oversight

The Southern Nevada Regional Housing Authority, Las Vegas, NV, Did Not Always Administer Its Recovery Act Capital Fund Grants in Accordance With Recovery Act and HUD Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-01-23.

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

 OFFICE OF AUDIT
 REGION 9
 LOS ANGELES, CA




     Southern Nevada Regional Housing Authority,
                   Las Vegas, NV

                   Recovery Act Capital Funds




2013-LA-1002                                    JANUARY 23, 2013
                                                        Issue Date: January 23, 2013

                                                        Audit Report Number: 2013-LA-1002




TO:            Velma Navarro, Director, Office of Public Housing, San Francisco, 9APH

               ///SIGNED///

FROM:          Tanya E. Schulze, Regional Inspector General for Audit, Los Angeles Region,
               9DGA


SUBJECT:       The Southern Nevada Regional Housing Authority, Las Vegas, NV, Did Not
               Always Administer Its Recovery Act Capital Fund Grants in Accordance With
               Recovery Act and HUD Requirements

    Enclosed is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General (OIG), final results of our review of the Southern Nevada Regional Housing
Authority’s American Recovery and Reinvestment Act of 2009 Public Housing Capital Fund
grants.

    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.

    The Inspector General Act, Title 5 United States Code, section 8L, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.

   If you have any questions or comments about this report, please do not hesitate to call me at
213-534-2471.
                                            January 23, 2013
                                            The Southern Nevada Regional Housing Authority, Las
                                            Vegas, NV, Did Not Always Administer Its Recovery Act
                                            Capital Fund Grants in Accordance With Recovery Act
                                            and HUD Requirements


Highlights
Audit Report 2013-LA-1002


 What We Audited and Why                     What We Found

We audited the Southern Nevada              The Authority generally complied with HUD
Regional Housing Authority’s                procurement policies for its Recovery Act Capital
American Recovery and Reinvestment          Fund grants. However, it did not always ensure that its
Act Public Housing Capital Fund grants      contractors complied with the Davis-Bacon Act and
as part of our objective to review funds    Federal labor standards. The Authority did not (1)
provided under the American Recovery        ensure that proper wage rates were paid, (2) ensure that
and Reinvestment Act of 2009. We            additional wage classifications and rates were
selected the Authority because it is a      requested and received from the U.S. Department of
newly formed entity, created January 1,     Labor, or (3) investigate complaints received by
2010, and the Authority and the entities    contractor employees. Further, the Authority did not
that formed it received more than $21       always ensure that it complied with Recovery Act
million in Recovery Act Capital Fund        reporting requirements. Specifically, it did not
grants. The objective of our review was     accurately report in FederalReporting.gov the number
to determine whether the Authority          of jobs created and retained. This condition occurred
administered its Recovery Act funds in      because the Authority did not effectively monitor its
accordance with Recovery Act and U.S.       contractors in the enforcement of Federal labor
Department of Housing and Urban             standards and lacked written policies and procedures
Development (HUD) regulations.              for Recovery Act reporting. As a result, the
                                            Authority’s contractors did not always comply with the
                                            Davis-Bacon Act and underpaid employees more than
 What We Recommend
                                            $7,300. Also, the Authority’s use of Recovery Act
                                            funds was not always transparent, and the public did
We recommend that the Director of           not always have access to accurate information about
HUD’s San Francisco Office of Public        the Authority’s use of the Recovery Act grants.
Housing require the Authority to obtain
documentation to support that
contractors and subcontractors made
corrective payments for improper wages
cited, update its policies and procedures
related to Davis-Bacon compliance, and
establish policies and procedures to
ensure accurate and complete reporting
to HUD and other Federal agencies.
                           TABLE OF CONTENTS

Background and Objective                                                           3

Results of Audit
      Finding: The Authority Did Not Always Ensure That Its Contractors Complied
      With the Davis-Bacon Act and Recovery Act Reporting Requirements              4


Scope and Methodology                                                              10

Internal Controls                                                                  11

Appendixes
A.    Schedule of Questioned Costs                                                 12
B.    Auditee Comments and OIG’s Evaluation                                        13




                                           2
                       BACKGROUND AND OBJECTIVE

On January 1, 2010, the Housing Authority of the City of Las Vegas and the Clark County
Housing Authority combined to form the Southern Nevada Regional Housing Authority. The
Authority absorbed the North Las Vegas Housing Authority on January 1, 2011. The Authority
has a nine-member board of commissioners that have fiduciary responsibility as well as the
responsibility of establishing and overseeing policy for the agency.

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act
of 2009. 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 the distribution of $3 billion in
formula grants and the remaining $1 billion through a competitive grant process.

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 Authority was required to obligate 100
percent of its formula grant funds by March 18, 2010. The Authority was also required to
expend 100 percent of the formula grant funds by March 18, 2012. Transparency and
accountability are critical priorities in the funding and implementation of the Recovery Act.

The Authority and the agencies of which it is comprised obtained three formula grants totaling
more than $8.8 million and two competitive grants totaling more than $12.2 million for total
Recovery Act funding of more than $21 million. The Authority obligated its Recovery Act
funding within the required deadlines. It expended its formula grants and one of its competitive
grants within the required timeframe and is on track to expend the remaining competitive grant
by its expenditure deadline. The Authority used the funds to develop and renovate public
housing projects, perform energy upgrades on scattered-site units, and demolish one public
housing project.

