oversight

The Wilmington, DE, Housing Authority Generally Administered Its Public Housing Capital Fund Recovery Act-Funded Formula and Competitive Grants in Accordance With Applicable Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-06-24.

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

                                                                               Issue Date
                                                                                     June 24, 2011
                                                                               Audit Report Number
                                                                                     2011-PH-1011




TO:              Dennis G. Bellingtier, Director, Office of Public Housing, Pennsylvania State
                  Office, 3APH
                 //signed//
FROM:            John P. Buck, Regional Inspector General for Audit, Philadelphia Region,
                  3AGA

SUBJECT:         The Wilmington, DE, Housing Authority Generally Administered Its Public
                 Housing Capital Fund Recovery Act-Funded Formula and Competitive Grants
                 in Accordance With Applicable Requirements


                                            HIGHLIGHTS

    What We Audited and Why

                 We audited the Wilmington Housing Authority’s (Authority) administration of its
                 Public Housing Capital Fund formula and competitive grants that it received
                 under the American Recovery and Reinvestment Act of 2009 (Recovery Act).
                 We selected the Authority for audit because it received a $5.2 million Public
                 Housing Capital Fund Formula (Recovery Act-Funded) grant and two Public
                 Housing Capital Fund Competitive (Recovery Act-Funded) grants totaling $13.6
                 million, 1 which was the largest formula grant and the largest amount of capital
                 fund competitive grants awarded in the State of Delaware. Our objective was to
                 determine whether the Authority administered capital funds provided under the
                 Recovery Act according to the requirements of the Recovery Act and applicable
                 U.S. Department of Housing and Urban Development (HUD) rules and
                 regulations.



1
  $13.6 million = a $10 million grant under Creation of Energy-Efficient, Green Communities Option 1 (substantial
rehabilitation or new construction) and a $3.6 million grant under Creation of Energy-Efficient, Green Communities
Option 2; (moderate rehabilitation).
What We Found


           The Authority generally administered its capital fund grants according to the
           requirements of the Recovery Act and applicable HUD rules and regulations. It
           used grant funds for eligible activities, obligated grant funds within the
           established deadlines, received and disbursed grant funds in a timely manner,
           generally complied with applicable procurement requirements, maintained
           documentation to support expenditures, and generally calculated and reported job
           count information in accordance with Recovery Act guidance.


What We Recommend

           This report does not contain recommendations.

Auditee’s Response


           We provided a discussion draft audit report to the Authority on June 1, 2011, and
           discussed it with the Authority at an exit conference on June 8, 2011. The
           Authority provided written comments to the draft audit report on June 8, 2011.
           The Authority agreed with the conclusions in the report. The complete text of the
           Authority’s response can be found in appendix A of this report.




                                           2
                           TABLE OF CONTENTS


Background and Objective                                                        4

Results of Audit
      Finding: The Authority Generally Administered Grant Funds in Accordance   5
      With Applicable Requirements

Scope and Methodology                                                           11

Internal Controls                                                               13

Appendix
   A. Auditee Comments                                                          15




                                           3
                         BACKGROUND AND OBJECTIVE
The Wilmington Housing Authority (Authority) was created in March 1938 when the Delaware
Board of Housing determined that there was a need for a housing authority in the city of
Wilmington. The Authority is governed by a nine-member board of commissioners. The current
executive director is Frederick Purnell. The Authority’s main administrative office is located at
400 North Walnut Street, Wilmington, DE.

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act
of 2009 (Recovery Act). This legislation included a $4 billion appropriation of capital funds to
carry out capital and management activities for public housing agencies as authorized under
Section 9 of the United States Housing Act of 1937. The Recovery Act requires that $3 billion
of these funds be distributed as formula grants and the remaining $1 billion be distributed
through a competitive process. The U.S. Department of Housing and Urban Development
(HUD) awarded the Authority a total of $18.8 million 2 in Public Housing Capital Fund Recovery
Act-funded grants. Title XII of the Recovery Act addresses the requirements for HUD’s
appropriations under the Act.

The Recovery Act and HUD’s Office of Public and Indian Housing (PIH) Notice PIH 2009-12,
required public housing agencies to use formula funds on eligible capital fund activities currently
identified in either its annual statement or 5-year action plan. The annual statement and 5-year
action plan are the agencies’ plans for using capital funds. They include general descriptions of
major work categories along with estimated costs for each of the planned activities.

The Authority allocated its formula grant to the demolition of public housing units, sidewalk
improvements, kitchen and bathroom renovations, window replacement, and administrative
expenses. It allocated its $10 million competitive grant to the demolition and redevelopment of a
high rise into a mixed-use and mixed-income development. The Authority allocated its $3.6
million competitive grant to renovate 180 housing units and install high-efficiency furnaces, air
conditioners, tankless water heaters, Energy Star appliances, over-the-range microwaves, and
electronic ignition stoves.

