oversight

The Housing Authority of the City of Bridgeport, CT, Did Not Always Ensure That Expenses Charged to Its Federal Programs Were Eligible, Reasonable, and Supported

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-01-24.

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

OFFICE OF AUDIT
REGION 1
   895
BOSTON, MA




                  The Housing Authority of the
                    City of Bridgeport, CT

       Public Housing and Housing Choice Voucher
                 Program Expenditures




2014-BO-1001                              JANUARY 23, 2014
                                                        Issue Date: January 23, 2014

                                                        Audit Report Number: 2014-BO-1001


TO:            Jennifer Gottlieb Elazhari
               Program Center Coordinator, Office of Public and Indian Housing, Hartford Field
               Office, 1EPHP

               //SIGNED//
FROM:          Edgar Moore,
               Regional Inspector General for Audit, Boston Region, 1AGA


SUBJECT:       The Housing Authority of the City of Bridgeport, CT, Did Not Always Ensure
               That Expenses Charged to Its Federal Programs Were Eligible, Reasonable, and
               Supported


    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our review of the City of Bridgeport Housing
Authority, Bridgeport, CT.

    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 8M, 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.
                                            January 23, 2014
                                            The Housing Authority of the City of Bridgeport, CT,
                                            Did Not Always Ensure That Expenses Charged to Its
                                            Federal Programs Were Eligible, Reasonable, and
                                            Supported


Highlights
Audit Report 2014-BO-1001


 What We Audited and Why                     What We Found

We audited the Housing Authority of         Authority officials did not always ensure that expenses
the City of Bridgeport, CT, based on a      charged to the Authority’s Federal programs were
request from the U.S. Department of         eligible, reasonable, and supported. Specifically, they
Housing and Urban Development               did not (1) properly charge and support all costs
(HUD), Hartford, CT, field office.          allocated to Federal housing programs, (2) adequately
HUD officials were concerned about the      manage maintenance costs, and (3) ensure that
Authority due to significant financial      employee health care and liability insurance policies
deficiencies that were not corrected in a   were obtained at the most cost-effective price. These
timely manner. Our audit objective was      deficiencies occurred because Authority officials
to determine whether Authority officials    improperly implemented asset management procedures
ensured that expenses charged to            and did not provide formal accounting procedures and
Federal programs were eligible,             supervision. As a result, ineligible costs of more than
reasonable, and supported.                  $895,000 were incurred, and more than $790,000 in
                                            charges was unsupported. These improper charges
                                            weakened the projects’ financial position and left
 What We Recommend
                                            fewer funds for operations. Also, with diminishing
                                            budgets and staffing levels, diverting staff from
We recommend that the Director of
                                            Federal to non-Federal properties could result in
HUD’s Hartford Office of Public and
                                            degraded maintenance at the Federal properties.
Indian Housing require Authority
officials to (1) repay more than
$895,000 in ineligible costs and support
or repay more than $790,000 in costs
charged to the Authority’s Federal
programs, (2) measure and monitor the
maintenance staff’s productivity and
rotate work schedules to avoid
unnecessary overtime costs, (3) develop
procedures to competitively obtain
insurance, and (4) train staff on asset
management rules.
                            TABLE OF CONTENTS

Background and Objective                                                             3

Results of Audit
      Finding 1: The Authority Did Not Always Properly Charge and
                 Support Costs Allocated to Its Federal Programs                     4

      Finding 2: Maintenance Costs Were Not Adequately Managed                       12
      Finding 3: Procurement Procedures Did Not Ensure That Health Care and
                 Liability Insurance Was Obtained at the Most Cost-Effective Price   14

Scope and Methodology                                                                16

Internal Controls                                                                    19

Appendixes
A.    Schedule of Questioned Costs and Funds To Be Put to Better Use                 21
B.    Auditee Comments and OIG’s Evaluation                                          22
C.    OIG Estimate of Workers Compensation Insurance Overcharges and
      Undercharges                                                                   32




