding #2, Davis-Bacon Act. We
respectfully disagree with the auditors findings in part or in whole. Our
responses are included herein.
Summary Comments: IN 2009 SMHA received an ARRA or Stimulus
Grant in the approximate amount of $1,500,000. The funds were used
primarily to fund the modernization or improvements to existing buildings.
The PHA entered into four larger construction projects requiring labor
monitoring. Three of the contracts totaled approximately $880,000 with the
contract in question to Nesser Roofing in the amount of approximately
$200,000. The only contract with labor issues was the Nesser Roofing
Comment 1 contract. During the OIG review it was discovered that Nesser Roofing was
out of business, in receivership. According to SMHA contact with Nesser
Roofing, all the records were destroyed in a fire. Access to Nesser payroll
records would have afforded the OIG Auditor possibly the answer to his
questions regarding the workers on the roofing project which were 100%
subcontractors. No employees were employed on this project. At this time we
are unable to secure any further documentation from the contractor. It should
be noted that in the attached Pre-Construction Meeting outline and notes, the
contractors were informed of the requirement to keep labor reports
maintained for a period of three years. (In addition, Contractors were issued
the HUD labor guidebook, “Contractor’s Guide to Davis-Bacon” at the Pre-
Construction Meetings).
PHA Labor Guidance changes in 2006:
PHAs were informed in 2006 that less stringent oversight and paper recordings
were to be required in the future. The PHA labor monitoring guidance, the
2006 HUD issued “Streamlining of Davis-Bacon” reduced the required
Comment 2 number of onsite interviews and checking of the payrolls submitted. Please
see the attached HUD guidance, “Making Davis-Bacon Work, A Practical
Guide for States and Indian Tribes and Local Agencies”, pages 10 and 11,
items #6 and #7.
This includes Workers Compensation Certificate, as well as all subcontractors
being covered under Nesser Roofing Certificate of Liability Insurance.
16
Ref to OIG Evaluation Auditee Comments
The following is our current and brief responses to the items listed in
finding #2:
Page 8, paragraph #1 last sentence: As a result,…..
Response: Nesser Roofing did not have any employees. Rather, Nesser
Roofing did subcontract the roofing labor work with subcontractors. Each
Comment 3 person working on the project was a subcontractor. SMHA required the
usual insurance requirements of all contractors working on our projects.
This includes Workers Compensation Certificate, as well as all
subcontractors being covered under Nesser Roofing Certificate of Liability
Insurance.
Page 8, last paragraph:
The internal memo or email noted by the OIG Auditor was our way to
Comment 4 advise the contractor of additional workers on the job and that the PHA
needed labor documentation of other subcontractors observed on the
project. The number noted was a general number.
Page 10, 2B.: As there were no indications of employees on the job, then
Comment 5 employee restitution is a non-issue. It is our understanding that PHAs are
not required to receive copies of subcontractors’ contracts, contract
adjustments, and or change orders. The payrolls examined indicated the
subcontractors were paid more than the minimum per the issued wage
decision. Listing the subcontractor’s name and the hours worked is all that
is required on the weekly payrolls for subcontractors. This was at the
direction and instruction at labor training conferences and calls to HUD for
clarification.
PHA Action Plan for improving Labor Monitoring:
During the next several months staff will be trained both internally and by
Comment 6 attending contract monitoring and Davis-Bacon labor seminars for better
compliance and oversight of the projects. The labor monitoring duties have
been or will be reassigned to PHA staff. Staff will include Director of
Modernization, the Construction Manager and the Procurement Officer.
17
Ref to OIG Evaluation Auditee Comments
In closing it is unreasonable that SMHA would be required to repay HUD
for any employee restitution:
1. The contractor is no longer in business and the contractor’s records are
unavailable.
Comment 7
2. Stating that $110,580 of a contract that totaled approximately $200,000
was mismanaged would indicate that 95% of the labor was fraudulent
which is not correct. Materials in most contracts usually equal 60% of the
total contract. If this finding stands SMHA will need more documentation
of how the $110,580 was arrived.