The Recovery Act imposed additional reporting requirements and more stringent obligation and
expenditure requirements on the grant recipients beyond those applicable to the ongoing Public
Housing Capital Fund program grants. For example, the Recovery Act required the Authority to
obligate 100 percent of its formula grant funds by March 17, 2010. It also required it to expend
100 percent of the grant funds by March 17, 2012. Transparency and accountability were critical
priorities in the funding and implementation of the Recovery Act.

Our objective was to determine whether the Authority administered capital funds provided under
the Recovery Act according to the requirements of the Recovery Act and applicable HUD rules
and regulations.

2
 $18.8 million = a $5.2 million Public Housing Capital Fund Formula (Recovery Act-Funded) grant awarded in
March 2009 and two Public Housing Capital Fund Competitive (Recovery Act-Funded) grants totaling $13.6 million
awarded in September 2009.

                                                      4
                                RESULTS OF AUDIT

Finding: The Authority Generally Administered Grant Funds in
Accordance With Applicable Requirements
The Authority generally administered its grant funds in accordance with the requirements of the
Recovery Act and applicable HUD rules and regulations. It used grant funds for eligible
activities included in its annual plan or 5-year action plan, obligated grant funds within the
established deadlines, received and disbursed grant funds in a timely manner, generally complied
with applicable procurement requirements, maintained documentation to support expenditures,
and generally calculated and reported job count information in accordance with Recovery Act
guidance.




 HUD Closely Monitored the
 Authority’s Recovery Act
 Grants



              HUD had monitored the Authority’s Recovery Act grants six times since January
              2010. The monitoring efforts performed by HUD included two each of the
              following types of reviews: remote monitoring, quick-look monitoring, and
              onsite monitoring. The purpose of HUD’s monitoring efforts was to determine
              whether the Authority was administering Recovery Act capital funds in
              accordance with all applicable regulatory and programmatic requirements. The
              scope of HUD’s monitoring consisted of reviewing grant initiation and approval,
              environmental compliance, procurement and contract documentation, and
              Recovery Act performance. HUD’s monitoring efforts identified 73 issues, most
              of which were related to the Authority’s procurement practices. However, most
              of the issues identified by HUD’s monitoring were closed before our audit began.
              Specifically, the Authority took corrective action on 46 of the issues, and HUD
              closed them. Only 14 of the 73 issues HUD identified related to contracts that we
              reviewed. Four of the issues were closed before our audit began. For 10 issues,
              the Authority recently submitted responses to HUD. However, eight of these
              issues were not related to our audit work.




                                               5
The Authority Used Grant
Funds for Eligible Activities
Included in Its Annual Plan or
5-Year Action Plan



            The Authority selected and funded eligible activities from its annual plan and 5-
            year action plan. Under the Recovery Act, HUD issued Notice PIH 2009-12,
            which required the Authority to use formula grant funds for activities currently
            identified in either its annual plan or 5-year action plan. All of the activities that
            the Authority selected were either in its annual plan or 5-year action plan. The
            Authority selected activities that were eligible to be funded with its Recovery Act
            formula grant. It allocated its formula grant to the demolition of public housing
            units, sidewalk improvements, kitchen and bathroom renovations, window
            replacement, and administrative expenses. The following pictures show one of the
            work items that the Authority funded with its Recovery Act formula grant.




            Before (left) and after (right) pictures illustrate the demolition of public housing units at Riverside
            (completed).

            The Authority allocated its $3.6 million competitive grant to the renovation of
            180 units in its Southbridge family development. Renovations included the
            installation of high-efficiency furnaces, air conditioners, tankless water heaters,
            Energy Star appliances, over-the-range microwaves, and electronic ignition
            stoves. In addition, the Authority allocated its $10 million competitive grant to
            the demolition and redevelopment of Lincoln Towers into a mixed-use and
            mixed-income development. When completed, Lincoln Towers will contain 88
            units of age-restricted elderly, mixed-income, low-income, and Section 8
            households. The following pictures show some of the work items that the
            Authority funded with its Recovery Act competitive grants.




                                                     6
                 New high-efficiency furnaces (left) and tankless water heaters (right) were installed in units
                 at the Southbridge family development (ongoing).




                 Before (left) and after (right) pictures illustrate the demolition and redevelopment of Lincoln
                 Towers (ongoing).


    The Authority Met the
    Required Obligation Deadlines


                 Under the Recovery Act and HUD Notices PIH 2009-12 and PIH 2010-34, the
                 Authority was required to obligate 100 percent of its formula grant by March 17,
                 2010, and competitive grants by September 22 and 23, 2010. 3 Our review of all
                 of the Authority’s contracts and purchase orders related to the three Recovery Act
                 grants showed that the Authority obligated 100 percent of its Recovery Act grants
                 by the required deadlines.