The overall objective of our review was to determine whether the Authority administered its
Recovery Act funds in accordance with Recovery Act and U.S. Department of Housing and
Urban Development (HUD) regulations.




                                                 3
                                RESULTS OF AUDIT


Finding: The Authority Did Not Always Ensure That Its Contractors
Complied With the Davis-Bacon Act and Recovery Act Reporting
Requirements

The Authority did not always ensure that its contractors complied with the Davis-Bacon Act and
Federal labor standards. It did not (1) ensure that proper wage rates were paid, (2) ensure that
additional wage classifications and rates were requested and approved by the U.S. Department of
Labor, or (3) investigate complaints received by contractor employees. Further, the Authority
did not always ensure that it complied with Recovery Act reporting requirements. Specifically, it
did not accurately report in FederalReporting.gov the number of jobs created and retained. This
condition occurred because the Authority did not effectively monitor its contractors in the
enforcement of Federal labor standards and lacked written policies and procedures for Recovery
Act reporting. As a result, the Authority’s contractors did not always comply with the Davis-
Bacon Act and underpaid employees more than $7,300. Also, the Authority’s use of the
Recovery Act funds was not transparent, and the public did not have access to accurate
information about the Authority’s use of the Recovery Act grants.


 The Authority Did Not Always
 Ensure That Proper Wage
 Rates Were Paid

              The Authority generally complied with HUD procurement policies for its
              Recovery Act Capital Fund grants. However, it did not ensure contractor
              compliance with the Davis-Bacon Act. Department of Labor regulations at 29
              CFR (Code of Federal Regulations) 5.5(a)(1) state that all laborers and mechanics
              employed or working upon the site of the work will be paid wage rates not less
              than those contained in the wage determination attached to each contract. In two
              contracts reviewed, the Authority failed to follow up on Davis-Bacon violations,
              which resulted in Davis-Bacon wages not being paid. For example, the certified
              payroll for contract C10006 indicated that the cement mason was paid $41.45 per
              hour. The approved wage determination states that cement masons are to be paid
              $42.53 per hour. As a result of this error, the contractor underpaid its cement
              mason by $86.40. Also, the certified payrolls for the same contract identified one
              employee as a general laborer earning $9 per hour. However, during the
              interview, the Authority’s Inspector witnessed the employee performing carpentry
              work. A carpenter earns $15.34 per hour. The contractor underpaid this
              employee $431 for the work performed on this contract.

              The certified payroll for contract C10003 showed two employees, classified as
              glaziers, who worked a total of 26 hours and earned $52.82 per hour. However,


                                               4
            during the wage interviews, one employee stated that he earned $19 per hour and
            the other stated he earned $20 per hour. The contractor potentially underpaid
            these two employees by $866. The Authority identified an error made by a
            subcontractor on the same contract, but the amount calculated by the Authority
            for repayment was incorrect. As a result, the subcontractor owed its electrician
            $37.77 for work performed on the contract. If the Authority had performed
            timely certified payroll reviews and compared the certified payrolls to the wage
            interviews, it could have identified these deficiencies and followed up in a timely
            manner to ensure that employees received the proper wages.

The Authority Did Not Ensure
That Contractors Obtained
Additional Wage Classifications
and Wage Rates Approved by
the Department of Labor

            HUD’s Making Davis-Bacon Work guide for public housing agencies states that
            if the work classification needed does not appear on the wage decision, the
            contractor needs to request an additional classification and wage rate. It further
            states that contractors should start the request for additional classifications and
            wage rates right away. However, contractors either did not submit requests or
            submitted the requests months after they started the job. For example, on contract
            C11289, the contractor identified a painter, plumber, and insulation installer on its
            certified payrolls submitted to the Authority. These positions were not on the
            approved wage decision for the contract. The Authority issued a letter to the
            contractor 4 months after the certified payrolls were submitted, stating that the
            contractor was required to submit an additional wage classification and rate
            request to the Department of Labor for these job classifications. The contractor
            submitted 20 payroll reports prior to the Authority identifying the violation. The
            Department of Labor denied the contractor’s request and stated that the contractor
            was required to pay its employees at a rate higher than the contractor was paying
            them. The Authority has not required the contractor to pay the additional wages
            owed to its employees. As a result, the contractor owes 16 employees who
            performed painting, plumbing, and insulation services a total of $5,888. Also, for
            contracts C10003 and C10006, the Authority did not receive an approved
            additional job classification request from the Department of Labor for glaziers
            and painters. As a result, there was no assurance that the contractors paid these
            employees the proper wages.




                                              5
The Authority Did Not
Investigate Complaints
Received by Contractor
Employees

            Regulations at 29 CFR 5.6(a)(3) requires the agency to perform investigations to
            ensure compliance with applicable statutes. The regulations further state that
            complaints of alleged violations must receive priority. The Authority did not
            investigate complaints received by contractor employees. For example, three
            employees performing work on contract number C10006 complained to the
            Authority’s inspector that they did not receive payment for all hours worked on
            the job. The inspector noted that he would follow up, but there was no
            documentation to support that the Authority investigated the issue further.

