oversight

The City of Brackettville Housing Authority, Brackettville, TX, Failed To Properly Operate Its Low Rent Program But Generally Oversaw Its Capital Fund Grants Properly

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-09-18.

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

                                               U.S. DEPARTMENT OF
                               HOUSING AND URBAN DEVELOPMENT
                                        OFFICE OF INSPECTOR GENERAL




                                                    September 18, 2013
                                                                                              MEMORANDUM NO:
                                                                                                   2013-FW-1803


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

              Craig T. Clemmensen,
              Director, Departmental Enforcement Center, CACB

              //signed//
FROM:         Gerald Kirkland
              Regional Inspector General for Audit, 6AGA

SUBJECT:      The City of Brackettville Housing Authority, Brackettville, TX, Failed To
              Properly Operate Its Low Rent Program But Generally Oversaw Its Capital Fund
              Grants Properly


                                           INTRODUCTION

In accordance with our regional plan to review public housing programs and because of
weaknesses identified by the U.S. Department of Housing and Urban Development’s (HUD)
Office of Public Housing, we reviewed the City of Brackettville Housing Authority,
Brackettville, TX. Our objective was to determine whether the Authority operated its public
housing and related grant programs in accordance with HUD requirements.

HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.

                                METHODOLOGY AND SCOPE

We conducted our work at the Authority’s administrative offices in Brackettville, TX, the San
Antonio, TX, Office of Public Housing, and the Office of Inspector General’s (OIG) offices in
San Antonio and Fort Worth, TX, between April 22 and June 27, 2013. The review generally
covered the period July 1, 2010, to June 30, 2012. We expanded the scope, as necessary, to
accomplish our objective.

                                               Office of Audit (Region 6)
                                819 Taylor Street, Suite 13A09, Fort Worth, TX 76102
                                      Phone (817) 978-9309, Fax (817) 978-9316
                          Visit the Office of Inspector General Web site at www.hudoig.gov.
To accomplish our objective, we performed the following related to the Authority’s programs:

•   Reviewed and obtained an understanding of the relevant laws, regulations, and HUD
    guidance and the Authority’s policies and procedures.
•   Reviewed the Authority’s American Recovery and Reinvestment Act of 2009 grant
    agreement, annual statement, and 5-year action plan.
•   Reviewed the Authority’s procurement records.
•   Tested 100 percent of the Authority’s Recovery Act contracts to determine whether the
    Authority obligated them by the March 17, 2010, obligation deadline.
•   Reviewed 100 percent of the Authority’s program disbursements for the review period. We
    extended our testing through March 31, 2013, for disbursements related to travel, fuel, cell
    phones, and payroll.
•   Reviewed the Authority’s unaudited financial statements information for fiscal years ending
    June 30, 2010, through June 30, 2012.
•   Reviewed the Authority’s rent collection policy and procedures.
•   Tested tenant rent collection and recording procedures for the month of March 2013.
•   Reviewed the Authority’s board meeting minutes to determine the dollar amount of tenant
    accounts receivable written off as uncollectable, whether the board approved a travel policy
    or fuel expense policy, the board-approved salary and wage rates for employees, the
    incorporation date for the Authority, and whether the Authority had adopted a Recovery Act-
    compliant procurement policy.
•   Interviewed HUD San Antonio Office of Public Housing, Authority, Texas Secretary of
    State, City of Brackettville, and Kinney County staff. We also interviewed current board
    members and the Authority’s fee accountant and executive director.

                                       BACKGROUND

The Authority incorporated under the laws of the State of Texas and is governed by a
five-member board of commissioners appointed by the mayor of Brackettville. The board is
responsible for establishing operating policies and oversees the executive director, who manages
the Authority’s day-to-day operations. The Authority owns and manages 48 low-rent public
housing units. HUD provided operating subsidies, Public Housing Capital Fund program funds,
and Recovery Act funds to the Authority for it to manage, maintain, operate, and improve its
public housing developments. Table 1 shows HUD’s funding provided during fiscal years 2010
through 2012.




                                               2
                    Table 1. Total HUD funding provided to the Authority
         Fiscal year 1         Tenant’s rents 2     Operating subsidy      Capital Fund
             2010                       $76,618                $91,855             $70,299
             2011                         61,750                77,011              58,041
             2012                         74,194               112,652              56,063
            Totals                    $ 212,562              $281,518            $184,403

In addition, the Authority received $87,802 in Recovery Act grant funds in March 2009, which it
expended during the review period.

The Authority’s executive director resigned without notice on April 23, 2013. Concurrent with
the beginning of our fieldwork, HUD began working with the Authority to address management
concerns. On June 6, 2013, the Authority entered into a 90-day interagency management
agreement with the Del Rio Housing Authority in which Del Rio agreed to manage the
Authority’s program operations in accordance with HUD requirements. However, the
Authority’s board remained responsible for oversight of the Authority.