                                             2
                      BACKGROUND AND OBJECTIVE

The Housing Authority of the City of Bridgeport, CT, was created under section 8-40 of the
Connecticut General Statutes to provide low-income public housing for qualified individuals.
The Authority has contracted with the Federal Government, acting through the U.S. Department
of Housing and Urban Development (HUD), for financial assistance for low-income housing
under the United States Housing Act of 1937 as amended. The Authority is governed by a five-
member board of commissioners, which appoints an executive director to manage the day-to-day
operations of the Authority. The Authority administered more than 2,800 Section 8 housing
choice vouchers and more than 2,500 public housing low-rent units. It received approximately
$30 million in Federal Section 8 Housing Choice Voucher program funds and $18 million in
public housing funds in fiscal year 2012.

The Authority also manages Baldwin Holdings, Incorporated, a non-Federal tax-exempt
organization created for the development of housing units that benefit low-income residents of
Bridgeport. The board members of Baldwin are employees or commissioners of the Authority.
The Authority’s employees provided the following services for Baldwin: (1) administrative
services, (2) maintenance services, (3) accounting services, and (4) insurance for Baldwin units.

Our audit objective was to determine whether Authority officials ensured that expenses charged
to Federal housing programs were eligible, reasonable, and supported. Specifically, we reviewed

      Maintenance labor costs;
      Property management, book-keeping, and asset management fees;
      Auditing, consulting, and fee accountant services;
      Legal fees; and
      Insurance costs.

We also wanted to determine whether Authority officials complied with asset management rules
when they transferred funds from Federal asset management projects to other asset management
projects in fiscal year 2012.




                                                3
                                         RESULTS OF AUDIT

Finding 1: The Authority Did Not Always Properly Charge and Support
           Costs Allocated to Its Federal Programs
Authority officials did not always properly charge and support costs allocated to the Authority’s
Federal housing programs. Specifically, they improperly charged the Federal programs for
central maintenance employees, management and book-keeping fees, insurance, non-Federal
maintenance work, auditing and consulting fees, and legal costs. In addition, officials transferred
cash between asset management projects that were not eligible for the transfers. These
conditions occurred because Authority officials inappropriately implemented asset management
procedures and did not provide formal accounting procedures and supervision. As a result, the
Federal programs were overcharged by more than $895,000, and officials could not support more
than $790,000 charged to Federal programs. These improper charges weakened the projects’
financial position and left fewer funds for operations.


    Federal Programs Were
    Overcharged

                   Authority officials overcharged Federal housing programs $895,852 as follows:

                     Overcharges                                                                        Amount
                     Central maintenance employees                                                     $240,321
                     Management and book-keeping fees                                                   281,611
                     Non-Federal maintenance                                                             88,290
                     Public officials’1 and property liability insurance                                 26,434
                     Auditing and consulting costs                                                       30,000
                     Contract legal costs                                                                 4,196
                     Transfers                                                                          225,000
                     Total                                                                             $895,852


                   Central Maintenance Costs Charged to Federal Programs

                   Authority officials charged the Authority’s asset management projects for three
                   central maintenance employees: a central maintenance coordinator, a central
                   work order clerk, and a sweeper operator-maintenance aide.2 Under asset
                   management rules,3 these central maintenance costs must be charged to the central
                   office cost center. As a result of the improper charges, $240,321 in ineligible
                   salary and benefit costs was charged to Federal programs.
1
   Public officials’ liability insurance provides liability coverage for the errors and omissions of public officials.
2
  Charged between January 2012 and May 2013
3
  24 CFR (Code of Federal Regulations) 990.280(d)

                                                             4
                  When we informed Authority officials that these costs could not be allocated and
                  charged to the asset management projects, they stated that they planned to
                  eliminate these positions.