3
 The obligation deadline for Creation of Energy Efficient, Green Communities, Option 1; (substantial rehabilitation
or new construction) was September 22, 2010, and for Creation of Energy Efficient, Green Communities, Option 2;
(moderate rehabilitation) was September 23, 2010.

                                                         7
    The Authority Was Expending
    Funds as Required



                 The Recovery Act and HUD Notice PIH 2009-12 required the Authority to
                 expend at least 60 percent of the formula grant by March 17, 2011. The Authority
                 had expended $4.1 million, or 79 percent, of its formula grant as of March 8,
                 2011.

                 In addition, the Recovery Act and HUD Notice PIH 2010-34 required the
                 Authority to expend at least 60 percent of its competitive grants by September 22
                 and 23, 2011. 4 The Authority had expended $2.1 million, or 21 percent, of its $10
                 million competitive grant and $958,000, or 26 percent, of its $3.6 million
                 competitive grant as of March 31, 2011. The Authority’s expenditure schedules
                 showed that it planned to expend 60 percent of its competitive grant funds by
                 September 22 and 23, 2011, respectively. Based on this, the Authority appeared
                 to be on track to meet the expenditure requirements.

    The Authority Received and
    Disbursed Grant Funds in a
    Timely Manner


                 The Authority drew down grant funds from HUD’s automated Line of Credit
                 Control System 5 when the payments were due and after it had inspected and
                 accepted the work. HUD Notices PIH 2009-12 and PIH 2010-34 require the
                 Authority to requisition funds only when payment is due and after inspection and
                 acceptance of the work and to disburse the funds within 3 working days of receipt
                 of the funds. The Authority generally disbursed the funds within 3 working days
                 as required. It maintained adequate documentation to support the disbursements,
                 such as invoices and approved requests for periodic partial payments.


    The Authority Generally
    Complied With Applicable
    Procurement Requirements


                 The Authority generally followed HUD procurement regulations and guidance.
                 For example, it

4
  The 60 percent expenditure deadline for Creation of Energy Efficient, Green Communities, Option 1; (substantial
rehabilitation or new construction) is September 22, 2011, and for Creation of Energy Efficient, Green
Communities, Option 2; (moderate rehabilitation) is September 23, 2011.
5
  The Line of Credit Control System is HUD’s primary grant disbursement system.

                                                        8
              •   Amended its procurement policy, as required by HUD Notice PIH 2009-
                  12, to expedite and facilitate the use of grant funds by making State and
                  local laws and regulations inapplicable for Recovery Act grants.

              •   Awarded contracts competitively in accordance with 24 CFR (Code of
                  Federal Regulations) 85.36 and HUD Handbook 7460.8, REV-2. The
                  Authority advertised and competitively awarded contracts and had sufficient
                  documentation to support the procurement.

              •   Complied with HUD guidance for implementing the “buy American”
                  requirement of the Recovery Act in HUD Notice PIH 2009-31.

              •   Generally ensured that contractors complied with Davis-Bacon Act
                  requirements. The Recovery Act required that all laborers and mechanics
                  be paid in accordance with the prevailing wage rates in accordance with
                  the Davis-Bacon Act. HUD Handbook 1344.1, REV-1, also required the
                  Authority to review contractors’ weekly payrolls.

The Authority’s Federal
Reporting Generally Met
Recovery Act Requirements



           The Authority generally complied with all reporting requirements by the required
           deadlines. It complied with and properly reported its obligations, expenditures,
           and number of jobs created in accordance with guidance issued in Office of
           Management and Budget (OMB) Memorandum 10-08. It also complied with the
           National Environmental Policy Act reporting requirements of the Recovery Act.
           The Authority entered the number of housing units rehabilitated and units
           receiving energy efficiency measures into HUD’s Recovery Act Management and
           Performance System as required.

           Two specific provisions in the Recovery Act require quarterly reporting on the
           part of the Authority. 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 subrecipents 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. HUD requires Recovery Act grantees to complete
           their environmental reviews and enter compliance information into the Recovery Act
           Management and Performance System.




                                           9
Conclusion


             The Authority generally administered its grant funds in accordance with the
             requirements of the Recovery Act and applicable HUD rules and regulations.

Recommendations


             Based on the audit results, this report contains no recommendations.




