oversight

West New York, NJ Housing Authority Officials Generally Administered Their Recovery Act Capital Fund Program in Accordance With Recover Act and HUD Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-03-04.

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

OFFICE OF AUDIT
REGION 2
NEW YORK-NEW JERSEY




           West New York, NJ Housing Authority

               Recovery Act Capital Fund Program




2013-NY-1005                          MARCH 04, 2013
                                                        Issue Date: March 04, 2013

                                                        Audit Report Number: 2013-NY-1005



TO:            Sonia Burgos
               Director, Office of Public Housing, Newark, NJ, Field Office, 2FPH



FROM:          Edgar Moore
               Regional Inspector General for Audit, New York-New Jersey Region, 2AGA


SUBJECT:       West New York, NJ Housing Authority Officials Generally Administered Their
               Recovery Act Capital Fund Program 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 West New York, NJ Housing
Authority officials’ administration of the Recovery Act Capital Fund Program, conducted to
determine whether Authority officials administered the Recovery Act Capital Funds in
accordance with the Recovery and Reinvestment Act of 2009 and 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.

    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
212-264-4174.
                                           March 04, 2013
                                           West New York, NJ Housing Authority Officials
                                           Generally Administered Their Recovery Act Capital
                                           Fund Program in Accordance With Recovery Act and
                                           HUD Requirements



Highlights
Audit Report 2013-NY-1005


 What We Audited and Why                     What We Found

 We audited the West New York, NJ           Authority officials generally administered their
 Housing Authority’s American               Recovery Act capital fund program in accordance
 Recovery and Reinvestment Act              with the Recovery Act and HUD’s requirements.
 Capital Fund program in support of the     Specifically, funds were obligated and expended in a
 Office of Inspector General’s audit        timely manner for eligible activities and supported
 plan goal to oversee Recovery Act-         with adequate documentation, and the Authority’s
 funded activities. We selected the         activities were reported in compliance with Recovery
 Authority based upon a risk analysis of    Act requirements. However, while costs were
 authorities receiving Recovery Act         incurred for eligible activities, Authority officials
 capital funds administered through the     misclassified $68,260 to the fees and costs budget line
 U.S. Department of Housing and             item as opposed to that of dwelling structures. This
 Urban Development’s (HUD) Newark,          occurred because officials over-expended dwelling
 NJ, field office, which considered         structures and did not request a budget revision from
 authorities’ funding and HUD’s risk        HUD.
 analysis. The Authority received a
 moderate risk score of 57, ranking it
 27th out of 107 authorities monitored
 by the field office. The audit
 objectives were to determine whether
 Authority officials obligated and
 expended their capital funds in
 accordance with the Recovery Act and
 HUD regulations and complied with
 Recovery Act reporting requirements.

  What We Recommend

 We recommend that the Director of the
 HUD Newark, NJ Office of Public
 Housing instruct Authority officials to
 ensure their revised Actual
 Modernization Cost Certificate reflects
 the reclassification of $68,260 in
 accordance with its revised budget.
                            TABLE OF CONTENTS


Background and Objectives                                                       3

Results of Audit
      Finding: Authority Officials Generally Administered Their Recovery Act    4
                Capital Fund Program in Accordance With Requirements


Scope and Methodology                                                           7

Internal Controls                                                               9

Appendixes
   A. Schedule of Funds To Be Put to Better Use                                11
   B. Auditee Comments and OIG’s Evaluation                                    12




                                            2
                       BACKGROUND AND OBJECTIVES

The West New York, NJ Housing Authority is a nonprofit corporation created in 1950 under
Federal and State housing laws as defined by New Jersey State statute for the purpose of
engaging in the development, acquisition, and administrative activities of the low-income
housing program and other programs with similar objectives for low- and moderate-income
families residing in the town of West New York, NJ, in accordance with the rules and regulations
prescribed by the U.S. Department of Housing and Urban Development (HUD). The Authority is
governed by a seven-member board of commissioners appointed by the mayor and town council.
The Authority’s day-to-day operations are overseen by the executive director, who is appointed by
the board.

On February 17, 2009, the President signed the American Recovery and Reinvestment Act of 2009
into law.1 The Recovery Act provided $4 billion for public housing agencies to carry out capital
and management activities, including the modernization and development of public housing. The
funds included $3 billion of formula grants and $1billion of competitive grants.

The Recovery Act required public housing agencies to obligate 100 percent of the funds within 1
year of the date on which the funds became available to the agency for obligation and expend 60
percent within 2 years and 100 percent within 3 years of such date. HUD awarded the Authority
$1.9 million in formula grant Recovery Act capital funds, which were made available to the
Authority on March 18, 2009.

The objectives of the audit were to determine whether Authority officials obligated and
expended their capital funds in accordance with the Recovery Act and HUD regulations and
complied with Recovery Act reporting requirements.