                  Additionally, Authority officials did not properly charge the salary and benefit
                  costs of a heating, ventilation, and air conditioning technician when they allocated
                  approximately $187,550 of this employee’s costs across all of the asset
                  management projects based on the number of boilers at each project. Asset
                  management rules require that central maintenance services such as these be
                  charged on a reasonable fee-for-service basis to ensure that the asset management
                  projects pay only for the services they receive.4

                  Asset Management, Property Management, and Book-Keeping Fee
                  Overcharges

                  The Federal projects were overcharged $281,611 in asset management, property
                  management, and book-keeping fees between October 2009 and April 2013.
                  Specifically, $158,880 in asset management fees was overcharged in fiscal year
                  2010. Before our audit, the chief financial officer also identified the overcharges,
                  which were made before he was employed at the Authority. However, journal
                  entries to correct the overcharges and reimburse the asset management projects
                  had not been made. In addition, property management and book-keeping fees of
                  $108,193 and $14,538, respectively, were overcharged when Authority officials
                  overstated the number of housing units used to calculate the fees. HUD requires
                  that only occupied and HUD-approved vacant units be included in fee
                  calculations; however, Authority officials included vacant units that did not have
                  the required HUD approval.

                  Non-Federal Maintenance

                  Federal funds may be used only to operate, maintain, and manage public housing
                  properties.5 However, federally paid scattered sites workers’ activities included
                  maintaining and managing the Authority’s non-Federal Baldwin Holdings
                  properties.6 We attributed this noncompliance to the improper implementation of
                  asset management procedures. Although the officials tried to track and charge
                  Baldwin for the work, the hours charged were not always accurate. At least 197
                  hours of maintenance were not charged during 2011, and work for grounds



4
  We noted that this employee also performed some work on non-Federal properties; however, because the majority
of the work was at the Federal properties, we did not take a cost exception for the $187,550. In addition, Authority
officials agreed that going forward, they would charge the properties on a fee-for-service basis in accordance with
asset management rules.
5
  The Housing Act of 1937, Section 9,
http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/am/eligibility
6
  There are approximately 66 Baldwin Holdings, Incorporated, units.

                                                         5
                  maintenance and snow removal was not tracked or billed.7 In addition, officials
                  did not bill for the equipment or gas used. As a result, the $19,010 billed to
                  Baldwin for maintenance was materially understated. The scattered sites’ staff
                  also provided administrative services for Baldwin, and officials billed $69,280 for
                  these services. However, the accounting records provided did not show that the
                  scattered sites were paid for these services.8 Due to the condition of the
                  Authority’s books and records, we could not readily determine the total amount
                  requiring repayment. Therefore, we estimated that at least $88,290 required
                  repayment.

                  Insurance Overcharges

                  Authority officials overcharged Federal programs $26,434 for insurance. They
                  improperly allocated $11,172 for public officials’ liability insurance to the
                  Authority’s Federal programs in 2012. The Authority’s allocation plan was based
                  on the number of housing units and resulted in no charges to the central operating
                  cost center and Section 8 program. However, since the central operating cost
                  center and Section 8 program had approximately 54 of the Authority’s 144
                  employees, they benefited from the insurance and should have paid a portion of
                  its costs. During the audit, finance officials agreed to allocate the costs based on
                  the number of covered employees starting in fiscal year 2013.

                  In addition, Authority officials overcharged the Authority’s asset management
                  projects $15,262 for general property liability insurance because recently acquired
                  non-Federal housing units were not included in its allocation plan.9

                  Auditing and Consulting Fees Improperly Charged

                  A majority of the $641,000 in accounting and auditing charges reviewed were for
                  necessary, reasonable, and supported project costs. However, $30,000 was not
                  eligible. Specifically, Authority officials charged Federal programs $20,000 for
                  organizational consulting services provided by the Authority’s auditor that
                  benefited the central operating cost center’s human resources, procurement,
                  finance, and information departments. However, this was not an eligible expense
                  because the services provided had already been paid for as part of the
                  management fees the asset management projects paid to the central operating cost
                  center.