            Also, the Authority did not respond to complaints in a timely manner. During
            wage interviews, dated May 3, 2011, employees working on contract C10108
            stated that they did not receive payment for all hours worked. Seven months after
            receiving the complaints, the Authority sent a letter to the contractor regarding the
            inconsistencies in the pay for some of the workers and requested additional
            information. The contractor failed to submit the documentation required by the
            Authority. As a result, the contractor may have owed its employees additional
            wages. If the Authority had taken prompt action to resolve this matter, it could
            have ensured that contractor employees working on the job received the proper
            wages before the employees finished the job and before it made final payment to
            the contractor.

The Authority Did Not
Effectively Monitor Its
Contractors

            The Authority did not ensure contractor compliance because (1) its written policy
            and procedures were not adequate, (2) personnel did not follow its written policy
            and procedures, and (3) its wage interviews were not reliable.

            The Authority does not review the certified payrolls in a timely manner. HUD
            Handbook 1344.1, REV-1, paragraph 3-3(c), states that payrolls should be dated
            and initialed upon review. The Authority should examine the payrolls upon
            receipt so that it can initiate any necessary corrective action before the problem
            multiplies and accomplish needed changes while the workers are still available.
            The Authority’s policy also requires a review of the certified payrolls upon
            receipt. However, the policy does not require the reviewer to date the certified
            payrolls upon completing the review. The Authority’s policy also states that the
            reviewer should compare the wage interviews to the certified payrolls to
            determine whether the information agrees and initial both the payroll report and
            wage interview when completed. In most cases, there was no signature on the


                                              6
            wage interview reports to indicate that the reviewer had compared the two reports.
            The employee responsible for Davis-Bacon compliance stated that she did not
            always review certified payrolls upon receipt, compare wage interviews to
            certified payrolls, or follow up on complaints and deficiencies in a timely manner.
            The employee stated that she was responsible for many other tasks and that it was
            difficult to thoroughly complete Davis-Bacon reviews or always follow written
            policies. She also stated that if the Authority had a more detailed written policy
            with deadlines, she could prioritize her responsibilities and do a better job of
            completing reviews.

            According to Authority personnel, the deficiencies noted for contract C10006
            occurred during the transition period when the three housing Authorities were
            combined into one. The Authority did not review the certified payrolls or wage
            interviews for this contract. The contractor submitted certified payrolls, and the
            Authority performed wage interviews as required. However, the Authority stated
            that due to the confusion of the merger, it did not review the payrolls and
            interviews. This error resulted in the Authority’s not monitoring Davis-Bacon
            compliance for this contract as required.

            The Authority’s wage interviews were not reliable and did not assist the Authority
            in ensuring contractor compliance. HUD Handbook 1344-1, REV-1, paragraph 3-
            2(b), states that employee interviews must be sufficient to establish the degree of
            compliance and indicate the nature and extent of violations, if any. The Authority
            interviewed employees the first week the employee was on the job. As a result,
            the information obtained was not reliable because the employee had not received
            a paycheck and was unable to state whether proper wages were received for all
            hours worked on the job. The Authority was unable to determine the degree of
            compliance and identify violations through its wage interviews.

            As a result of the deficiencies cited above, the Authority did not adequately
            monitor its contractors, and it either missed the compliance issues noted in this
            report or identified the issues months after they occurred.

The Authority Did Not
Accurately Report Information
on the Use of Its Recovery Act
Grants

            The Authority did not accurately report the number of jobs created or retained.
            After comparing the hours submitted for reporting purposes to the certified
            payroll for four contracts, we determined that the number of jobs reported by the
            Authority was not consistent. For example, in the first quarter of 2012 under
            contract number C11289, the contractor reported that only one employee worked
            a total of 376 hours, and its subcontractor reported that six employees worked a
            total of 144 hours for an overall total of 520 hours. However, the certified payroll
            listed more employees with total hours equal to 2,400.55. The Authority submits


                                              7
             quarterly reports in FederalReporting.gov, which then become available to the
             public on the Recovery.gov Web site. Office of Management and Budget (OMB)
             Memorandum 10-08 requires recipients of Recovery Act funds to submit
             estimates of jobs created and retained for each project or activity in their recipient
             reports. Overall, from the four contracts reviewed, the Authority over reported
             2.26 jobs in the fourth quarter of 2011 and underreported 6.88 jobs in the first
             quarter of 2012. The discrepancy in the number of jobs created or retained was
             due to contractors’ not submitting accurate hours to the Authority.

The Authority Did Not
Effectively Implement
Procedures To Ensure Accurate
Reporting in
FederalReporting.gov

             The Authority did not effectively oversee contractors to ensure accurate reporting.
             Data quality is an important responsibility of key stakeholders identified in the
             Recovery Act. The Authority, as owners of the data submitted, have the principal
             responsibility for the quality of the information submitted. However, according
             to the two employees responsible for reporting on Recovery Act grants, it is the
             contractor’s and not the Authority’s responsibility to report accurate hours when
             requested each month. The Authority did not have controls in place to perform a
             review of the data submitted to ensure the accuracy of the data.

