oversight

Authority Officials Generally Administered Recovery Act Funds in Accordance With Requirements but Budgetary and Procurement Controls Had Weaknesses

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-06-21.

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

OFFICE OF AUDIT
REGION 2
NEW YORK-NEW JERSEY




               New Brunswick Housing Authority
                     New Brunswick, NJ

               Recovery Act Capital Fund Program




2013-NY-1007                                  JUNE 21, 2013
                                                        Issue Date: June 21, 2013

                                                        Audit Report Number: 2013-NY-1007




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

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

SUBJECT:       Authority Officials Generally Administered Recovery Act Funds in Accordance
               With Requirements but Budgetary and Procurement Controls Had Weaknesses


    Enclosed is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our audit of the New Brunswick, NJ, Housing
Authority’s administration of its Recovery Act Capital Fund Program.

    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.
                                            June 21, 2013
                                            Authority Officials Generally Administered Recovery Act
                                            Funds in Accordance With Requirements but Budgetary
                                            and Procurement Controls Had Weaknesses



Highlights
Audit Report 2013-NY-1007


 What We Audited and Why                         What We Found

We audited the Housing Authority of             Authority officials obligated and expended
the City of New Brunswick’s American            Recovery Act funds for eligible activities within
Recovery and Reinvestment Act                   required timeframes; however, there were
Capital Fund Program based upon a               weaknesses in budgetary controls, and officials did
risk analysis of authorities administered       not always adequately document the procurement
through the Newark, NJ field office,            history in compliance with applicable regulations
which considered the funding received           or properly report Recovery Act-funded activities.
and the U.S. Department of Housing              Specifically, (1) $56,993 was expended prior to
and Urban Development’s (HUD)                   Board approval and $107,319 was expended in
assigned risk score. The objectives of          excess of the approved budget; (2) two of five
the audit were to determine whether             contracts lacked sufficient documentation to show
Authority officials (1) obligated and           that procurements were based upon a complete
expended their funds in accordance              cost analysis and a detailed scope of work; and (3)
with the Recovery Act and HUD                   $157,701 expended for labor cost was not
regulations, and (2) complied with              adequately supported. In addition, reporting of
Recovery Act reporting requirements.            Recovery Act-funded activity did not reconcile
                                                with approved budgets or the actual work
                                                performed. We attribute these deficiencies to
 What We Recommend
                                                inadequate oversight and unfamiliarity by
                                                Authority officials with Recovery Act and HUD
We recommend that HUD instruct                  reporting requirements. As a result, HUD lacks
Authority officials to (1) provide              assurance that procurement of security cameras
support for the board approval of the           was executed in the most economical manner, and
$107,319 expended in excess of the              accurate information on the expenditure of
amount authorized for the installation          Recovery Act funds was reported.
of security cameras; (2) provide
documentation to adequately support
that the $157,701 paid for installation
and maintenance labor costs was
reasonable and that the costs were
incurred; (3) strengthen procurement,
financial, and budgetary controls; and
(4) ensure that any future reporting of
activities undertaken with grant funds
complies with applicable reporting
requirements.
                           TABLE OF CONTENTS

Background and Objectives                                                3

Results of Audit                                                         4
      Finding: Authority Officials Generally Administered Recovery Act
               Funds in Accordance With Requirements but Budgetary and
               Procurement Controls Had Weaknesses


Scope and Methodology                                                    10

Internal Controls                                                        11

Appendixes
A.    Schedule of Questioned Costs                                       13
B.    Auditee Comments and OIG’s Evaluation                              14




                                           2
                               BACKGROUND AND OBJECTIVES

The New Brunswick Housing Authority is a nonprofit corporation created in 1947 under Federal and
State housing laws as defined by New Jersey State statute1 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 New Brunswick,
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,
which appoints an executive director to manage the Authority’s day-to-day operations. HUD data
disclosed that the Authority operated 487 low-rent units and administered 903 Housing Choice
Voucher program units.

On February 17, 2009, the President signed the American Recovery and Reinvestment Act of 2009,
Public Law 111-5. The Act provided $4 billion for public housing authorities to fund capital and
management activities, as authorized under Section 9 of the United States Housing Act of 1937. The
Recovery Act provided that $3 billion be distributed as formula grants and the remaining $1 billion be
distributed through a competitive grant process.