                                         RESULTS OF REVIEW

The Authority’s board of commissioners and executive director did not operate the Authority in
accordance with HUD’s program requirements. This condition occurred because neither the
board nor the executive director took adequate steps to oversee the Authority’s operations. In
addition, the executive director abused her authority and failed to follow established Authority
policies. As a result, the Authority had excessive past-due tenant accounts receivable totaling
$42,531 and paid questioned costs and funds put to better use totaling $31,813. The Authority
properly procured and paid for $215,260 in renovation and repair contracts funded with Capital
Fund and Recovery Act grant funds.

The Authority Failed To Properly Administer Its Tenants’ Rents

The Authority kept three different tenant accounts receivable ledgers and did not reconcile them
to the general ledger. In addition, it did not collect tenant rents in a timely manner. This
condition occurred because management did not take appropriate action concerning its rental
revenues, including taking actions to collect overdue balances. Specifically, the executive
director did not follow the board approved rental collection policy. She failed to notify tenants
of past-due rent, did not enter into repayment agreements, and failed to take eviction actions as
required. According to her, she did not perform these required actions because it was a waste of
time. Apparently, the board was unaware of the executive director’s inaction, which allowed this
condition to continue for years. As a result, the Authority did not collect all rental revenue due
to it. For the review period, the Authority accumulated a total of $42,531 in past-due tenant

1
    The Authority’s fiscal year ends June 30.
2
    Net tenant rental revenue
                                                    3
accounts receivable, which amounts to more than 57 percent of its annual tenant rental receipts. 3
The Authority wrote off $23,691 of this amount in 2011 and 2012, leaving a balance of $18,840,
or 25 percent of its annual rental revenue, uncollected as of March 31, 2013. Additionally, the
fee accountant stated that his balances did not always match those kept by the executive director.

The Executive Director Approved Ineligible Payments and Benefits to Staff

The executive director approved the maintenance supervisor’s cash leave payments, advanced
leave to the maintenance supervisor, and used Authority funds to pay the maintenance
supervisor’s fuel costs while he was on vacation. This condition occurred because the executive
director took actions not allowed by Federal cost principles 4 and Authority’s policies and
procedures, 5 failed to oversee staff leave balances, and failed to adequately review credit card
charges. The board indicated that it was unaware of such activities. The Authority paid the
maintenance supervisor a total of $14,243 for leave that he had not earned. In addition, the
Authority’s financial records showed additional leave accrued for the maintenance supervisor
totaling $1,052, which he had not earned. The Authority also paid the maintenance supervisor
$495 for fuel charged to the Authority’s fuel charge card while he was on vacation.

The Executive Director Used Authority Funds To Pay for Personal Costs

The Authority’s executive director abused her position by using Authority funds to pay for
personal charges and costs. According to Federal regulations, costs charged to a Federal
program are allowable only if the costs are necessary, reasonable, and allocable to the program. 6
The executive director stated that she was unaware of the improper nature of the charges and
costs. The board was unaware that the executive director had made these costs and charges. The
board chairman stated that the board would not have allowed such costs. The executive director
charged the Authority a total of $1,359 in ineligible charges and costs, including $690 during the
review period, which she charged to the Authority for a cell phone that her husband used. The
Authority had paid for the cell phone charges for many years. In addition, the executive director
charged $430 to the Authority’s fuel charge card while she was on leave. She also charged the
Authority’s credit card $239 for a charge to Gold Canyon Candles.

The Authority Lacked Support for Fuel Charge Card Costs

The executive director and the maintenance supervisor used the Authority’s fuel charge cards but
did not track their use or mileage to ensure that the Authority paid only for eligible and
supported charges or costs. Neither the board nor the executive director had established a policy

3
    For fiscal yearend June 20, 2012, the Authority’s annual dwelling rent totaled $74,194.
4
    To be allowable, costs must be necessary and reasonable. A cost is reasonable if, in its nature and amount, it
    does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the
    time the decision was made to incur the cost (2 CFR (Code of Federal Regulations) Part 225, Costs Principles
    for State, Local, and Indian Tribal Governments).
5
    The Authority’s 2006 personnel policy allowed for cash payments for accumulated sick leave but did not
    discuss allowing cash payments for annual leave.
6
    2 CFR Part 225
                                                         4
for the Authority’s fuel card to ensure that staff made only reasonable and necessary charges. 7
Further, the executive director admitted that she used the gas card for personal costs but stated
that she did so because the Authority had not provided a car for her use. During the review
period, the executive director and maintenance supervisor charged $9,911 to the Authority’s fuel
cards for both business and personal use. These costs appeared excessive as the Authority’s
properties consisted of 48 units, all of the properties were within a few miles of each other, and
the executive director and maintenance supervisor lived near the Authority.