1
    Public Law 111-5

                                                3
                                RESULTS OF AUDIT


Finding: Authority Officials Generally Administered Their Recovery
         Act Capital Fund Program in Accordance With Requirements
Authority officials generally administered their Recovery Act Capital Fund program in
accordance with Recovery Act and HUD requirements. Specifically, the funds were obligated
and expended within required timeframes, used for eligible activities, and properly supported,
and their use was reported in accordance with Recovery Act requirements. However, while costs
were incurred for eligible activities, Authority officials misclassified $68,260 to the fees and
costs budget line item as opposed to that of dwelling structures. This occurred because officials
over-expended dwelling structures and did not request a budget revision from HUD.


 Funds Were Obligated and
 Expended in a Timely Manner

              Authority officials obligated all of the $1.9 million awarded in Recovery Act
              capital funds by the required deadline of March 17, 2010. Further, they expended
              the funds by June 30, 2011, thus complying with the required obligation deadline
              of March 17, 2010, and 100 percent expenditure deadline of March 17, 2012.

              The Recovery Act and HUD’s Office of Public and Indian Housing Notice PIH
              2009-12 required fund recipients to obligate 100 percent of the funds within 1 year
              of the date on which the funds became available to the agency for obligation and
              expend 60 percent within 2 years and 100 percent within 3 years of such date. Since
              the funds were made available to the Authority on March 18, 2009, Authority
              officials had to obligate all of the funds by March 17, 2010, and spend 100 percent
              by March 17, 2012.

 Funds Were Expended for
 Eligible Activity and Properly
 Documented

              The Authority used the funds to renovate bathrooms; replace hot water heaters;
              and upgrade lobbies, stair enclosures, and elevators as follows:




                                               4
                         Budget line item               Activity             Amount obligated
                        Fees and costs             Architect-engineer       $ 150,000
                        Dwelling structures        Water heaters               709,902
                        Dwelling structures        Lobbies & stairs            433,465
                        Dwelling structures        Elevators                   341,727
                        Dwelling structures        Bathrooms                   246,535
                        Total                                               $1,881,629

                 These activities were included in the Authority’s annual statement as required,
                 and Authority officials complied with Recovery Act procurement requirements in
                 the acquisition of the activities reviewed. Specifically, they properly procured all
                 contracts, ensuring that they were competitively awarded, and maintained
                 procurement files to detail the history and method of the procurements, bid
                 advertisement and specifications, cost and price analysis, contractor selection, and
                 compliance with Davis-Bacon Act and buy American requirements. In addition,
                 proper supporting documentation was maintained for all disbursements.

                 While all costs were incurred for eligible activities, Authority officials obligated
                 and disbursed $68,260 more than was budgeted for budget line item 1460,
                 dwelling structures. Regulations at 24 CFR (Code of Federal Regulations)
                 968.125 require that an authority undertake modernization activities as approved
                 by HUD in the budget, annual statement, or 5-year plan. As a result of the
                 misclassification, $68,260 was unavailable to be expended for dwelling and
                 structure costs. This condition occurred because Authority officials did not
                 request a budget revision from HUD as required but, rather, charged the excess
                 cost to budget line item 1430, fees and costs. Upon our notifying them, Authority
                 officials promptly requested a budget revision from HUD. HUD officials
                 approved the request and required Authority officials to include the approved cost
                 certificate in the Authority’s next fiscal year audit. The report is required to be
                 submitted within nine months after the beginning of next fiscal year cycle.
                 Therefore, Authority officials can correctly complete and submit to HUD their
                 Actual Modernization Cost Certificate (form HUD-53001)2, thus ensuring that the
                 funds were put to better use.

    Recovery Act-Funded Activity
    Was Properly Reported

                 Authority officials complied with all reporting requirements by the required
                 deadlines. They reported obligations, expenditures, and the number of jobs
                 created or retained in accordance with Recovery Act requirements and guidance
                 issued by the Office of Management and Budget. Section 1512 of the Recovery

2
 Regulations at 24 CFR 968.125 require that authority officials undertake modernization activities as approved by
HUD in the budget, annual statement, or 5-year plan, and regulations at 24 CFR 968.145(A) and (B) require that
upon completion of the activities funded in a modernization program, the officials submit to HUD a form HUD-
53001 to initiate the fiscal closeout of any modernization grants.

                                                         5
             Act required all recipients to report on their activities, job creation, and job
             retention in FederalReporting.gov, a system created and managed by the Office of
             Management and Budget. While the Authority did not retain or create jobs as a
             result of the Recovery Act funding, Authority officials reported jobs based upon
             data supplied by the contractors performing the Recovery Act-funded activities,
             which was supported by payroll documentation.

Conclusion

             Authority officials generally administered their Recovery Act Capital Fund
             program in accordance with the Recovery Act and HUD requirements. As a
             result, the funds were obligated and expended within required timeframes, used
             for eligible activities, and properly supported, and their use was reported in
             accordance with Recovery Act requirements. However, while costs were incurred
             for eligible activities, Authority officials charged budget line item fees and costs
             for $68,260 of costs that should have been charged to budget line item dwelling
             structures. As a result, costs were misclassified.