The Recovery Act required that funds be obligated within 1 year of the date on which funds became
available to an authority for obligation, 60 percent of the funds be expended within 2 years, and 100
percent be expended within 3 years of such date. HUD awarded the Authority more than $1.28 million
via a formula grant, which was made available to the Authority on March 18, 2009.

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




1
    N.J., S.A. 4A: 12A-1, et. Seq. the Housing Authority Act

                                                               3
                                    RESULTS OF AUDIT


Finding: Authority Officials Generally Administered Recovery Act Funds in
         Accordance With Requirements but Budgetary and Procurement
         Controls Had Weaknesses
Although Authority officials obligated and expended their Recovery Act capital funds for eligible
activities within required timeframes, there were weaknesses in budgetary controls, and officials did
not always adequately document the procurement history in compliance with applicable regulations or
properly report Recovery Act-funded activities. Specifically, (1) $56,993 was expended prior to Board
approval and $107,319 was expended in excess of the approved budget; (2) two of five contracts lacked
sufficient documentation to show that procurements were based upon a complete cost analysis and a
detailed scope of work; and (3) $157,701 expended for labor costs were not adequately supported. In
addition, the officials’ reporting of their Recovery Act-funded activity did not reconcile with the
approved budgets or the work performed. We attribute these deficiencies to inadequate oversight and
unfamiliarity by Authority officials with Recovery Act and HUD reporting requirements. As a result,
Authority officials could not provide HUD adequate assurance that all procurement actions were made
in the most economical manner, as they expended $107,319 more than the board authorized for the
purchase and installation of security cameras, lacked adequate support for labor costs of $157,701; and
did not accurately report Recovery Act-funded activities to HUD and the public.


 Funds Obligated and Expended
 for Eligible Activity within
 Recovery Act Timeframes
 Manner
              Authority officials obligated more than $1.28 million in Recovery Act capital funds by
              the March 17, 2010, Recovery Act obligation deadline and had expended all funds by
              the March 17, 2012, expenditure deadline. The funds were obligated and expended for
              five contracts awarded for the following eligible activities previously identified in the
              Authority’s annual plan:

                            Activity                   Amount obligated           Amount expended
                   Purchase and installation of          $ 577,803                  $ 653,273
                        security cameras
                        Exterior lighting                 $ 173,000                   $ 173,000
                          replacement
                    Masonry repair and stair              $ 118,000                   $ 116,693
                          replacement
                    Roof, gutters, doors, and             $ 417,000                   $ 342,837
                     windows replacement
                              Total                       $1,285,803                  $1,285,803


                                                   4
    Funds Expended Before Board
    Approval and Contrary to
    Budget

                 While all Recovery Act capital funds were expended for eligible activities, some funds
                 were spent before Board approval. The Authority’s procurement policy, section F,
                 entitled “Contract Modifications/Change Orders,” provides that board approval be
                 obtained for contract modifications or changes which extend the scope of work, services,
                 or supplies beyond the scope of the original contract. Authority officials expended
                 $56,993 on January 20, 2010, prior to Board approval, as part of a $277,803
                 procurement for the additional purchase and installation of security cameras2. However,
                 Authority officials obligated3 the $277,803 on February 4, 2010, which was prior to
                 board approval on February 24, 2010, and issued a “notice to proceed” to the contractor
                 on February 25, 2010.

                 In addition, funds were not spent in accordance with the approved budget. Regulations
                 at 24 CFR (Code of Federal Regulations) 85.20 (b) (4) require that a grantee financial
                 management system meet the budget control standard that actual expenditures or outlays
                 be compared with budgeted amounts for each grant, and financial information must be
                 related to performance or productivity data. As shown below, Authority officials
                 initially budgeted $300,000 for security cameras under budget line item 1475, non-
                 dwelling equipment and reported their revised budget in the final Performance and
                 Evaluation Report (P&ER) by adding $277,803 for security system under budget line
                 item 1460, dwelling. However, they expended $653,273 in Recovery Act funds for this
                 activity, which was allocated among three different budget categories without an
                 additional budget revision: $56,993, $296,280, and $300,000 to budget line items 1450
                 (site improvement), 1460 and 1475, respectively.




2
  This procurement was in addition to an earlier $300,000 procurement in April 2009 for the purchase and installation of
security cameras.
3
  While these funds were obligated after expenditure of $56,993, Authority officials obligated the funds within the
timeframe required by the Recovery Act.

