oversight

The Housing Authority of the City and County of Denver, CO, Generally Followed Requirements When Obligating and Expending its Recovery Act Capital Funds But Did Not Accurately Report Recovery Act Grant Information

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-06-16.

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

                                                                Issue Date
                                                                         June 16, 2011
                                                                 
                                                                Audit Report Number
                                                                             2011-DE-1003




TO:        Carol Ann Roman, Director, Denver Office of Public Housing, 8APH

           //signed//
FROM:      Ronald J. Hosking, Regional Inspector General for Audit, 8AGA


SUBJECT: The Housing Authority of the City and County of Denver, CO, Generally
           Followed Requirements When Obligating and Expending Its Recovery Act
           Capital Funds But Did Not Accurately Report Recovery Act Grant
           Information


                                  HIGHLIGHTS

 What We Audited and Why

            We reviewed the Housing Authority of the City and County of Denver, CO
            (Authority), because it had the largest number of low-rent and Section 8 units and
            received the largest amount of American Recovery and Reinvestment Act of 200
            (Recovery Act) capital funds of all of the housing authorities in HUD’s Region
            VIII (Colorado, Utah, Wyoming, Montana, North Dakota, South Dakota).

            The objectives of our review were to determine whether the Authority obligated
            and expended its formula Recovery Act capital funds in accordance with
            Recovery Act rules and regulations and whether it properly reported Recovery
            Act information in federalreporting.gov.

 What We Found
            The Authority generally followed Recovery Act rules and regulations in the
            obligation and expenditure of its formula Recovery Act capital funds. However,
            it did not accurately report required Recovery Act capital fund grant information
            in federalreporting.gov.

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           For the five quarterly reports submitted during our audit period, the Authority
           overreported the number and total amount of payments to vendors of greater than
           $25,000. For payments to vendors of less than $25,000, the Authority
           underreported the number of payments in two quarters, overreported the number
           of payments in one quarter, and underreported the total amount of payments in all
           five quarters.

What We Recommend

           We recommend that the Denver Office of Public Housing assist the Authority in
           receiving formal training on how to properly report Recovery Act information in
           federalreporting.gov.

           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 discussion draft of the audit report to the Authority on May 20,
           2011, and requested its comments by June 3, 2011. The Authority provided its
           written response on June 1, 2011, and agreed with the finding. The complete text
           of the auditee’s response, along with our evaluation of that response, can be found
           in the appendix of this report.




                                            2
                            TABLE OF CONTENTS

                                                                               4
Background and Objectives

Results of Audit
                                                                                
       Finding 1: The Authority Did Not Accurately Report Recovery Act Grant   6
                     Information in Federalreporting.gov

Scope and Methodology
                                                                               9
 
                                                                                
Internal Controls
                                                                               10
 
                                                                                
Appendix
   A. Auditee Comments and OIG’s Evaluation                                    12




                                            3
                      BACKGROUND AND OBJECTIVES

The Housing Authority of the City and County of Denver, CO (Authority), was created as a
quasi-municipal corporation by the City of Denver, CO, in 1938 through the United States
Federal Housing Act of 1937 for the purpose of providing safe, decent, and sanitary housing for
low-income families. The Authority receives subsidy assistance from the U.S. Department of
Housing and Urban Development (HUD) to provide housing to eligible low-income households.
It is responsible for other rental assistance programs including Section 8 programs, which are
governed by HUD, and various other housing assistance programs governed by the Authority
that allow it to provide alternative housing possibilities for low- to moderate-income residents of
Denver. The Authority has continually entered into annual contributions contracts with HUD
since May 26, 1953, to provide low-rent housing to qualified individuals.

The mission of the Authority is to serve the residents by developing, owning, and operating safe,
decent, and affordable housing in a manner that promotes thriving communities. The executive
offices of the Authority are located at 777 Grant Street, Denver, CO.

The following table lists the number of public housing and Section 8 Housing Choice Voucher
program units managed by the Authority as of January 31, 2011, along with the amount of
funding awarded by HUD for fiscal years 2008 and 2009.

                                   Section 8 Housing Choice         Public Housing Capital
   Public housing program
                                      Voucher program                  Fund program
                   Amount                             Amount
     Units                            Units                             Amount awarded
                   awarded                            awarded
     3,904        $16 million         5,808          $52 million            $8 million

In February 2009, President Obama signed into law the American Recovery and Reinvestment
Act of 2009 (Recovery Act), which includes $13.61 billion for projects and programs
administered by HUD, nearly 75 percent of which was allocated to State and local recipients.
Recovery Act investments in HUD programs will generate tens of thousands of jobs, modernize
homes to make them energy efficient, and help the families and communities hardest hit by the
economic crisis. Almost all of the remaining 25 percent of the funds have been awarded via
competition. The Authority received more than $7 million in Public Housing Formula Recovery
Act grant funds (Formula Recovery Act capital funds). As of January 19, 2011, the Authority
had expended more than $6 million of its Formula Recovery Act capital funds.