                                             10
                        SCOPE AND METHODOLOGY

We conducted the audit from January through May 2011 at the Authority’s office located at 400
North Walnut Street, Wilmington, DE, and at our office located in Philadelphia, PA. The audit
covered the period March 2009 through December 2010 but was expanded when necessary to
include other periods. We relied in part on computer-processed data in the Authority’s computer
system. We used computer-processed data provided by the Authority that consisted of a listing
of contracts related to its Recovery Act-funded capital fund grants and the accumulated
expenditures related to those contracts. We used this data to select samples of contracts and
expenditures to evaluate the Authority’s compliance with applicable procurement and
expenditure requirements. Although we did not perform a detailed assessment of the reliability
of the data, we did perform a minimal level of testing and found the data to be adequate for our
purposes.

To achieve our audit objective, we

   •   Obtained relevant background information.

   •   Reviewed the Recovery Act and applicable HUD rules, regulations, and guidance.

   •   Reviewed meeting minutes of the Authority’s board of commissioners.

   •   Reviewed the Authority’s fiscal years 2009 and 2010 audited financial statements.

   •   Reviewed reports from HUD’s monitoring of the Authority’s Recovery Act grants, dated
       January 11, 2010, February 12, 2010, June 1, 2010, August 12, 2010, January 11, 2011,
       and February 24, 2011, and the Authority’s responses.

   •   Selected and tested a sample of 5 contracts valued at $11.1 million from a universe of 64
       contracts valued at $17.7 million to determine whether the Authority followed applicable
       procurement requirements. The five contracts included two contracts that were funded
       with formula grant funds, two contracts that were funded with funds from the $3.6
       million competitive grant, and one contract that was funded with funds from the $10
       million competitive grant. We selected these contracts for review because they had the
       largest amount of expenditures as of December 31, 2010.

   •   Reviewed documentation supporting 16 expenditures totaling $2.2 million that were
       related to 3 contracts valued at $10.3 million (1 contract from each of the Authority’s 3
       Recovery Act capital fund grants). We selected the contracts with the largest amount of
       expenditures as of December 31, 2010, funded with the formula grant and the $10 million
       competitive grant and the contract with the second largest amount of expenditures as of
       December 31, 2010, funded with the $3.6 million competitive grant.




                                               11
   •   Interviewed the Authority’s staff and officials from HUD’s Pennsylvania State Office of
       Public Housing.

   •   Conducted onsite reviews of work items completed or to be completed by the Authority
       at its Southbridge, Riverside, Northeast, Crestview, and Lincoln Towers developments
       where the grant funds were being used. We randomly selected and visited 15 housing
       units to determine whether the planned activities were either underway or completed and
       verified that they contained kitchen and bathroom upgrades, Energy Star appliances, and
       newly installed windows. We also verified the demolition of housing units at one
       housing development, as well as the demolition of an apartment complex that was being
       redeveloped.

   •   Reviewed the Authority’s 2010 quarterly reports to the Federal reporting Web site and to
       HUD’s Recovery Act Management and Performance System.

   •   Reviewed all 33 payrolls associated with a formula grant-funded demolition contract
       valued at $732,000 to determine whether the Authority complied with Davis-Bacon Act
       requirements.

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. The audit included tests of internal controls that
we considered necessary under the circumstances.




                                                12
                              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
                   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 payments to contractors/vendors are
                   made in accordance with applicable requirements.

               •   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.



                                                13
We evaluated internal controls related to the audit objective 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
on the effectiveness of the Authority’s internal control.




                                14
                                                 APPENDIX

Appendix A

                                      AUDITEE COMMENTS



WHA
                                                                Frederick S. Purnell, Sr., Executive Director
                                                                Bernadette P. Winston, Chairwoman

                                                                Martin Luther King, Jr.     400 Walnut Street            Ph:
(302) 429-6701
Wilmington Housing Authority                                    Administration Building     Wilmington, Delaware 19801   Fax:
(302) 429-6815


          June 8, 2011

          Mr. John Buck, Regional Inspector General
          Department of Housing and Urban Development
          Wanamaker Building
          100 Penn Square East
          Philadelphia, PA 19107-3380

          Re:      WHA Audit Report for PA Capital Fund Recovery Act-Funded Formula
                    and Competitive Grants

          Dear Mr. Buck:

          In response to the audit exit conference conducted at our offices in Wilmington today, the
          Wilmington Housing Authority accepts the Audit (PH 11 0005) as submitted.

          We do wish to thank the OIG auditors Ron Lloyd and Gregg Burgwald for their cooperation and
          professionalism in working with the WHA staff to complete this review. It was a pleasure to
          work with them.

          Sincerely,

          Frederick S. Purnell, Sr.
          Executive Director

          FSP:sb

          C:       Dennis Bellingtier, HUD
                   Judy Axler, HUD
                   Debra Gardner, HUD
                   David Kasperowicz, HUD
                   John Concannon, HUD
                   Roger Turk, WHA
                   Laverne Hanson, WHA
                   Eustace Kamanja, WHA




                                                          15