Conclusion

             The Authority did not adequately monitor its contractors to ensure compliance
             with the Davis-Bacon Act and Federal labor standards and did not accurately
             report Recovery Act grant activities. As a result, HUD and the Authority lacked
             assurance that the Authority’s contractors complied with the Davis-Bacon Act,
             and its contractors underpaid employees more than $7,300. Also, the public did
             not have access to accurate information regarding the number of jobs created and
             retained, and the Authority’s use of the formula and competitive grants it received
             was not transparent.

Recommendations

             We recommend the Director of HUD’s San Francisco Office of Public Housing:

             1A. Request that HUD’s Department of Labor Relations conduct a Davis-Bacon
                 compliance review of both Recovery Act and non-Recovery Act capital
                 funds to ensure the Authority’s compliance with Davis-Bacon Act
                 requirements.




                                               8
We recommend the Director of HUD’s San Francisco Office of Public Housing
require the Authority to:

1B. Obtain documentation to support that the subcontractors for contracts
    C10006 and C10003 made restitution payments totaling $555 to their
    employees or reimburse the employees from non-Federal funds for the
    inaccurate wages cited.

1C. Withhold from the contractor for contract C11289 a total of $5,888 for wages
    owed to its employees and only release the funds after the contractor
    provides support of the restitution payments.

1D. Obtain documentation from the contractor for contract C10003, showing that
    it paid its glaziers the proper wages. If the proper wages were not paid, the
    Authority should require the contractor to make corrective payments totaling
    $866 or reimburse the contractor’s employees from non-Federal funds.

1E. Update its policies and procedures to ensure that its employees sign and date
    the certified payrolls after reviewing them, perform timely and reliable wage
    interviews, and fully investigate wage complaints.

1F. Develop and implement written procedures and controls to ensure the
    accuracy, completeness, and timeliness of all reports submitted to HUD or
    other Federal agencies.




                                9
                         SCOPE AND METHODOLOGY

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.

Our audit period covered March 1, 2009, to July 31, 2012, but was expanded when necessary.
We conducted our fieldwork at the Authority’s office at 340 North 11th Street, Las Vegas, NV,
between August and November 2012.

To accomplish our objective, we:

      Reviewed applicable laws and regulations and HUD’s Making Davis-Bacon Work guide
       for public housing agencies.

      Reviewed HUD regulations and reference materials for management and marketing
       support services.

      Reviewed the Authority’s annual contributions contracts with HUD, accounting records,
       5-year annual plan, contract files, independent auditor’s reports, policies and procedures,
       board meeting minutes pertinent to the program, organizational charts, Line of Credit
       Control System information, and Recovery Act reports submitted to
       FederalReporting.gov.

      Reviewed HUD’s monitoring reports of the Authority’s Recovery Act funds and projects.

      Interviewed staff from HUD, the Authority, and Authority contractors.

We reviewed the Authority’s contract files to determine whether the Authority followed
Recovery Act and HUD procurement requirements. Using auditor judgment, we selected 4
contracts to review from a universe of 32 contracts. We selected the largest contract for three of
the grants and a smaller contract from one grant to test the Authority’s small purchase
procedures.

We also reviewed the progress of all five Recovery Act grants reported by the Authority through
FederalReporting.gov to determine whether the Authority accurately reported the amount of
funds obligated and expended and vendor payments. Using auditor judgment, we selected the
largest contract from 4 of the 17 contracts under grant NV01800001610R to determine whether
the Authority accurately reported the number of jobs created and retained.




                                                10
                              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:

                     Compliance with applicable laws and regulations – Policies and procedures
                      that the Authority implemented to provide reasonable assurance that it
                      complied with procurement, Davis-Bacon, and Recovery Act reporting
                      requirements.

               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 Deficiencies

               Based on our review, we believe that the following items are significant deficiencies:

                     The Authority lacked sufficient procedures and controls to ensure
                      compliance with Davis-Bacon Act requirements (finding).




                                                 11
                                   APPENDIXES

Appendix A

                SCHEDULE OF QUESTIONED COSTS

                            Recommendation        Unsupported
                                number                1/
                                  1B                      $555
                                  1C                    $5,888
                                  1D                      $866
                                 Total                  $7,309


1/   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. In this case, the Authority needs to support that
     the contractors paid restitution for underpayment of wages. Also, the Authority needs to
     obtain supporting documentation showing that the contractor for contract C10003 paid its
     glaziers the proper wages.




                                             12
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                              Auditee Comments


              December 20, 2012


              Ms. Tanya E. Aschulze
              Regional Inspector General for Audit
              Office of Inspector General
              U.S. Department of Housing and Urban Development
              611 W. Sixth Street, Suite 1160
              Los Angeles, CA. 90017

              Re: SNRHA ARRA Draft Audit Report Response


              Dear Ms. Aschulze:

              I am pleased to know there are not procurement related findings as it was the primary focus of the
              Office of the Inspector General (OIG) review. Southern Nevada Regional Housing Authority
              (SNRHA) respectfully submits the following responses regarding the Office of Inspector General
              (OIG) findings.

