oversight

The San Antonio Housing Authority, San Antonio, TX, Generally Administered Its Recovery Act Public Housing Capital Funds Properly

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-06-07.

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

                                                               Issue Date
                                                                        June 7, 2011
                                                               Audit Report Number
                                                                            2011-FW-1011




TO:        David G. Pohler, Director, Office of Public Housing, 6JPH

           //signed//
FROM:      Gerald R. Kirkland
           Regional Inspector General for Audit, Fort Worth Region, 6AGA

SUBJECT: The San Antonio Housing Authority, San Antonio, TX, Generally Administered
         Its Recovery Act Public Housing Capital Funds Properly


                                   HIGHLIGHTS

 What We Audited and Why

             In accordance with our goal to review funds provided under the American
             Recovery and Reinvestment Act of 2009 (Recovery Act), we audited the San
             Antonio Housing Authority’s (Authority) Public Housing Capital Fund Stimulus
             Recovery Act-funded activities. We wanted to determine whether (1) the
             Authority obligated, expended, and reported on its Recovery Act funds within
             regulatory requirements and (2) its procurements were made in accordance with
             24 CFR (Code of Federal Regulations) Part 85 and Recovery Act requirements.

 What We Found


             Generally, the Authority complied with the Recovery Act requirements regarding
             the obligation and expenditure of capital funds, and its procurements were made
             in accordance with Federal and Recovery Act requirements. The Authority also
             properly reported its accomplishments and grant status as required by the
             Recovery Act.
What We Recommend


           This report does not contain recommendations as it contains no findings.

Auditee’s Response


           We provided a draft report to the Authority and the U. S. Department of Housing
           and Urban Development on May 26, 2011, with a request for written response by
           June 6, 2011. We held an exit conference on June 2, 2011, and the Authority
           provided a written response to the draft report that day.

           The Authority agreed with the audit report and we acknowledge its agreement.
           The complete text of the auditee’s response, along with our evaluation of that
           response, can be found in appendix B of this report.




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                           TABLE OF CONTENTS

Background and Objectives                                                            4

Results of Audit
      The Authority Generally Administered Its Public Housing Capital Recovery Act   5
      Funds Properly

Scope and Methodology                                                                8

Internal Controls                                                                    10

Appendix
       A. Auditee Comments and OIG’s Evaluation                                      11




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                        BACKGROUND AND OBJECTIVES

The San Antonio Housing Authority (Authority) was created in June 1937. Its mission is to
create safe neighborhoods by partnering with individuals and organizations to provide housing,
education, and employment opportunities for families of modest means to become self-sufficient
and improve their quality of life. The Authority’s low-income housing portfolio consists of 70
developments with more than 6,200 housing units.

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

Of the $4 billion made available for public housing improvement, the State of Texas received
more than $129 million. The Authority received almost $20 million in combined formula and
competitive grant funds, the most in Texas. The Authority’s Recovery Act Capital Funds
Formula grant amount totaled more than $14.5 million, and it assisted 34 low-income housing
complexes. The Authority’s Capital Fund Recovery Competition grants amount totaled more
than $5.3 million and was used to assist 13 communities for elderly and disabled persons 2.

The assisted projects were selected from the Authority’s Public Housing Agency Plans. The
public housing plan is a comprehensive guide to public housing agency policies, programs,
operations, and strategies for meeting local housing needs and goals. The plan has two parts, the
five year and annual plan.

Our audit objectives were to determine whether (1) the Authority obligated, expended, and
reported on its Recovery Act funds within regulatory requirements and (2) its procurements were
made in accordance with 24 CFR (Code of Federal Regulations) Part 85 and Recovery Act
requirements.




1
    Public Law 111-5
2
    The Authority’s Competition grants were all for the “Improvements Addressing the Needs of the Elderly and/or
    Persons with Disabilities”.


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                                        RESULTS OF AUDIT

Finding: The Authority Generally Administered Its Recovery Act
         Public Housing Capital Funds Properly
Generally, the Authority complied with Recovery Act requirements as it properly planned and
selected projects from its annual and five-year action plan (action plan) that met the Recovery
Act purpose of developing and modernizing public housing projects. 3 It properly obligated
funds by procuring the services of architects and contractors to rehabilitate 37 4 housing
complexes. The Authority awarded the contracts based on experience and cost, and it ensured
that the funds expended were properly supported for appropriately procured services. Finally, it
properly reported its accomplishments and grant status as required by the Recovery Act, section
1512, and ensured that appliances were Energy Star rated.