                                                             5
                                                            Final performance and
                                Annual statement               evaluation report                 Drawdowns
              Budget line
                 item           Activity     Amount          Activity       Amount          Activity         Amount
                            Grading and
                            irrigation,                  Masonry work,
                                                                                        Security system     $ 56,993
                            repair-                      Repair, replace-
               1450 (site
                            replacement                  ment of
               improve-
                            of exterior                  exterior stairs,
                 ment)                                                                  Exterior lighting    143,007
                            stairs,                      railings, and
                                                                                        replacement
                            railings, and                foundation
                                             $200,000                       $200,000                        $200,000
                            foundation
                                                         Replacement of
                                                                                        Masonry work        $ 116,692
                                                         exterior
                                                         window and
                                                                                        Roof, gutter,        342,838
                                                         doors
                            Replacement                                                 window, and
                 1460
                            of exterior                                                 door repair
               (dwelling                                 Replacement of
                            windows and
              structures)                                roofs and
                            doors                                                       Exterior lighting
                                                         gutters
                                                                                        replacement           29,993
                                                         Security
                                                                                        Security system       296,280
                                             $785,803    systems            $785,803
                                                                                                            $ 785,803
                            Security                     Security                       Security
              1475 (non-
                            cameras and                  cameras and                    cameras and
               dwelling
                            camera                       camera                         camera
              equipment)                     $300,000                       $300,000                        $300,000
                            installations                installations                  installation

                 These conditions occurred because Authority officials did not have adequate controls to
                 obtain Board approval prior to obligation and track expenditures to ensure they did not
                 exceed budgeted amounts. As a result, Authority officials eventually spent $685,122
                 ($653,273 from Recovery Act funds and $31,849 from their 2008 and 2009 Capital
                 Fund Program grants) for the purchase and installation of security cameras, which was
                 $107,319,4 or 18.6 percent, more than what was authorized by the board.

    Weaknesses in Procurement
    Documentation

                 Authority officials lacked adequate documentation to show that the purchase and
                 installation of security cameras complied with regulations at 24 CFR 85.36(f)(1) which
                 require that a cost or price analysis be performed in connection with every procurement
                 action, including contract modifications, unless price reasonableness can be established
                 on the basis of a catalog or market price of a commercial product sold in substantial
                 quantities to the general public. Consequently, they could not provide assurance that the

4
 The $107,319 is the difference between the total cost of $685,122 and the total amount obligated of $577,803 ($300,000
and $277,803) for purchase and installation of security cameras.

                                                            6
                 procurement was made in the most economical manner and that all payments were
                 adequately supported. We attribute this condition to Authority officials’ unfamiliarity
                 with procurement requirements and weaknesses in maintenance of documentation.

                 On April 23, 2009, and February 25, 2010, Authority officials issued two “notice to
                 proceed” orders to an authorized service provider of a General Services Administration
                 (GSA) Schedule contractor5, with whom they had previously contracted6, for the
                 purchase and installation of security cameras not to exceed $300,000 and $277,803,
                 respectively. GSA encourages state and local government entities to use GSA's Schedule
                 Ordering Procedures in Federal Acquisition Regulation (FAR) 8.4 to ensure the benefit
                 of receiving the best value from GSA Schedule contractors, and allows State and local
                 government entities to use GSA Advantage7 to locate GSA-approved prices for specific
                 equipment. Federal Acquisition Regulation 8.405-2 further provides that when ordering
                 Schedule 84 contract services priced at hourly rates, the purchasers must develop a
                 statement of work, which includes a description and location of the work to be
                 performed, the period of performance, deliverable schedule, and applicable performance
                 standards. However, the two “notice to proceed” orders did not comply with this
                 statement of work provision because they merely stated that the Authority would use the
                 company’s service to purchase and install security cameras and systems at its public
                 housing sites and indicated the amounts not to be exceeded of $300,000 and $277,803,
                 respectively. Further, documentation was lacking to verify that 9 of 11 equipment price
                 quotes were based on the GSA-approved prices and costs of $157,7018 had been
                 incurred and were fair and reasonable.

    Recovery Act-Funded Activities
    Not Accurately Reported


                 While Authority officials reported their Recovery Act-funded activity to
                 FederalReporting.gov in a timely manner, they did not accurately report their activities.
                 Although $653,273 was spent on security camera installation, the officials reported that
                 the entire $1,285,803 in Recovery Act funds was expended on such activity. This
                 condition occurred because Authority officials were unfamiliar with Recovery Act and
                 HUD reporting requirements.