              Finding: The Authority did not always ensure that its contractors complied with the Davis-
              Bacon Act and Recovery Act Reporting Requirements
Comment 1
                       The Authority did not always ensure that proper wage rates were paid.

                       SNRHA is a new housing authority that was formed on January 1, 2010 as the result of
                       the merger of the former Housing Authority of the County of Clark (HACC) and former
                       Housing Authority of City of Las Vegas (HACLV), and Housing Authority of the City of
                       North Las Vegas (HACNLV) joining SNRHA on January 1, 2011. In an effort to provide
                       project continuity the former agencies respective employees continued to oversee the
                       construction work assigned to their respective former agencies and gradually transitioned
                       to new projects. While we take responsibility of the oversight of the projects, as you
                       might imagine the merger process of the agencies was very challenging times for the
                       authority as this was the first merger in HUD history.

                       In reference to C10006, the work under this contract was funded through the ARRA
                       Grant allocated to the former HACC. The contractor provided certified payrolls and the
                       Construction Inspector assigned to the project did conduct employee interviews however,
                       the review of the certified payrolls fell under the radar.

Comment 2     In reference to C10003, the work under this contract was funded through the ARRA Grant allocated to
              the former HACLV. The review of the certified payrolls were conducted, deficiencies were identified and
              contractor was notified however,




                                                      13
            it appears that the contractor did not submit the supporting documentation confirming
            that the workers were paid the amount indicated in the certified payroll.

            To ensure that the certified payroll reports review are performed timely and the
            employee interviews are compared with certified payroll SNRHA has updated the
            Certified Payroll Standard Operating Procedures (SOPs – See Exhibit C) to require that
            all certified payroll reports be reviewed within (10) business days of receipt. A letter will
            be issued to the contractor within (24) hours of the review if any discrepancies are found.
            The contractor will be required to address the stated issues and provide applicable
            supporting documentation within (30) calendar days of the date of the letter. On the (31 st)
            day, if the issue(s) are not addressed a written notification of intent to withhold funds
            from the Contractor under this contract or any other Federal contract with the same
            Prime Contractor, or any other Federally-assisted contract subject to Davis-Bacon
            prevailing wage requirements, which is held by the same Prime Contractor, will be sent
            to the Prime Contractor.
Comment 3
            If restitution is not made, SNRHA will use the monies held from the Prime Contractor to
            make restitution to the worker(s). Should SNRHA be required to withhold monies from a
            Prime Contractor in order to make restitution to workers on their project the Prime
            Contractor will be deemed non-responsive and will cause one or more of the following:

                     Suspension of any further payment
                     Restrict contract close-out
                     Contract termination
                     Ineligibility for future awards
                     Possible debarment

            As of the date of this letter we have been in contact with contractor of record for C10006
            and subcontractor for C10003. The contractor for C10006 submitted documentation on
            December 6, 2012 which have been reviewed and a follow up letter sent to the contractor
            to correct a few remaining minor details. On December 5, 2012, an email was sent to the
            contractor for C10003 and we are continuing to follow up on this issue (See Exhibit A).

            Moving forward the SNRHA will ensure that the review of certified payroll reports is in
Comment 4   accordance with HUD and SNRHA policies and procedures.

            In addition SNRHA will follow the recommendation to obtain documentation to verify
            that contractors and subcontractors pay compensation for improper wages cited.




                                            14
            The Authority did not ensure that contractors obtained additional wage classifications
            and wage rates approved by the department of labor.

            In reference to C11289, the work under this contract is funded through the ARRA Grant
            allocated to SNRHA. Due to the extraordinary work load certified payroll reports for
            some projects were not reviewed timely therefore, there was a delay in following up with
            the contractor. However, on August 21, 2012 SNRHA did follow up with this contractor
            advising them that the DOL denied their Additional Classification Requests for Painter,
            Plumber and Insulation Installer. The contractor chose to appeal the DOL’s decision
            therefore on September 26, 2012 they submitted a request for reconsideration to our local
            HUD Labor Relations Specialist. On or about November 21, 2012 our local HUD Labor
            Relations Specialist telephoned the contractor and notified them that the DOL denied
            their request for reconsideration therefore compensation of the difference in the pay rates
            used on the project and the wage rate the DOL approved is due and must be paid to the
            workers. On November 26, 2012 SNRHA received an email from the HUD Specialist
            forwarding us a copy of the DOL’s decision letter. On Wednesday, December 12, 2012
            the contractor called and notified SNRHA that the worker’s compensation checks were
            ready and would be dropped off later that day. As of December 12, 2012 the contractor
            submitted (17) checks totaling $6,262.84 (See attached Exhibit B). On December 13,
            2012 the restitution checks amounts were reviewed and found to be correct. As of the
            date of this letter a total of (16) workers have received their restitution checks; the final
            worker now lives in Sparta, WI. He was contacted at the telephone number provided by
            the contractor and, due to the distance great distance involved, he requested the check be
            mailed to him. His check was mailed via certified mail #701002290000341348011 with
            a signature and return receipt required. USPS.com confirms that the letter was delivered
Comment 5   December 20, 2012, at 1:22 pm (confirmation printout attached). SNRHA cannot be held
            accountable for the DOL’s decisions with regards to Additional Classification Requests.
            Whenever an Additional Classification Request is submitted, be it at the beginning of the
            project or not, SNRHA has no control over when the DOL will respond to the request or
            what their decision may be. The contractor would have to comply with the DOL’s
            decision regardless therefore the amount due to the workers of this project as a result of
            the DOL’s wage decision should not negatively impact the SNRHA. SNRHA
            respectfully disagrees with the OIG’s statement that SNRHA did not follow up with the
            contractor in regards to this issue. This was an open and ongoing item until November
Comment 6   26, 2012 when the DOL rendered a decision on the reconsideration request. Please see
            attached supporting documentation regarding this issue (See Exhibit B). Now that all of
            the affected workers have been compensated 100% we respectfully request this portion
            of this finding be closed.