    The Authority Properly
    Obligated Recovery Act Funds

                   The Authority appropriately selected projects that were included in its annual action
                   plan. The projects selected received Recovery Act formula capital funding on
                   March 18, 2009, and the Authority had 1 year to obligate the funds. The Authority
                   obligated all of the 34 formula grant projects’ funds before the deadline. Similarly,
                   the Authority’s 13 competitive grant projects were for elderly and disabled persons
                   and, therefore, were required to be obligated by September 27, 2010. 5 The
                   Authority met the obligation deadline, and the projects were underway, an example
                   of which is shown in picture 1.




3
     42 U.S.C. (United States Code) 1437g: (d) Capital Funds (1) IN GENERAL.—“The Secretary shall establish a
     Capital Fund for the purpose of making assistance available to public housing agencies to carry out capital and
     management activities, including— (A) the development, financing, and modernization of public housing
     Projects…”
4
     The 37 housing complexes are a mixture of 34 formula grant projects and 13 competitive grant projects, of which
     10 apartment complexes were aided with both formula grant and competitive grant funds.
5
      Notice PIH 2010-34 (HA), Section V. letter E. Category 1.


                                                          5
                       Picture 1




                       The Lewis Chatham modernization project contracts totaled more than $7 million.


The Authority Properly
Procured Services for 37
Housing Complexes

            The Authority had controls and procedures to ensure that it properly procured
            services for the 37 housing complexes. The Authority’s procurement department
            maintained significant control over the procurement process to ensure that the
            contracts were awarded to an experienced contractor and the costs were reasonable.
            The Authority’s centralized procurement process provided layers of oversight that
            adequately solicited for contractors. The contractors were appropriately evaluated
            and ranked, and projects were awarded based on a combination of the contractors’
            experience and negotiated cost. A review of more than $1.7 million in disbursed
            grant funds found that those costs were (1) appropriately reviewed by three
            departments, (2) adequately supported by receipts and vouchers, and (3) properly
            posted in the Authority’s financial statements. A review of the contractor’s
            payments for the playground (see picture 2) showed that all costs were adequately
            supported.

                       Picture 2




                       Three complexes reviewed, one of which is pictured, received
                       new and upgraded playgrounds, which cost $291,000.


                                                 6
    The Authority Purchased
    Energy-Efficient Appliances

                 Federal policy 6 requires that public housing agencies abide by energy efficiency
                 standards when purchasing appliances. The Authority ensured that products
                 purchased were Energy Star rated or Federal Energy Management Program
                 designated products. The Authority’s efforts garnered it recognition from the
                 Environmental Protection Agency for excellence for installing energy-efficient
                 appliances, light fixtures, doors, and windows at 835 units and for the modernization
                 of the Lewis Chatham Apartment building shown in picture 1.


    The Authority Reported Its
    Accomplishments on Time


                 The Recovery Act mandated that all grant recipients report on their activities, job
                 creation, and job retention. 7 The Authority properly submitted quarterly reports
                 that detailed its accomplishments for job preservation, creation, and investment in
                 infrastructure. According to the Authority, as of March 2011, the Recovery Act
                 formula and competitive grants had created 258 new jobs and will have improved
                 37 public housing complexes for low-income families, the elderly, and disabled
                 persons.

    Conclusion


                 Generally, the Authority complied with Recovery Act policy for obligations and
                 expenditures, procurements, the purchase of energy-efficiency products, and
                 Recovery Act reporting. Upon completion of the various projects, the Authority
                 will have completed 37 public housing projects with the almost $20 million in
                 Recovery Act funds that it received.




6
     Notice: PIH-2009-25 (HA), The Energy Policy Act of 2005
7
     Public Law 111-5, section 1512


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                        SCOPE AND METHODOLOGY

We reviewed the Authority’s Recovery Act Public Housing Capital Formula and Competitive
Grant fund obligation and expenditures made from March 2009 through March 2011. We
performed the work at the Authority’s office located in San Antonio, TX, and HUD’s and our
offices in San Antonio and Fort Worth, TX.

