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.
14
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)