                  Authority officials also used $10,000 in Federal operating funds for additional
                  services related to the Authority’s 2009 independent audit. The additional audit

7
  The work orders did not include travel time and supervisory costs for the foreman, which also resulted in
undercharges to Baldwin.
8
  Employees from other Federal projects also performed work for Baldwin at times, but scattered sites employees
were generally the employees who performed the work.
9
   Officials overcharged the asset management projects for property liability insurance $7,965 in fiscal year 2012
and $7,297 in fiscal year 2013 for a total of $15,262.


                                                          6
                 work was required to cover tasks related to the absence of a chief financial officer
                 and newly acquired component units. However, these costs should have been
                 charged to the central operating cost center because the asset management
                 projects paid for a chief financial officer as part of the fees they paid to the central
                 operating cost center and the component units were non-Federal units, the costs of
                 which should be charged to the central operating cost center.

                 In addition, Authority officials did not allocate any of the Authority’s annual audit
                 costs to the central operating cost center, its non-Federal component units, or the
                 Section 8 program, all of which were audited. Thus, the asset management
                 projects paid more than their fair share of these costs.

                 Legal Costs Mistakenly Charged

                 Authority officials charged $4,196 in ineligible legal costs to the Authority’s asset
                 management projects, which should have been charged to its central operating
                 cost center. The ineligible charges included $3,346 in legal fees paid to a law
                 firm for a central operating cost center employee and $850 charged to research
                 procurement procedures. We attributed these ineligible charges to nonsystemic
                 mistakes, but both required repayment.

                 $225,000 in Cash Improperly Transferred

                 Authority officials transferred funds between asset management projects in fiscal
                 year 2012 when the projects did not have the required excess cash.10 They also
                 did not record all income and expenses for the Presidential Village project in the
                 general ledger; thus, the Authority’s excess cash calculation was incorrect. This
                 condition occurred due to inadequate accounting procedures and the finance
                 staff’s misunderstanding of asset management rules. As a result, the $225,000
                 transferred reduced the amount of funds to operate the three projects and must be
                 repaid. Also, unless Presidential Village’s excess cash calculation for 2012 is
                 corrected, additional ineligible transfers may have been made in fiscal year 2013.

     Charges to the Federal
     Programs Were Unsupported

                 Authority officials did not provide adequate supporting documents for $790,555
                 in costs charged to Federal programs. Specifically, they lacked documents to
                 support (1) whether their allocation for workers compensation insurance was
                 equitable, (2) various legal fees charged to the Authority’s properties, and (3)
                 their reasoning for charging the Section 8 program for general property insurance.




10
  The three asset management projects that did not have “excess cash” were Presidential Village, Park City Eleanor,
and Park City Franklin.

                                                         7
Unsupported charges                       Amount
Workers compensation insurance            $394,702
In-house legal fees                        376,298
General property liability insurance        19,555
Total                                     $790,555


Workers Compensation Insurance Allocations Unsupported

Authority officials charged workers compensation premiums to the Authority’s
central operating cost center, asset management projects, and the Section 8
program based on percentages; however, they lacked support regarding how the
percentages were determined. We questioned the charges because the Authority’s
central operating cost center had 23 percent of the employees but was charged
only 2 percent of the costs and the Section 8 program had 12 percent of the
employees but paid only 6 percent of the costs. During the review, finance
officials provided a proposed allocation plan; however, the plan was inadequate
because it used arbitrary percentages and did not account for insured employees
who did not submit claims but benefited from the insurance and, thus, should
have also been allocated a portion of the costs. Based on one method of
allocating costs, we determined that the Authority may have overcharged its asset
management projects $394,702 and undercharged the Section 8 program and the
central operating cost center $207,821 and $186,881, respectively (see appendix
C for details).