Recommendations

             We recommend that the Director of the HUD Newark Office of Public Housing
             instruct Authority officials to

             1A. Ensure that the Authority’s revised Actual Modernization Cost Certificate
                (form HUD-53001) reflects the reclassification of $68,260 from budget line
                item fees and costs to dwelling structure costs in accordance with its revised
                budget.




                                              6
                            SCOPE AND METHODOLOGY

The review focused on whether Authority officials administered the Recovery Act Capital Fund
program in accordance with applicable regulations. To accomplish our audit objectives, we

       Reviewed the Recovery Act and applicable HUD regulations and guidance.

       Obtained an understanding of the Authority’s financial and management controls.

       Interviewed HUD field office staff and Authority officials.

       Reviewed the Authority’s financial and management data in HUD’s Line of Credit
        Control System,3 HUD’s Financial Assessment Submission-Public Housing, and HUD’s
        Public and Indian Housing Information Center system. Assessment of the reliability of
        the data in these systems was limited to the data sampled, which was reconciled to the
        Authority’s records.

       Reviewed the Authority’s performance evaluation reports, budgets, financial data
        schedules, procurement records, and contract files.

       Reviewed HUD monitoring reports and independent public accountant audit reports.

       Analyzed the Authority’s Recovery Act obligations, procurements, and disbursements.

       Selected a nonstatistical sample of $1 million in Recovery Act Capital Fund program
        drawdowns, representing 53 percent of the $1.9 million drawn down during the audit
        period, and reconciled the amount to the Authority’s trial balance and supporting
        documentation. The sample selection was not statistically based but identified the
        highest drawdowns in fees and costs (budget line item 1430) and dwelling structures
        (budget line item 1460); therefore, the results were not projected to the universe.

       Selected a nonstatistical sample of 8 of the 10 contracts, valued at $1.5 million,
        representing 80 percent of the $1.9 million in Recovery Act funds obligated, to determine
        whether funds were properly obligated for eligible activities. The sample selection was
        not statistically based but included the two highest valued contracts and six other
        contracts to get a representation of different types of contracts, such as architectural and
        engineering and emergency procurements. Therefore, the results were not projected to
        the universe.

We conducted our audit work at the Authority’s office located at 6100 Adams Street, West New
York, NJ. The audit generally covered the period March 1, 2009, through June 30, 2012, and
was expanded as necessary to meet our objectives.
3
 HUD’s Line of Credit Control System is the system HUD uses to disburse and track the payment of grant funds to
grant recipients

                                                       7
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(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                                8
                              INTERNAL CONTROLS

Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

      Effectiveness and efficiency of operations,
      Reliability of financial reporting, and
      Compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.


 Relevant Internal Controls

               We determined that the following internal controls were relevant to our audit
               objectives:

                     Program operations – Policies and procedures that management has
                      implemented to reasonably ensure that a program meets its objectives.

                     Compliance with laws and regulations – Policies and procedures that
                      management has implemented to reasonably ensure that resource use is
                      consistent with laws and regulations.

                     Safeguarding resources – Policies and procedures that management has
                      implemented to reasonably ensure that resources are safeguarded against
                      waste, loss, and misuse.

                     Validity and reliability of data – Policies and procedures that management
                      has implemented to reasonably ensure that valid and reliable data are
                      obtained, maintained, and fairly disclosed in reports

               We assessed the relevant controls identified above, and no significant deficiencies
               were identified.

               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 the effectiveness or efficiency of operations, (2) misstatements in


                                                 9
             financial or performance information, or (3) violations of laws and regulations on a
             timely basis.

Significant Deficiencies

             We evaluated internal controls related to the audit objectives in accordance with
             generally accepted government auditing standards. Our evaluation of internal
             controls was not designed to provide assurance regarding the effectiveness of the
             internal control structure as a whole. Accordingly, we do not express an opinion
             on the effectiveness of the West New York Housing Authority’s internal control
             as a whole.




                                              10
                                    APPENDIXES

Appendix A

        SCHEDULE OF FUNDS TO BE PUT TO BETTER USE

                                         Funds to be
                    Recommendation
                                             put
                        Number
                                        To better use1/

                           1A.             $68,260



   1/    Recommendations that funds be put to better use are estimates of amounts that could
         be used more efficiently if an Office of Inspector General (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, Authority officials
         obtained a budget revision from HUD and will be able to correctly complete and
         submit to HUD their Actual Modernization Cost Certificate (form HUD-53001), thus
         ensuring that the $68,260 will be properly reported and the funds put to better use.




                                             11
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation   Auditee Comments




Comment 1




                         12
Ref to OIG Evaluation   Auditee Comments




Comment 1




                         13
                         OIG Evaluation of Auditee Comments

Comment 1   As the report notes, all costs were incurred for eligible activities; however,
            Authority officials charged budget line item 1430, fees and costs, for $68,260 of
            costs allowable under budget line item 1460, dwelling structures. This was done
            because budget line item 1460 had been fully dispersed and a budget revision had
            not been requested. Once we informed Authority officials of this condition, they
            requested, and received, HUD approval to revise their budget. Auditee officials
            should ensure in the future that actual costs are charged to appropriate budget line
            items.




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