The Recovery Act requires reports on the use of Recovery Act funding by recipients no later than
the 10th day after the end of each calendar quarter. The recipient enters project and job
information, sub-award information, and vendor transaction information in federalreporting.gov.
It is important for the recipients to accurately and timely report this information, because it is
necessary to effectively implement the accountability and transparency reporting requirements of
the Recovery Act.



                                                 4
The objectives of our review were to determine whether the Authority obligated and expended its
Formula Recovery Act capital funds in accordance with Recovery Act rules and regulations and
whether it properly reported Recovery Act information in federalreporting.gov.




                                              5
                                RESULTS OF AUDIT


Finding: The Authority Did Not Accurately Report Recovery Act Grant
          Information in Federalreporting.gov
The Authority did not accurately report required Recovery Act capital fund grant information in
federalreporting.gov. It did not understand how to accurately report the grant information. As a
result, the public did not have access to accurate information related to the Authority’s
expenditures of Recovery Act capital funds.



 The Authority Did Not
 Accurately Report the Number
 of Vendors and Expenditures

              The Authority generally obligated and expended Recovery Act grant funds in
              accordance with Recovery Act requirements, but it did not accurately report required
              Recovery Act grant information in federalreporting.gov. According to the Recovery
              Act reporting requirements (2 CFR (Code of Federal Regulations) Part 176),
              Recovery Act grant recipients are required to report the following information in
              federalreporting.gov:

                     Amount of the Recovery Act grant award
                     Project information for use of the grant funds
                     Number of jobs created or retained using Recovery Act grant funds
                     Grant funds invoiced
                     Grant funds received
                     Expenditure amounts
                     Listing of vendors receiving Recovery Act grant funds
                     Vendor transactions/payments

              For the five quarterly reports submitted during our audit period, the Authority
              overreported the number and total amount of payments to vendors of greater than
              $25,000. For payments to vendors of less than $25,000, the Authority underreported
              the number of payments in two quarters, overreported the number of payments in
              one quarter, and underreported the total amount of payments in all five quarters.




                                               6
           The following tables lists what was reported in federalreporting.gov, what the actual
           expenditures were, and the difference between the two numbers.

                  Total number & amount of payments to vendors greater than $25,000
             Quarter Expenditures          Actual    Reporting     Number of      Actual
             ending       reported in expenditures differences*      vendors     number
             date for       federal-                               reported in      of
            reporting reporting.gov                                  federal-    vendors
              period                                              reporting.gov
           09/30/2009         $758,778      $703,849    $54,929                9        6
           12/31/2009       $1,375,253      $537,563   $837,690               23        6
           03/31/2010         $309,405      $283,177    $26,228                9        2
           06/30/2010       $3,032,242    $1,498,347 $1,533,895               23       16
           09/30/2010       $5,231,470    $2,065,118 $3,166,352               33       14
          *Represents overreported expenditures


                Total aggregate number & amount of payments to vendors less than $25,000
             Quarter    Expenditures        Actual      reporting    Number of       Actual
             ending      reported in     expenditures  differences     vendors      number
             date for      federal-                         **       reported in       of
            reporting reporting.gov                                    federal-     vendors
              period                                                reporting.gov
           09/30/2009         $10,650          $20,190     ($9,540)              3
           12/31/2009         $29,692          $59,933    ($30,241)              8
           03/31/2010        $118,117         $230,736   ($112,619)             16        23
           06/30/2010        $209,559         $342,329   ($132,770)             32        31
           09/30/2010        $209,559         $494,264   ($284,705)             32        40
           **Represents underreported expenditures

The Authority Did Not
Understand the Reporting
Requirements

           The Authority did not understand how to accurately report the grant information.
           The assistant chief financial officer entered Recovery Act grant information into
           federalreporting.gov. He had received no formal training on how to properly
           report required Recovery Act grant information in federalreporting.gov.




                                             7
The Public Did Not Have
Access to Accurate Grant
Information

           The public did not have access to accurate grant information related to the
           Authority’s expenditures of Recovery Act capital funds. As a result, the Authority’s
           use of Recovery Act capital funds was not transparent.

Recommendations

           We recommend that the Director of the Denver Office of Public Housing

            1A. Assist the Authority in receiving formal training on how to accurately report
                required Recovery Act grant information in federalreporting.gov.

            1B. Perform a postmonitoring review of the Authority’s input into
                federalreporting.gov to ensure that the Authority meets Recovery Act
                reporting requirements.