In-House Legal Fees Unsupported

Authority officials could not support their time allocation for in-house and some
miscellaneous legal expenses totaling $376,298. We questioned the support for
in-house legal expenses because contrary to HUD’s requirements, the Authority’s
finance department charged all of its in-house legal staff’s salaries and benefits to
its Federal asset management projects between October 2011 and November
2012. Although some work was performed for the projects during this period,
Authority officials could not show that all staff time was billable to the asset
management projects. We attributed this condition to weak accounting controls
and Authority officials’ failure to require the Authority’s legal department to track
time spent working for Federal housing programs. The Authority changed
procedures in December 2012 and started billing based on an estimate of 5 hours
per case. However, the finance department overstated the number of legal cases
charged, resulting in some overcharges. As a result, the $375,145 charged for in-
house legal services was considered to be unsupported and required support or
repayment. In addition, we identified $1,153 paid for miscellaneous legal
expenses that needed to be supported or repaid.



                                  8
             Unsupported Property Liability Insurance Charged to the Section 8 Program

             The Authority charged the Section 8 program $19,555 for general property
             liability insurance but could not show how the program benefited from the
             insurance. Therefore, the $19,555 must be supported or repaid.

Conclusion

             Authority officials did not always properly charge and support costs allocated to
             the Authority’s Federal housing programs. Specifically, they improperly charged
             the Federal programs for central maintenance employees, management and book-
             keeping fees, non-Federal maintenance work, insurance, auditing and consulting
             fees, and legal costs. In addition, officials transferred cash between asset
             management projects that were not eligible for the transfers. These conditions
             occurred because Authority officials improperly implemented asset management
             procedures and did not provide formal accounting procedures and supervision.
             As a result, Federal programs were overcharged by more than $895,000, and
             officials could not support more than $790,000 charged to Federal programs.
             These improper charges weakened the projects’ financial position and left fewer
             funds for operations.

Recommendations

             We recommend that the Director of HUD’s Hartford Office of Public and Indian
             Housing require Authority officials to

             1A.    Repay the Authority’s asset management projects from non-Federal funds
                    $582,562 related to the ineligible cost deficiencies identified in this
                    finding; specifically, charges of $240,321 for central maintenance
                    employees; $281,611 for asset management, property management, and
                    bookkeeping fees; $26,434 for insurance; $10,000 for auditing; $20,000
                    for consulting; and $4,196 for legal expenses.

             1B.    Determine the amount the Baldwin Holdings properties owe for
                    maintenance and administrative services provided by federally paid
                    workers from October 1, 2009, to the present in accordance with HUD’s
                    asset management rules, including but not limited to grounds cleanup,
                    grass cutting, and snow removal, and repay at least $88,290 to the
                    scattered sites and other asset management projects from non-Federal
                    funds.

             1C.    Stop using federally paid public housing maintenance staff to maintain
                    non-Federal properties.


                                             9
1D    Confirm that they have stopped the practice of allocating all of the salary
      and benefits costs for three central maintenance employees to the
      Authority’s asset management projects.

1E.   Charge the heating, ventilation, and air conditioning technician and any
      other positions providing services across asset management projects to the
      central cost center and charge the asset management projects and if
      applicable, the Baldwin Holdings, Inc., properties on a fee-for-service
      basis in accordance with asset management rules.

1F.   Establish and implement accounting controls to ensure that property
      management, book-keeping, and asset management fees are properly
      charged to the asset management projects and adequate records are retained
      to support the fees charged.

1G.   Establish and implement formal written procedures for insurance
      allocation plans to ensure that all entities pay for services in proportion to
      the benefits received.

1H.   Develop and implement procedures to charge the Authority’s Section 8
      program, central operating cost center, and non-Federal units an
      appropriate share of the annual independent audit costs.

1I.   Repay the Authority’s asset management projects 058 (Park City Eleanor),
      059 (Park City Franklin), and 061(Presidential Village) $75,000 each for a
      total of $225,000 related to the ineligible transfers made in fiscal year 2012
      from the asset management projects that received these funds.