3. The owner received a product that conformed to the specifications and
was approved by the architect and the owner.
We hope the FO and the OIG find that our comments and interpretations have
merit and this finding can be removed from the OIG audit report. If you
require additional information from us, please call (937) 325-7331, extension
202 or 212.
Sincerely,
//signed//
Anita M. Perrin
Interim Executive Director
CC: Johnetta Jaudon, SMHA Vice-Chair
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OIG’s Evaluation of Auditee Comments
Comment 1 HUD Handbook 1344.1 states that each agency is responsible to HUD for
ensuring compliance with Federal labor standards requirements as follows:
maintaining full documentation attesting to all administrative and enforcement
activities with respect to Federal labor standards, such documentation to be made
freely available for HUD review. Such documentation shall include all weekly
payrolls, copies of wage determinations, on-site inspection reports and employee
interviews, and any other records utilized in enforcement administration. In
addition, the HUD guidebook requires local contracting agencies that administer
HUD program to agree to administer and enforce Davis-Bacon requirements as a
condition for receiving program assistance.
Comment 2 We agree that the HUD guidance streamlined procedures, policies, and paperwork
in regards to Davis-Bacon. However, as mentioned in the guidance, the key labor
objectives are to apply Davis-Bacon requirements properly, support contractor
compliance with labor standards, monitor contractor performance, investigate
probable violations and complaints of underpayments, and pursue debarment and
other available sanctions against repeat labor standards violators.
Comment 3 Section 1606 of the Recovery Act requires the payment of Davis-Bacon Act (40
U.S.C. (United States Code) 31) wage rates to “laborers and mechanics employed
by contractors and subcontractors on projects funded directly by or assisted in
whole or part by and through the Federal Government” pursuant to the Recovery
Act.
Comment 4 We concede that the Authority identified additional workers observed on the work
site. Its internal documentation specifically requested additional documentation
from the contractor to support and ensure compliance with applicable
requirements. However, the Authority was unable to provide documentation at
the time of our review of the resolution. As previously mentioned, according to
HUD’s requirements, the Authority should investigate all probable violations, and
maintain full documentation of Federal labor standards administration and
enforcement activities.
Comment 5 The Authority was unable to provide complete and accurate documentation to
support its assertion that the payrolls it examined indicated the subcontractors
were paid more than the minimum per the issued wage decision. HUD’s
Contractor’s Guide to Prevailing Wage Requirements for Federally Assisted
Construction Projects, section 2, requires an employee’s payroll records to contain
the employee’s name, address, and Social Security number. Additionally, see
comment 3.
Comment 6 We commend the Authority for taking necessary actions to ensure its staff
receives training on Davis-Bacon.
19
OIG’s Evaluation of Auditee Comments
Comment 7 HUD requirements established that authorities are responsible for the
administration and the enforcement of labor standards in Federally-funded or
assisted projects. Since the Authority did not adequately monitor its contractors
for compliance with Davis-Bacon, it is the Authority’s responsibility to make
employees whole. Therefore, the Authority should determine whether contractors
are owed wage restitutions. At the time of our review, the Authority was unable
to provide complete and accurate documentation to support its payment of wages
to its contractors.
20
Appendix C
FEDERAL REQUIREMENTS
Notice PIH 2009-12, issued March 18, 2009, states that management improvements cannot be
used for operations or rental assistance activities such as staff training, resident assistance, and
maintenance staff salaries unless they are applied to force account work on a capital project.
Frequently Asked Questions # 2, as of March 15, 2009. Eligible Use of Funds: Answer 14:
Recovery Act funds cannot be used to cover operational expenses.
Answer 17: A public housing authority’s ongoing operation expenses are ineligible management
improvements costs.
The Authority’s consolidated annual contributions contract, effective March 18, 2009, states that
this grant (Recovery Act) is conditioned on the acceptance of the Authority to comply with the
reporting requirements of the Recovery Act and the following requirements: The Authority must
obligate 100 percent of the grant within 1 year of the effective date. At the 1-year date, any
unobligated funds will be recaptured.