            In reference to C10003 and C10006 it appears that we did not receive an approved
            additional classification and it appears that we did not follow up with the Department of
            Labor.




                                        15
         To ensure that the proper wages are consistently paid to all individuals working on
         SNRHA federally funded projects SNRHA has updated its SOPs to require that at the
         time of the pre-construction meeting the Prime Contractor is notified that they must
         submit any and all Additional Classification Request within (10) business days of
         issuance of Notice to Proceed (NTP). On the (11th) day, if the Additional Classification
         Request is not received a written notification will be sent to the Prime Contractor
         notifying them that they have (48) hours to submit these required documents.

         Should the duration of the contract be less than (30) days, the Prime Contractor will be
         required to submit applicable Additional Classification Request within (48) hours of the
         issuance of the NTP.

         If Additional Classification Request(s) are not submitted within the specified time frame,
         SNRHA will issue written notification of intent to suspend future payments and the
         Prime Contractor will be deemed non-responsive and could cause one or more of the
         following:

                  Suspension of any further payment
                  Restrict contract close-out
                  Contract termination
                  Ineligibility for future awards
                  Possible debarment

         Additionally, SNRHA has updated their SOPs to require weekly follow-up e-mails with
         the Department of Labor on all outstanding Additional Classification Request(s) over 30
         days.

         The SNRHA has already implemented a confirmation process prior to processing
         payments. Currently the certified payroll examiner is required to sign off on the request
         for payment prior to securing Dev/Mod Director approval.

         The Authority did not investigate complaints received by contractor employees

          In reference to C10006, the work under this contract is funded through the ARRA Grant
          allocated to the former HACC. It appears that the complaint was not investigated any
          further.
Through the regionalization the Dev/Mod Departments from the former HACC and HACLV went
through an integral transition period April 2010 when the two departments were combined into one
department and moved to one location. Consequently, a re-assessment of duties and responsibilities was
performed and changes were made to Dev/Mod staff roles and responsibilities. At the end of 2010 the
selection of the new Executive Director was made thereby causing




                                     16
another integral agency wide transitional period bringing a new direction to agency.
Dev/Mod Department was impacted with the assignment of the preparation of the
strategic plan and participation in countless meetings adding additional strain on an
already understaffed department.
Due to the increased workload as a result of the regionalization of the Agencies the
volume of projects being managed by the Dev/Mod Department increased tremendously
and consequently so did the number of certified payroll reports to be reviewed.
Therefore, the decision was made to cross train and split the responsibilities between two
employees. The employee of the former HACLV (Dev/Mod Coordinator) had over (10)
years experience in reviewing certified payroll and the employee of the former HACC
(Administrative Assistant) who had no experience in reviewing certified payroll reports.
The first project that this employee was made responsible for reviewing certified payroll
reports was Contract C10108. This contract entails the new construction of (112)
apartment units totaling over $10MIL requiring certified payroll reports monitoring of
over (20) subcontractors.
On May 3, 2011 the Dev/Mod Coordinator submitted a notice of intent to retire effective
May 31, 2011. In preparation of this eventuality the responsibility for the review of all
certified payroll reports was transferred to the Administrative Assistant. Although, a
replacement was hired for this vacated position the Agency did not allow the transfer of
the replacement employee until October 2011. From May 2011 through October 2011
the Administrative Assistant was called upon to
       The responsibility of the review of certified payroll reports for all active
           projects,
       Assist with the compellation of bid packages for numerous IFB’s and RFQ’s
           for work funded by capital fund grants which the Dev/Mod Department was
           handling for the Procurement Department
       Assist with the coordination of the acquisition and rehabilitation of (91) single
           family homes under the first round of the Neighborhood Stabilization Program
           (NSP-1) which was also in full swing at the time.
       Submit ARRA Federal Reporting and RAMPS Reporting for all (5) ARRA
           Grants

From 2010 when the vacant position was filled the Dev/Mod Department went through
yet another transitional period with the re-assignment of duties and responsibilities.




                            17
          To ensure that any and all complaints are consistently investigated and addressed
          SNRHA has updated its SOPs as stated under the previous finding. In addition, the
          Dev/Mod was recently granted approval to hire an Administrative Clerk allowing the
          Administrative Assistant to focus primarily on the review of certified payroll reports.