1J.   Properly account for income and expenses in the Authority’s general ledger
      for asset management project 061 (Presidential Village), recalculate the
      excess cash for fiscal year 2012, and resubmit the excess cash amount for
      this project to HUD’s Real Estate Assessment Center.

1K.   Support or repay the Authority’s asset management projects from non-
      Federal funds $771,000 related to workers compensation insurance
      ($394,702) and in-house legal staff salaries and miscellaneous legal
      expense ($376,298).

1L.   Support or repay the Authority’s Section 8 program from non-Federal
      funds $19,555 related to general property liability insurance.

1M.   Establish and implement formal written procedures to track time for in-
      house legal services charged to the Authority’s Federal programs in
      accordance with HUD’s requirements.




                                10
1N.   Establish and implement formal written accounting procedures and train
      staff to ensure that expenses are properly allocated and charged in
      accordance with asset management rules.




                              11
Finding 2: Maintenance Costs Were Not Adequately Managed
Authority officials did not adequately manage maintenance labor costs to ensure that they were
reasonable and cost effective when they did not use a rotating schedule for maintenance staff to
avoid unnecessary overtime costs, establish a method to measure and monitor productivity, and
ensure that their in-house maintenance staff had the necessary skills to perform the required
work. We attributed these deficiencies to poor record-keeping and accounting controls and poor
management decisions. As a result, the Authority’s asset management projects paid more than
they should have.


     A Rotating Work Schedule Was
     Not Used

                 The Authority’s contract with nonsupervisory maintenance staff allowed for a 7-
                 day rotating work schedule.11 However, Authority officials scheduled a regular
                 work week for Monday through Friday and overtime for all weekends.12 Officials
                 said that they continued with this schedule because they had done so for years and
                 did not want to make changes during union negotiations. Yet, if they had used the
                 rotating 7-day work schedule, they could have avoided the unnecessary overtime.
                 We attribute the unnecessary overtime costs to poor management decisions.

                 Due to the condition of the Authority’s records, we could not readily determine
                 the total amount of unnecessary overtime costs. However, we conservatively
                 estimated that the asset management projects paid at least $45,276 annually for
                 unnecessary overtime totaling $158,465 during the 3½ years reviewed.13

     Officials Lacked an Effective
     Method To Measure and
     Monitor Productivity

                 Authority officials lacked a method to measure, track, and evaluate worker
                 productively. Maintenance was recorded on automated work orders; however,
                 Authority officials did not review them to ensure that staff completed tasks in a
                 timely manner and met an acceptable standard of productivity. In addition, work
                 orders were not completed for grounds, landscaping, snow removal, and janitorial
                 work. Our review of three maintenance employees’ work orders for 1 week
                 showed that work orders accounted for only about half of the 40-hour work week.
                 Additionally, Authority officials stated that a prior executive director promoted all
11
   Therefore, some staff could be scheduled to work a 5-day week that spanned a Saturday or Sunday.
12
   The overtime schedule included a foreman, a maintenance mechanic, and a maintenance aide for 8 hours per day
plus two janitors for 3 hours per day.
13
   $158,465 / 3.5 years = $45,276 per year, which accounts for the difference between regular or straight pay and
overtime at 1.5 times straight pay.

                                                        12
                    of the janitors to maintenance aides without ensuring that they had the skills to
                    perform their new duties. Thus, Authority officials were concerned that many of
                    the Authority’s maintenance workers needed additional skills to perform all of the
                    work required in their job descriptions. As a result, officials could not show that
                    maintenance was completed in the most cost-effective manner.14 We attributed
                    this condition to poor management decisions.

                    During the review, recently hired Authority officials agreed to implement
                    procedures to track and evaluate maintenance productivity.

     Recommendations

                    We recommend that the Director of HUD’s Hartford Office of Public and Indian
                    Housing require Authority officials to

                    2A.     Implement a 7-day rotating work week in accordance with the Authority’s
                            union contract, which if implemented, should decrease overtime costs by
                            at least $45,276 per year.