The Authority Lacked Support for Travel Costs

The Authority had lacked supporting documentation for travel authorizations and
reimbursements. Instead of reimbursing staff for actual costs as required by its policies, 8 the
Authority allowed travelers to bill travel costs to its charge card and also gave them per diem
advances before travel. In addition, for training travel, the Authority did not require its staff to
certify that it attended the training. Neither the executive director nor the board approved all
travel in advance or required travelers to submit a reimbursement request or receipts after a trip
occurred, as required by its policy. As a result, the Authority could not support travel costs
totaling $2,446 paid to the maintenance supervisor, the executive director, and one board
member.

The Executive Director Used HUD Funds for Little-Used Software and Computers

The executive director paid $8,141 9 for two software systems, a laptop computer, and a tablet
computer but did not use this software or equipment to oversee the Authority’s operations. 10
This condition occurred because the executive director could not get the systems she purchased
to connect to HUD’s or the Authority’s systems. Federal regulations state that costs charged to a
Federal program are allowable only if the costs are necessary, reasonable, and allocable to the
program. 11 The Authority could use the computer equipment, which cost $2,307, more
efficiently by using the equipment to carry out or manage its program activities.

The Authority Did Not Perform Required Unit Inspections

The Authority’s files lacked documentation showing that it performed annual inspections as
required. This condition occurred because the executive director did not ensure that the
inspections occurred and were documented. As a result, the Authority’s units may not have met
housing quality standards and unreported damage may not have been repaired in a timely
manner.


7
     See footnote 4
8
     The Authority provided a policy for travel, but it could not provide proof that the board had approved the
     policy.
9
     These purchases totaled almost 11 percent of the Authority’s annual rental revenue for fiscal year 2012. See
     footnote 3
10
     The costs of the computer software agreements totaled to $5,834.
11
     2 CFR Part 225
                                                         5
The Authority Could Not Locate Its Primary Legal Documents

During our review, the Authority could not provide articles of incorporation. It also could not
provide copies of its by-laws or travel policy that had been adopted or approved by its board.
However, it did have a copy of unapproved by-laws. Neither the Authority, the clerk of the City
of Brackettville, HUD, nor the State of Texas could locate the necessary articles of incorporation
under which the Authority should be operating. As a result, the Authority lacked the necessary
guiding documents to properly operate in an effective and efficient manner.

                                            RECOMMENDATIONS

We recommend that the Director of the San Antonio Office of Public Housing

1A.       Continue to monitor and provide technical assistance to Authority to ensure that its
          operations comply with HUD program requirements.

1B.       Require the Authority to comply with its rent collection policy to avoid excessive tenant
          accounts receivable.

1C.       Require the Authority to repay $16,097 to its public housing program from non-Federal
          funds for ineligible costs incurred by the executive director and maintenance
          supervisor. 12

1D        Require the Authority to correct its financial records by reducing the maintenance
          supervisor’s annual leave liability by $1,052.

1E.       Require the Authority to support or repay its public housing program from non-Federal
          funds $2,446 for the unsupported travel costs.

1F.       Require the Authority to support or repay its public housing program from non-Federal
          funds the $9,911 in unsupported fuel charge costs.

1G.       Require the Authority to more efficiently use the computer equipment it purchased at a
          cost of $2,307 to carry out or manage program operations.

1H.       Require the Authority’s board to adopt resolutions approving and implementing travel
          and fuel charge card policies.

1I.       Require the Authority to perform and document annual inspections at its occupied units
          to ensure that the units meet housing quality standards.


12
      For the executive director, the amount consisted of cell phone charges totaling $690, fuel card charges totaling
      $430, and a credit card charge of $239 for personal expenses. For the maintenance supervisor, the amount
      consisted of annual leave payments totaling $14,243 and fuel card charges totaling $495.
                                                           6
1J.   Require the Authority to obtain and maintain its articles of incorporation.

IK.   Require the board to adopt the Authority’s by-laws.


We recommend that the Director, Departmental Enforcement Center,

1L.   Take appropriate administrative action, including possible debarment, against the
      executive director.




                                               7
                                     APPENDIXES

Appendix A

               SCHEDULE OF QUESTIONED COSTS
              AND FUNDS TO BE PUT TO BETTER USE

     Recommendation                                                      Funds to be put
                             Ineligible 1/          Unsupported 2/
         number                                                          to better use 3/
           1C                   $16,097
           1D                     1,052
           1E                                            $ 2,446
           1F                                              9,911
           1G                                                                   $2,307
        Totals                  $17,149                 $12,357                 $2,307


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.