          To ensure that worker complaints are investigated timely SNRHA has updated the
          Certified Payroll Standard Operating Procedures (SOPs) to require that all complaints
          must be submitted within (1) business day to the certified payroll examiner. Within (2)
          business days the certified payroll examiner will open an investigation. If necessary an
          appointment will be scheduled, as soon as possible, with the worker submitting the
          complaint to collect any documentation substantiating the claim, provide a written
          statement and to complete the Federal Labor Standards Questionnaire HUD Form 4730.
          The certified payroll examiner will review the submitted information within (2) business
          day and will issue a request for information to the general contractor to cross reference
          information obtained from the worker. The worker(s) name and any information obtained
          from the worker are kept confidential at all time. The contractor will be required to
          provide supporting documentation (10) business days. On the (11th), if the requested
          documentation is not provided a written notification of intent to withhold funds from the
          Contractor under this contract or any other Federal contract with the same Prime
          Contractor, or any other Federally-assisted contract subject to Davis-Bacon prevailing
          wage requirements, which is held by the same Prime Contractor, will be sent to the
          Prime Contractor.

          If the requested documentation is not provided or the contractor does not respond,
          SNRHA will use the monies held from the Prime Contractor to make restitution to the
          worker(s). Should SNRHA be required to withhold monies from a Prime Contractor in
          order to make restitution to workers on their project SNRHA will issue a Notification of
          Default to the DOL, the Prime Contractor will be deemed non-responsive and will cause
          one or more of the following:

                   Suspension of any further payment
                   Restrict contract close-out
                   Contract termination
                   Ineligibility for future awards
                   Possible debarment

If documentation is submitted timely the certified payroll examiner will have (10) business to cross
reference the information obtained from the contractor and the worker and issue a decision which
includes calculations of back pay if any. At the conclusion of the investigation the certified payroll
examiner will issue a notice to the contractor of the final decision and the amounts of back-pay if any.
Should the contractor wish to appeal the certified payroll reviewer decision they must submit within-in
(2) business days a formal letter in writing requesting an appeal. The




                                      18
            certified payroll examiner will forward the contractor’s appeal request and all related
            documents to the appropriate HUD Labor Relations representatives.

            The Authority did not effectively monitor its contractors

            SHRHA respectfully disagrees in regards to the employee interviews not being reliable
            and requests that this finding be reduced to a comment. Please be reminded that the
            majority of our jobs have a duration between 60 to 90 days in which various trades are in
            and out of the job in a couple of days. We do not have the benefit of wait a week or more
            before conducting employee’s interviews because some trades will be missed. In
            addition, our Construction Inspectors consistently inform the workers regarding the wage
            rates applicable for the job and encourage workers to contact them or SNRHA at any
            time in the event the contractor is not in compliance (i.e. not paying applicable wage
            rates, or not applying actual number of hours, not paying applicable overtime etc.). The
            workers are informed that the information given is confidential. If the Construction
            Inspector(s) see a worker performing work that would fall under a different classification
Comment 7   than what was previously interviewed the Construction Inspector conducts another
            employee interview.

            To further ensure compliance in regards to the review certified payroll reports in timely
            manner, in addition to the updates to the SOPs indicated in the previous comment
            SNRHA has updated the SOPs requiring the reviewer to date certified payroll reports
            upon receipt and dated upon review as well as to initial the wage review after compering
            both, the certified payroll reports and wage interviews, for compliance.


            The Authority did not accurately report information on the use of its recovery act
            grants

            The OMB M-10-8 dated December 8, 2009 which provided further clarification in
            regards to definition of jobs created or retained, it is assumed that it was forwarded to the
            Executive Director and appears that it was not forwarded to either the former HACC or
            HACLV staff responsible for the reporting. The release of this document came at a
            critical time with very unusual circumstances due to the merger activities and it appears
            that this document was missed. Since the new Executive Director came on board systems
            have been implemented to ensure that HUD information received via e-mail is
            disseminated immediately to the Deputy Executive Director, and the Directors of
            Finance, Housing Choice Voucher and Dev/Mod via an auto-forwarded e-mail system.




                                        19
                      The Authority did not effectively implement procedures to ensure accurate reporting in
                      federalreporting.gov.

                      SNRHA respectfully disagrees with this finding. (4) of the (5) ARRA grants were
                      awarded prior to the agencies regionalizing and requests that this finding be reduced to a
                      comment. The agencies were all separate, individually functioning agencies and
                      therefore they held different views of the requirements for ARRA reporting. After the
                      merger HUD still maintained those existing grants separately under the (3) former
                      agencies requiring SNRHA to continue reporting as individual former agencies. Also,
                      some of the projects were near completion at the time the two departments were
                      combined into one department and moved to one location April 2010. The report process
                      was challenging for numerous reasons and we were in constant contact with San
                      Francisco Office requesting that they intercede, on the SNRHA’s behalf with the proper
                      department(s), to fast track the resolution to our issues. Many of the questions included
Comment 8             in the FederalReporting.gov report are unclear and misleading as to exactly what
                      information is being requested subsequently the two employees responsible for the
                      reporting of the ARRA grants had different interpretations of what was being asked and
                      therefore included or didn’t include different pieces of information in their respective
                      reports. At no time did anyone from HUD or Federalreporting.gov ever question the
                      differentiation in the information that was being reported. Even after the agencies
                      merged there was no mention of the differences in information being reported. Whenever
                      a discrepancy is discovered in the information reported under Federalreporting.gov an
                      email is sent to notify the respective housing authority of the discrepancy and a
                      correction of the noted discrepancy is required. Throughout the required reporting of the
                      ARRA grants some e-mails were received however, never requesting to correct the
                      number of jobs created, vendor payments, and/or sub-award payments being reported.