Section 1606 of the Recovery Act requires the payment of Davis-Bacon Act (40 U.S.C. (United
States Code) 31) wage rates to “laborers and mechanics employed by contractors and
subcontractors on projects funded directly by or assisted in whole or part by and through the
Federal Government” pursuant to the Recovery Act.
29 CFR 3.4(a) and (b); Submission of weekly statements and the preservation and inspection of
weekly payroll records.
(a) Each weekly statement required under section 3.3 shall be delivered by the contractor or
subcontractor, within seven days after the regular payment date of the payroll period, to a
representative of a Federal or State agency in charge at the site of the building or work,
or, if there is no representative of a Federal or State agency at the site of the building or
work, the statement shall be mailed by the contractor or subcontractor, with such
examination and check as may be made, such statement, or a copy thereof, shall be
available, or shall be transmitted together with a report of any violations, in accordance
with applicable procedures prescribed by the United States Department of Labor.
(b) Each contractor or subcontractor shall preserve his weekly payroll records for a period of
three years from date of completion of the contract. The payroll records shall set out
accurately and completely the name and address of each laborer and mechanic, his
correct classification, rate of pay, daily and weekly number of hours worked, deductions
made, and actual wages paid. Such payroll records shall be made available at all times
for inspection by the contracting officer or his authorized representatives of the
Department of Labor.
HUD Handbook 1344.1, REV-1, chapter 9, section 2, states that detailed reports of each labor
standards compliance review will be prepared covering labor standards enforcement staffing,
21
project inspection activities, weekly payroll review, complaint responsiveness, preconstruction
conferences, violations resolution, and records maintenance. Such reports will be made available
to the headquarters Office of Labor Relations upon request. All findings resulting from
compliance reviews must be closed, and documentation to that effect must be maintained in
compliance review files.
Chapter 3, paragraph 3-3, of the handbook states that payrolls must be retained for 3 years by the
public housing agency, Indian housing authority, local or State housing and community
development agency, coinsuring lender, or HUD, whichever is applicable, following completion
of the project and then may be destroyed unless an investigation, disputed compliance action, or
appeal remains outstanding. Clearance shall be obtained from HUD field office labor relations
staff before such destruction. Contractors and subcontractors must retain their basic payroll
records (payroll register, individual earning cards, etc.) for the same 3-year period.
24 CFR 85.36 requires grantees and subgrantees to meet the following standards:
(1) Reflect State and local laws and regulations provided the procurements conform to applicable
Federal law.
(2) Maintain a contract administration system to ensure that contractors perform in accordance
with the terms, conditions, and specifications in their contracts or purchase orders.
(3) Maintain a written code of standards of conduct for its employees engaged in the award and
administration of contracts including a conflict of interest, real or apparent.
(4) Provide for a review of proposed procurements to avoid the purchase of duplicate or
unnecessary items.
HUD guidebook, Making Davis-Bacon Work, A Practical Guide for States, Indian Tribes, and
Local Agencies, June 2006, states Key Labor Standards Objectives:
1. Apply Davis-Bacon requirements properly. Make certain that labor standards, including
Davis-Bacon prevailing wage rates, are applied where required. Ensure that any exceptions
or exceptions are identified.
2. Through education and advice, support contractor compliance with labor standards. Provide
basic training and technical support to contractors to ensure they understand their obligations
under prevailing wage reporting requirements.
3. Monitor contractor performance. Perform reviews of certified payroll submissions and other
information to help ensure contractor compliance with labor standards provisions and the
payment of prevailing wages to workers.
4. Investigate probable violations and complaints of underpayment. Thoroughly explore any
evidence of violations, especially allegations of underpayment.
5. Pursue debarment and other available sanctions against repeat labor standards violators.
Carry-out a no-tolerance policy toward contractors who violate prevailing wage laws.
22
The Springfield Metropolitan Housing Authority, Springfield, OH, Did Not Administer Its Grant in Accordance With Recovery Act and HUD Requirements
Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)