5
  Contractors that successfully complete a proposal process receive a GSA Schedule contract number. Under Schedules 70
and 84, the contractors agree to participate in the GSA Cooperative Purchasing Program, which allows state and local
governments to purchase a variety of commercial supplies (products) and services at negotiated prices.
6
  On April 16, 2009, Authority officials executed a $12,208 contract based upon a sealed bid procurement for the purchase
and installation of a command center computer server manufactured by the GSA Schedule Contractor.
7
  GSA Advantage provides eligible entities access to millions of commercial products and services from GSA-negotiated
contracts.
8
  The amount includes $102,564 from 814 unsupported hours (2,259 service hours billed minus 1,445 hours supported by
certified payroll data from December 2009 to October 2010) at a $126 hourly rate, one flat charge of $28,782 without any
detailed hours, and a charge of $26,355 (251 service hours at a maintenance hourly rate of $105) without any description as
to why maintenance was needed for newly installed equipment.

                                                             7
             In addition, as noted in the Table on page 6, Authority officials submitted a final
             Performance and Evaluation Report that did not reflect how its Recovery Act funds were
             drawn down and actually spent. HUD requires that the Annual Statement/Performance
             and Evaluation Report form to be used to report on the use of Capital Fund Program
             funds. According to the Annual Statement/Performance and Evaluation Report form,
             revisions to the Annual Statement which are not significant deviations or significant
             amendment/modifications to an Authority’s PHA plan, must be reported in the
             Performance and Evaluation Report with the revisions to the Annual Statement. Further,
             a revised form is required to be submitted when there are significant deviations or
             significant amendment/modifications to the approved Annual Statement. However,
             Authority officials did not request a budget revision or submit a revised final
             Performance and Evaluation Report to reflect how the Recovery Act funds were actually
             spent. As a result, HUD and the public were not accurately informed of the Authority’s
             use of its Recovery Act funds.

Conclusion

             Although Authority officials obligated and expended their Recovery Act capital funds
             for eligible activities within required timeframes, there were weaknesses in budgetary
             controls, and officials did not always document procurements in compliance with
             applicable regulations or properly report Recovery Act-funded activities. We attribute
             these deficiencies to inadequate oversight and unfamiliarity by Authority officials with
             Recovery Act and HUD reporting requirements. As a result, Authority officials could
             not provide HUD adequate assurance that some procurements were made in the most
             economical manner and Recovery Act-funded activities were accurately reported to
             HUD and the public.

Recommendations

             We recommend that the Director, New Jersey Office of Public Housing, instruct
             Authority officials to

             1A.    Strengthen budgetary controls to track expenditures against budgeted amounts to
                    ensure that funds are expended in accordance with approved budgets.

             1B.    Provide support for board approval of the $107,319 expended in excess of the
                    amount authorized in the “notices to proceed” for the installation of security
                    cameras, and if board approval was not obtained, repay these funds.

             1C.    Strengthen financial controls to ensure that funds are not disbursed before board
                    approval and obligation of funds to comply with Authority procedures.

             1D.    Strengthen procurement controls to ensure that procurement actions comply with
                    regulations regarding adequate documentation of cost analyses and scope of
                    work specifications.

                                                 8
1E.   Provide documentation to adequately support that $157,701 paid for installation
      and maintenance costs was reasonable and that the costs were incurred. If
      documentation is not provided, repay these funds.

1F.   Prepare and submit to HUD a revised final performance and evaluation report
      that reflects the actual activities and costs incurred.

1G.   Ensure that any future required reporting of activities undertaken with grant
      funds complies with applicable reporting requirements.




                                   9
                            SCOPE AND METHODOLOGY

To accomplish our objectives, we performed the following steps as they related to the Authority’s
Recovery Act Public Housing Capital Fund formula grant:

      Reviewed relevant laws, regulations, and HUD and GSA policies and guidance to become
       familiar with Recovery Act and applicable procurement requirements.

      Reviewed the Authority’s board of commissioners’ resolutions to confirm that the Authority
       had adopted a Recovery Act-compliant procurement policy.

      Reviewed the Authority’s audited financial statements for fiscal years 2009, 2010, and 2011 to
       identify trends and potential irregularities.