                      To ensure consistency in future HUD reports the duties and responsibilities have been
                      assigned to the Dev/Mod Coordinator. SOPs will be updated or implemented as required
                      by each of the new reporting guidelines.

            The OIG draft report recommended the San Francisco office request the DOL conduct a Davis-
            Bacon compliance review of both Recovery Act and Non-Recovery Act capital funds to ensure the
            Authority’s compliance with Davis-Bacon Act requirements. SNRHA requests that in as much as
            regulations require contractors to keep files for (3) years, our staff should be given the opportunity
            to follow up expeditiously on the contracts noted in the IOG draft report and provide a report back
            to the San Francisco Office confirming full compliance has been reached. Therefore, the DOL
            would not be required to conduct any further review.
Comment 9




                                                  20
I can assure you that the SNRHA has and will continue implementing controls that will satisfy
HUD and SNRHA requirements to ensure compliance. Please feel free to contact me at 702-922-
6855 if there are any questions or concerns or should you require additional information.


Sincerely,




John N. Hill
Executive Director

attachments

cc:      Velma Navarro, Director, Office of Public Housing, San Francisco, 9APH
         Kenneth LoBene, Director, Las Vegas Field Office, 9KMA
         Lisa Danzing, Special Assistant, Office of Strategic Planning and Management, X
         Michael Adams, Office of Strategic Planning and Management, X
         Catherine Neale, Office of Strategic Planning and Management, X
         Rudy Mehrbani, Special Policy Advisor, Office of the Secretary, S




                                       21
                           OIG Evaluation of Auditee Comments

Comment 1   We reviewed the Authority's written response including all supporting
            documentation. Based on the response, we made minor changes to the report.
            However, the overall conclusions of the report remain the same. In addition to the
            auditee response, the auditee also provided updated standard operating
            procedures, time sheets, checks and other documentation with its response. We
            did not include this in the report because it was too voluminous; however, it is
            available upon request.

Comment 2   We agree that the Authority reviewed payrolls and identified deficiencies for
            contract C10003. However, the deficiencies were not identified until two months
            after certified payrolls were submitted to the Authority. Also, the violation letter
            did not identify the difference between the wages reported during the wage
            interviews, and those reported on the certified payroll for two Glaziers as
            identified in the report. The Authority shall submit to HUD supporting
            documentation that these employees were paid the proper wages, or reimburse the
            employees from non-federal funds.

Comment 3   We are encouraged that the Authority has made changes to its policies and
            procedures relating to Davis Bacon compliance. The Authority can submit all
            changes to its policies and procedures to HUD for review and approval during the
            audit resolution process.

Comment 4   Once the Authority obtains sufficient supporting documentation for the violations
            noted in this report for contracts C10006 and C10003, it can submit it to HUD for
            audit resolution.

Comment 5   The Authority states that the contractor issued 17 checks totaling $6,262.84 in
            restitution for contract C11289. However, the supporting documentation only
            supported 14 checks totaling $5,286.69. Also, some of the checks issued were not
            sufficient to fully reimburse the employees. The contractor still owes 12 of its
            employees a total of $828.94. The report will remain unchanged until the
            Authority provides documentation that the contractor paid full restitution to all its
            employees who worked on contract C11289.

Comment 6   We understand that the Authority does not have control over how long the
            Department of Labor takes to issue its wage decisions. However, the Authority
            should take steps to identify deficiencies as early as possible to ensure contractor
            compliance while the workers are still on the job, and the contractor is still
            working. In this case, the Authority did not identify the deficiency until four
            months after the certified payrolls were submitted. If the Authority had taken
            prompt action, the employees could have been paid prior to leaving the job site,
            and in one case moving to a different state.




                                             22
Comment 7   The inadequate wage interviews is not a finding, but one of the causes of the
            Davis-Bacon violations we noted during our review. We understand that the
            Authority has jobs that are short in duration and will not allow for multiple wage
            interviews. However, for three of the four contracts we reviewed, the contractors
            were on sight for several months. This allowed time for interviews to be
            performed throughout the job and not just during the first week. Employees are
            not able to answer whether or not they are paid the correct wages if they have not
            received a paycheck. We did not remove this cause from the report.

Comment 8   We agree with the Authority's comments regarding the reporting of vendor and
            sub recipient data. We revised the report accordingly.

Comment 9   We recommend that HUD's Office of Labor Relations perform further review of
            Davis Bacon compliance. During our survey, we only looked at a small sample of
            contracts. The Office of Labor Relations would be able to perform a broader
            review to include contracts that are not funded by Recovery Act Capital Fund
            grants. Thus, in our opinion this recommendation is appropriate for HUD’s
            consideration, and will remain in the audit report.




                                            23