3/    Recommendations that funds be put to better use are estimates of amounts that could be
      used more efficiently if an OIG recommendation is implemented. These amounts include
      reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
      implementing recommended improvements, avoidance of unnecessary expenditures
      noted in preaward reviews, and any other savings that are specifically identified. In this
      case, it represents costs for computer equipment that could be put to better use in the
      future by the Authority to oversee its Federal programs.




                                               8
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION



Ref to OIG Evaluation                                  Auditee Comments



                                                        HOUSING AUTHORITY
                                              O F T H E C I T Y O F D E L R I O, T E X A S

                                                                               207 Bedell Avenue-P.O. Drawer 4080 Zip 78841-
                                             Cynthia A. de Luna                   Tel# (830) 774-6506-Fax# (830) 775-0674
                                      President & Chief Executive Officer                     drha@stx.rr.com



                September 12, 2013



                Mr. Gerald R. Kirkland
                Regional Inspector General for Audit
                Office of Audit (Region 6)
                819 Taylor Street, Suite 13A09
                Fort Worth, TX 76102

                SUBJECT: The City of Brackettville Housing Authority, Brackettville, TX, Failed To Properly
                         Operate Its Low Rent Program But Generally Oversaw Its Recovery Act and
                         Capital Funds Properly

                Dear Mr. Kirkland:

                Please be advised that the Housing Authority of the City of Del Rio (HACDR) currently has a
                Management Agreement with the Brackettville Housing Authority (BHA). On behalf of Ms. Barbara
                Dillon, Chairperson, and the Board of Commissioners for the Brackettville Housing Authority, I would
                like to provide the following response:

                We are in receipt of the Recommendations made to the Director of the San Antonio Office of Public
                Housing; Mr. David Pohler and would like to comment on the recommendations made to his office.
Comment 1
                1) In June of this year the Management Agreement with HACDR was approved and signed with BHA.
                The Secretary at the BHA has since resigned as well as the Maintenance Supervisor. A Site Manager
                position was advertised, interviewed and selected to manage the day to day operation, including the
                collection of rent as well as enforcing the rent collection process to avoid excessive tenant accounts
                receivable.

Comment 1       2) The repayment of funds to the public housing program from non-Federal funds to cover ineligible
                and unsupported expenses is an issue that may be addressed by the Director of the San Antonio Office
                of Public Housing. On behalf of the BHA, the Board of Commissioners approved that a request for
                repayment be made to the former Executive Director and former Maintenance Supervisor. In addition,
                notice will be made to the BHA's insurance carrier to advise of this loss of public funds.


Comment 1       3) In April, when the HACDR was asked to assist the BHA, the BHA and HACDR began utilizing the
                computer equipment and hardware in place at BHA. The software has allowed the HACDR to have
                oversight of entries being made, collections, renewals, move-in's, move-out's, etc.
                                                           9
Ref to OIG Evaluation                                   Auditee Comments


Comment 1       4) In April, when the HACDR was asked to assist the BHA, the credit cards (businesses and fuel) were
                immediately requested from the Maintenance Supervisor and a control log with a sign out form was
                enforced. In addition, a mileage form was provided for the company owned vehicle for tracking
                purposes.

Comment 1       5) In May, Annual inspections began to be conducted to ensure that Housing Quality Standards are met
                for all occupied units, prior to renewal of all leases.

Comment 1       6) Efforts will be made to obtain the articles of incorporation and by-laws for the BHA.

                Frequent Board meetings have been conducted and the Board, as well as the Mayor have been advised
                of policy issues as well as financial and occupancy information. Even though several other measures
                have been approved and implemented, there are still many improvements to be made.

                We appreciate the support of the HUD San Antonio Field Office as well as the assistance provided by
                Xxxxxxxxxxxxxxxx and xxxxxxxxxxxxx from the OIG offices, in our efforts to have the Brackettville
                Housing Authority work again towards the mission of providing affordable housing to the families in
                Brackettville.

                Should you have any questions, please feel free to contact us.

                Sincerely,




                CYNTHIA A. DE LUNA, C.M.H.
                President & C.E.O.
                Housing Authority of the City of Del Rio

                xc: Barbara Dillon, Chairperson, Brackettville Housing Authority
                    David Pohler, Director San Antonio Office of Public Housing




                                                           10
                         OIG Evaluation of Auditee Comments

Comment 1   The Authority generally agreed with our conclusions and recommendations. It
            stated it had already taken actions to address some recommendations cited in the
            report. However, HUD should confirm the actions have been taken and continue
            working with the Authority regarding the additional actions needed, including the
            collection and repayment of questioned costs




                                            11