                    2B.     Establish and implement formal written procedures to measure the
                            productivity of the maintenance staff, assess the maintenance staff’s
                            abilities, and ensure that the staff has the necessary skills to perform the
                            required work. Authority officials should also ensure that corrective
                            action is taken when productivity goals are not achieved and provide
                            training as needed.




14
     As required by the Authority’s annual contributions contract with HUD

                                                         13
Finding 3: Procurement Procedures Did Not Ensure That Health Care
           and Liability Insurance Was Obtained at the Most Cost-
           Effective Price
Authority officials did not always ensure that insurance was obtained at the most cost-effective
price. We attributed this condition to restrictive contracts with unionized staff and the
Authority’s reliance on an insurance broker to procure insurance. As a result, the Authority’s
Federal housing programs may have paid more for insurance than necessary, thereby reducing
the amount of funds available for housing services.


     Health Insurance Was Not
     Competitively Obtained

                 The Authority’s employee health insurance was not solicited competitively to
                 ensure that the most cost-effective plan was obtained.15 This condition occurred
                 because prior Authority officials signed collective bargaining agreements with
                 union employees that limited the Authority’s health insurance plan to one vender
                 and a specific plan. During our review, officials were trying to remove the
                 restriction and said they were hopeful but not certain that the union would
                 approve the change. In anticipation of a nonrestrictive agreement, officials
                 contacted the State of Connecticut to obtain a bid for health insurance under the
                 State’s plan. The director believed the State plan would significantly reduce
                 costs.

                 Authority officials said that the Authority’s health care plan was generous
                 compared with those of other authorities and private businesses. The plan, known
                 as a “Cadillac” health plan, will be subject to special additional taxes under the
                 Patient Protection and Affordable Care Act.16 Thus, controlling health care costs
                 is vital to Federal programs’ current and future financial condition.

     Procedures To Procure
     Liability Insurance Needed
     Improvement

                 Authority officials did not follow the Authority’s procurement procedures when
                 they procured insurance policies for more than $25,000. Specifically, they should
15
  Regulations at 24 CFR 85.36(c)(1) require full and open competition for all procurement actions.
16
  Under the Patient Protection and Affordable Care Act, starting in 2018, insurance companies will be assessed a 40
percent excise tax on “Cadillac” health plans. These are plans with annual premiums exceeding $10,200 for
individuals or $27,500 for families. The Federal Congressional Budget Office predicted, “For policies whose
premiums remained above the threshold, the tax would probably be passed through as a corresponding increase in
premiums”; thus, paying the additional tax would result in fewer funds for housing.


                                                        14
          have obtained these policies by sealed bid or the Authority’s competitive proposal
          method. Instead, they relied on an insurance broker to solicit liability insurance
          quotes. As a result, they lacked records to show that the insurance policies were
          properly competed and that the bid with the most advantageous price and other
          factors was selected. Authority officials expressed concern regarding the broker’s
          performance because the broker provided only one quote for general liability and
          two quotes for excess liability just before the end of the policy period. In
          addition, the premiums were high, with a substantial increase over the previous
          policy. However, with the policies about to expire, Authority officials had to
          accept the bids to maintain insurance.

          During the review, Authority officials solicited insurance quotes from a vender
          that had obtained a bidding waiver from HUD. Therefore, if officials obtain
          insurance through this vender, the requirement to competitively solicit and
          procure insurance would be satisfied, and multiple bids would not be required.

Recommendations

          We recommend that the Director of HUD’s Hartford Office of Public and Indian
          Housing require Authority officials to

          3A.     Develop a method to obtain competitively procured health insurance that
                  is acceptable to HUD and does not restrict insurance to one company.