To accomplish our objectives, we performed the following related to the Authority’s Recovery
Act grant funds:

    •   Reviewed the Recovery Act law and regulations and HUD notices, regulations, and other
        guidance.
    •   Reviewed the Authority’s policies and procedures.
    •   Reviewed and analyzed the Authority’s financial statements, annual, and five-year
        annual plans.
    •   Reviewed HUD’s monitoring reports and the Authority’s 2009 procurement
        accountability assessment report.
    •   Interviewed pertinent HUD staff, the Authority’s staff, and a contractor’s project
        manager.
    •   Reviewed and analyzed the Authority’s obligations, procurements, contracts, and
        expenditures.
    •   Reviewed, validated, and conducted data reliability tests by comparing and verifying that
        the Authority’s financial data matched the Authority’s independent audit report financial
        data that pertained to the Recovery Act funds. Based on our testing, we determined the
        electronic data used to be generally reliable.
    •   Selected, using a random number generator a sample of 10 of 88 Recovery Act funds
        grant disbursements. The 88 disbursements were worth more than $10.4 million, and the
        10 samples were valued at more than $1.7 million. The sample of 10 grant
        disbursements consisted of 5 formula and 5 competitive grant disbursements. We cannot
        and did not project the results of the sample to the universe.
    •   Reviewed the Authority’s “Buy American” waiver to ensure that regulations were
        followed.
    •   Reviewed HUD’s oversight of the Authority’s compliance with the Davis-Bacon Act.
    •   Reviewed the Authority’s energy efficiency-related purchases and compliance with
        Recovery Act requirements.
    •   Reviewed the Authority’s Recovery Act reporting.
    •   Conducted site visits to four apartment complexes in San Antonio, TX, to review the
        Recovery Act projects. Complex selection was based on testing performed on project
        expenditures.




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




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                              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:

                  •   Policy, manuals, checklists, and procedures that the Authority followed that
                      ensured control over procurements, contracts, and expenditures to ensure
                      compliance with the Recovery Act.

               We assessed the relevant controls identified above.

               A deficiency in internal controls 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.

               We evaluated internal controls related to the audit objectives in accordance with
               generally accepted government auditing standards. Our evaluation 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 the
               effectiveness of the Authority’s internal controls.




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                                       APPENDIXES

Appendix A

        AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation                          Auditee Comments
                                                      SAHA logo
                                                   EXECUTIVE OFFICE
            June 2, 2011

            Gerald R. Kirkland
            Regional Inspector General for Audit
            U. S. Department of Housing and Urban Development
            Office of Inspector General, Region VI
            819 Taylor Street, Suite 13A09
            Fort Worth, Texas 76102

            Dear Mr. Kirkland:

            The San Antonio Housing Authority (SAHA) has received and reviewed the draft Audit Report
            Number 2011-FW-100X for SAHA’s Public Housing Capital Fund Stimulus Recovery Act-funded
            activities. The report concludes that the SAHA (1) obligated, expended and reported on Recovery
            Act funds within the regulatory requirements and (2) procurements were made in accordance with
            24 CFR Part 85 and Recovery Act requirements.

            SAHA was cognizant of the Recovery Act requirements, the 24 CFR Part 85 requirements, and
            was well aware of the importance of transparency, accountability and the results mandated by the
            legislation, and worked very hard to ensure compliance with those requirements.

Comment 1   SAHA is pleased and concurs with the audit report’s conclusion that SAHA Properly Obligated
            Recovery Act Funds by obligating all 34 formula grant projects and 13 competitive projects within
            the required timelines. The Recovery Act allowed SAHA to undertake projects in the agency’s
            annual plan that met the required purpose to improve and modernize public housing properties.
            SAHA was poised to quickly proceed because, in mid-2009, SAHA adopted its updated
            Procurement Policy, which was consistent with the Recovery Act, and all staff was trained on the
            updated procurement procedures. The agency’s updated contracting and oversight procedures
            enhanced our ability to track expenditures and ensure compliance with the Recovery Act. SAHA
            greatly appreciates the validation that our systems worked as designed and planned. Also included
            in SAHA’s contracting requirements were energy efficiency and sustainability standards that have
            since been incorporated into SAHA’s Development Policy.

            We wish to express our thanks to the local HUD staff, led by David G. Pohler, for their excellent
            technical assistance throughout the year. We also wish to thank the OIG staff which conducted the
            comprehensive audit of SAHA’s administration of the Recovery Act funds for their professionalism
            and thoroughness. SAHA accepts the audit report as drafted.

            Sincerely,

            //signed//
            Lourdes Castro Ramirez
            President and CEO

            Cc: David G. Pohler, Director of PIH San Antonio




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                        OIG Evaluation of Auditee Comments

Comment 1   The Authority agreed with the report and we acknowledge its agreement.




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