                                            8
                        SCOPE AND METHODOLOGY

Our review period covered March 1, 2009, through December 31, 2010. We performed our
onsite audit work from February through early April 2011 at the Authority's office located at 777
Grant Street, Denver, CO.

To accomplish our objectives, we obtained and became familiar with applicable sections of the
Recovery Act, Federal Register notices, HUD regulations, HUD Office of Public and Indian
Housing notices, and Authority policies related to the use of its Recovery Act capital funds.

To determine whether the Authority properly obligated and expended its Recovery Act capital
funds in accordance with Recovery Act rules and regulations, we examined documentation in 3
of 22 Recovery Act procurement contracts issued by the Authority. The three contracts totaled
more than $2.5 million of the more than $7 million in Formula Recovery Act capital funds
awarded to the Authority. We selected two contracts based on large discrepancies identified
between the amounts reported to the public in recovery.gov as compared to the actual check
amounts paid to the vendors. The amounts reported to the public in recovery.gov were much
lower than the actual amount paid to the vendors. We selected the third contract because it was
the largest contract using the Authority’s Recovery Act capital funds. We then applied
applicable Recovery Act regulations and the Authority’s Recovery Act procurement policy in
our review of those documents.

To determine whether the Authority properly entered Recovery Act information into
federalreporting.gov, we examined all quarterly expenditures during our audit period. We then
compared that information to what was reported in federalreporting.gov.

During the audit, we identified a minor issue regarding the Authority’s Recovery Act contract
administration system and not accurately reporting in federalreporting.gov the correct number of
jobs created and the number of jobs retained for two quarterly reporting periods, which we
communicated to the Authority and HUD in a separate management letter.

We did not use computer-generated data as audit evidence or to support our audit conclusions.
We used source documentation maintained by the Authority in its Recovery Act procurement
contract files for background information and in selecting our samples. We compared the source
documentation to data reported in federalreporting.gov and data reported in HUD’s Line of
Credit Control System. All conclusions were based on source documentation reviewed during
the audit.

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 finding
and conclusions based on our audit objectives.



                                                9
                              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 the obligation and expenditure of Recovery Act capital funds.
                     Controls over properly entering Recovery Act information into
                      federalreporting.gov.

               We assessed the relevant controls identified above.

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

 Significant Deficiency


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

                     The Authority did not provide training to staff responsible for entering data
                      into federalreporting.gov to ensure that staff understood how to accurately
                      report the Recovery Act capital fund information.



                                                 10
Separate Communication of
Minor Deficiencies


           Minor internal control and compliance issues were reported to the auditee in a
           separate memorandum, dated June 16, 2011.




                                            11
Appendix

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                    Auditee Comments
             The Denver Housing Authority provided its written comments in the
             following email.
Comment 1
             “ DHA acknowledges that some over-and-under reporting errors of
             vendor payments occurred in the federalreporting.gov system. OMB’s
             reporting guidance for ARRA was not very clear and was issued after
             some of these errors identified in the OIG report were already submitted.
             For the ARRA federal reporting, DHA consolidated payments to the
             same vendor in the same quarter regardless of whether these payments
             were over $25,000 or under $25,000. The federal reporting system and
             guidance appear to have design inconsistencies because it allows
             payments under $25,000 to the same vendor in the same quarter to be
             reported as cumulative for all previous and current quarters. In
             addition, the federal reporting system has a copy function that copies all
             vendor payments over $25,000 from prior quarter without requiring the
             deletion of copied prior-quarter payments before submission of the
             current quarter . DHA did not find clear guidance on the correct
             reporting methodology and reported certain payments in a cumulative
             fashion.DHA also found out that once a new quarter reporting begins,
             the federal reporting system does not allow us to correct prior
             submissions.

             It is important to note that DHA’s reporting methodology did not cause
             any general ledger duplication of payments or any duplicate drawdown
             of funds from the LOCCS system. DHA agrees with the OIG that these
             reporting issues may have caused the public to access wrong
             information. DHA welcomes the opportunity to get clear guidance on
             ARRA reporting in the federalreporting.gov system. Going forward,
             DHA is following the clarifications provided to DHA during the OIG
             audit and will take additional training as offered by the Denver Office of
             Public Housing .”




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Ref to OIG Evaluation                     Auditee Comments


              Please call me if you have any questions.

              Thanks,

              Sarasu Zachariah
              Chief Financial Officer
              Denver Housing Authority
              777 Grant Street
              Denver, CO 80203
              720-932-3160
              szach@denverhousing.org




                                            13
                 OIG Evaluation of Auditee Comments

Comment 1   The Authority generally concurred with the report and plans to work with
            HUD to obtain training and follow the reporting guidelines.




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