      Reviewed the Authority’s Recovery Act Capital Fund formula grant agreement, annual
       statement, 5-year plan, and procurement and accounting policies to become familiar with
       conditions governing the funds.

      Interviewed Authority and HUD staff.

      Reviewed the five contract files for which more than $1.28 million was expended to document
       the advertising, cost estimate, invitation to bid, bid documents, references, recommendation for
       award, notice of award, notice to proceed, board resolution, and contracts.

      Reviewed all drawdowns for more than $1.28 million to document whether funds were
       obligated and expended in a timely manner.

      Reviewed Recovery Act reporting documents and reports submitted to FederalReporting.gov.

      Conducted site visits to verify that the security cameras and equipment purchased with the grant
       funds had been installed.

We conducted our audit work at the Authority’s administrative office at 7 Van Dyke Avenue, New
Brunswick, NJ, and the HUD Office of Inspector General’s (OIG) office in Newark, NJ, between
October 2012 and February 2013. The audit generally covered the period March 1, 2009, to June 30,
2012. We did not assess the reliability of computer-processed data because we based our conclusions
on source documentation reviewed during the audit.

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



                                                  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 objectives:

                     Policies and procedures to ensure that the Authority complied with applicable
                      procurement requirements when awarding Recovery Act contracts.

                     Policies and procedures over financial controls to ensure that the Authority properly
                      drew down and expended Recovery Act capital funds for eligible activities.

                     Policies and procedures to ensure that the Authority properly and accurately
                      reported its Recovery Act activities to the public.

               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.




                                                    11
Significant Deficiencies

             Based on our review, we believe that the following item is a significant deficiency:

                   Authority officials lacked adequate financial controls to ensure that funds were not
                    disbursed before board approval and obligation, and that adequate budgetary
                    controls to track expenditures against budgeted amounts were in place in
                    accordance with Authority procedures (see finding).




                                                  12
                                       APPENDIXES

Appendix A

                    SCHEDULE OF QUESTIONED COSTS

                       Recommendation                  Unsupported 1/
                           number
                             1B                           $107,319
                             1E                           $ 157,701
                            Total                         $ 265,020

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.




                                                13
Appendix B

           AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                            Auditee Comments


                                  City of New Brunswick, New Jersey, Housing Authority

                                                        June 13, 2013




               VIA ELECTRONIC AND CERTIFIED MAIL
               Mr. Edgar Moore, Regional Inspector General for Audit
               U.S. Department of Housing and Urban Development
               Office of Inspector General, Office of Audit
               New York/New Jersey Region 2
               26 Federal Plaza
               New York, New York 10278

               Re:    Comments and Response to OIG Audit Report - Recovery Act Capital Fund Program
                      New Brunswick Housing Authority

               Dear Mr. Moore:

              In accordance with your department’s request, below please find the New Brunswick Housing
              Authority’s (NBHA) written response to the draft audit report of the NBHA’s administration of
              the Recovery Act Capital Fund Program. Specifically, as a result of the audit conducted by
              XXXXXXXXXX of your office, a draft report was issued on June 4, 2013 containing seven (7)
              overall recommendations for improvement and one (1) tentative finding. In response, the NBHA
              agrees to provide the HUD field office with all required additional support and documentation
              substantiating the questioned costs in the tentative find and to work with the Director of the New
              Jersey Office of Public Housing to immediately implement an action plan addressing all of the
              proposed recommendations.

              Tentative Finding:
              The report contained one (1) tentative finding that indicated that: 1)$107,319.00 was expended
              in excess of the approved budget from the Board; and 2)$157,701.00 in installation and
              maintenance labor costs for the same security camera project were not adequately supported.

               Response:
               Here, the finding centers upon the NBHA’s procurement of the purchase, installation and
               maintenance of a security camera system for the various NBHA properties. This procurement
               was vital to both the Housing Authority and its seven (7) member Board of Commissioners in
               providing assistance to allow the Authority to provide quality, affordable housing to low-income
               families and seniors in the greater New Brunswick area. The primary purpose of this security
               system was to protect the assets of the Housing Authority.




                                                        14
            AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                              Auditee Comments

               The security camera project was one of four (4) projects which utilized a total of $1,285,803.00
               received by the NBHA in Recovery Act Capital Funding.             In this case, upon the review of
               potential security cameras and systems to utilize for the Authority, the Authority found and
               discovered that much of the equipment, labor and maintenance for such a system were available
               under the federal GSA Cooperative Purchasing Program, which included a series of federally
               negotiated and procured prices which were available for the utilization of federal, state and local
               entities receiving federal funding. As a result, instead of utilizing a public bid for the totality of
               the project, in order to take advantage of the GSA rates, the NBHA moved forward with a two-part
               procurement for the system: 1) the public bid of the system server (which was not available on
               GSA); and 2) the utilization of the GSA for the purchase, installation and maintenance of the
               initial round of security cameras to utilize on the server.

               In particular, this decision was based upon the determination by the NBHA's A&E firm that the
               cost for the purchase, installation and maintenance of the security cameras, with the capabilities
               the NBHA was seeking to obtain, was reasonable in comparison to the purchase of these items
               on the open market. In accordance with this, the NBHA Board of Commissioners approved and
               authorized both the public procurement of the server as well as the GSA purchase, installation
               and maintenance of the security cameras by the same qualified provider. Several months later,
               the Board further approved the purchase of a subsequent round of security cameras from the
               GSA based upon the identification of additional trouble areas and gaps in the system's coverage.

               Tentative Finding (Part 1): The initial part of the finding references $107,319.00 which the
               report finds was expended in excess of the approved budget. This finding is based upon the
               difference between the total cost of $685,122.00 expended for the security cameras versus the
               total amount obligated by the Board of $577,803.00. The report asks for the NBHA to provide
               additional support for the Board approval of this excess amount.

               Response: The NBHA shall provide the New Jersey HUD office with additional documentation
               showing that the NBHA Board of Commissioners was aware of the additional expenditure of
Comment 1      $107,319 at the time expended and will also provide a resolution from the Board ratifying
               their acknowledgment of this fact. The NBHA further notes, that as per the report's own
               finding, all of the $1,285,803.00 received by the NBHA as Recovery Act Capital Funds were
               authorized by the Board for obligation, and were expended accordingly, for one of the four (4)
               capital fund projects (including the security cameras). As a result of a surplus left over from two
               of the capital fund projects, these funds were re-allocated for the purchase of additional security
               cameras needed for the safety and security of the Authority residents.

               Tentative Finding (Part 2): The second part off the finding indicates that $157,701.00 was
               expended for labor costs which were not adequately supported. This number is based upon the
               OIG's review of the invoices and certified payrolls from the contractor. The report asks for the
               NBHA to provide additional documentation to adequately support that these costs were
               reasonable and actually incurred.

               Response: The NBHA shall provide the New Jersey HUD office with additional documentation
               showing that the maintenance hours worked and the rates maintained (totaling $157,701.00)
Comment 1      were both reasonable and incurred. Specifically, the additional documentation will show that
               all rates were GSA procured rates and that all such costs were fully incurred as part of the
               operation and maintenance of the security surveillance system.




                                                           15
            AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                               Auditee Comments

             Recommendations:

             In addition to the above, the report further recommended an additional five recommendations that
             includes the strengthening of budgetary, financial and procurement controls, the preparation and
             submission of a revised final performance and evaluation report reflecting all actual activities and costs
             incurred, and the future reporting of activities undertaken with grant funds in accordance with applicable
             reporting requirements.

             Response:

             The NBHA fully concurs with the OIG recommendations and shall immediately implement efforts to
             ensure that such recommendations are incorporated accordingly. Specifically, the NBHA shall undertake
Comment 2    a full review of its procurement, financial and budgetary policies in comparison to the practical
             application of such policies within its departments to ensure that appropriate checks and balances are
             implemented to ensure full transparency and clear record keeping of the use of all grant funds. A more
             detailed action plan shall be provided, along with the revised final performance and evaluation report, to
             the New Jersey HUD office.

             Finally, on behalf of the NBHA, I want to personally thank XXXXXX and XXXXXXX from your office
             for their hard work and professionalism on this review and for their patience with our staff throughout
             this process. Thank you.

             Sincerely,


             //SIGNED//
             John Clarke
             Executive Director




                                                            16
                             OIG Evaluation of Auditee Comments

Comment 1    Authority officials said that they will provide documentation to demonstrate that the
             Board was aware of the additional questioned costs of $107,319 and to support the
             unsupported labor costs of $157,701. Any documentation provided will be assessed for
             its adequacy during the audit resolution process with HUD.

Comment 2 Authority officials concurred with the recommendations and have promised action
          responsive to the recommendations.




                                               17