          3B.     Revise and implement the Authority’s contracting procedures to ensure
                  that insurance policies are competitively solicited and procured in a timely
                  manner and documentation is maintained to show the history for each
                  procurement. If an insurance company with a HUD bid waiver is used to
                  procure insurance, a copy of the waiver would satisfy these requirements.




                                           15
                        SCOPE AND METHODOLOGY

The review focused on whether Authority officials charged expenses to Federal programs that
were eligible, reasonable, and supported. To accomplish our audit objective, we

             Reviewed laws, regulations, and HUD guidance related to our objective,
              including Federal appropriations acts; Office of Management and Budget Circular
              A-87; the Authority’s annual contributions contracts with HUD; public housing
              asset management rules; and Housing Choice Voucher and Section 8 program
              requirements in HUD handbooks, notices, and guidance.

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

             Interviewed HUD field office and Authority staff.

             Reviewed general ledgers, journal entries, budgets, contracts, and cost allocation
              plans pertaining to our audit objective.

             Reviewed HUD’s most recent monitoring report and independent public
              accountant audit reports.

             Reviewed the Authority’s policies and procedures, collective bargaining
              agreements, and employee job descriptions.

             Reviewed all of the approximately $9 million in asset management, property
              management, and book-keeping fees charged to Federal asset management
              projects from October 2009 to April 2013 to determine whether they were eligible
              and supported.

             Reviewed more than $5 million in transfers made in fiscal year 2012 between
              asset management projects to determine whether the Authority met fungibility
              requirements.

             Tested a sample of 20 legal charges, which had the highest dollar amount, totaling
              $261,245 of the $411,055 in legal fees charged to the Authority’s Federal
              programs during our audit period.

             Reviewed more than $4.1 million in property and fire, general liability public
              officials’, and workers compensation insurance costs that the Authority charged to
              its asset management projects to determine whether there were material
              overcharges or undercharges.




                                               16
               Reviewed $641,137 in accounting and auditing costs charged to the Authority’s
                asset management projects to determine whether the costs were necessary,
                reasonable, and supported.

               Reviewed a sample from approximately $22 million in maintenance labor costs
                expended during the audit period. Specifically, we reviewed $240,321 in costs
                charged for three central maintenance employees during the audit period to
                determine the necessity and reasonableness of the costs.

               Conservatively estimated that at least $158,500 of the $1.7 million expended for
                overtime during the audit period was for unnecessary scheduled overtime. We
                calculated the unnecessary overtime costs by multiplying the number of hours
                scheduled for each weekend times the difference between the average hourly rate
                for the workers and the average overtime rate for the workers.

               Reviewed $88,290 in maintenance labor costs and administrative costs17 charged
                to Baldwin properties for maintenance and administrative services provided by
                asset management project employees during the audit period to determine whether
                the costs were properly charged and reimbursed.

               Relied on two automated data systems to test property management and book-
                keeping fees. We used the Authority’s Visual Homes electronic database to
                determine how many units were occupied each month. We tested 30 units listed
                as occupied in the database and used tenant files to verify the database accuracy.
                We used HUD’s Public and Indian Housing Information Center (PIC) to
                determine the number of HUD-approved vacancies per month. We compared 1
                month of vacancies listed in the database to HUD approval letters to verify the
                accuracy of the database. Our testing showed that we could reasonably rely on
                the databases for the number of occupied units per month and HUD-approved
                vacancies.

                Note - The number of HUD-approved vacancies before January 2011 was not
                available in PIC, and the number of occupied units before January 2011 was not
                available in Visual Homes. Thus, we used the Authority’s approved operating
                subsidy forms for this period because it was the best available information.

The audit covered the period October 2009 through September 2012 and was extended when
necessary to meet the audit objective. We performed the audit fieldwork from January to July
2013 at the Authority’s administrative office located at 150 Highland Avenue, Bridgeport, CT.

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

17
  Administrative labor costs charged were for one employee, who was an asset management program occupancy
specialist.

                                                    17
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               18
                              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:

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

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

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

               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.




                                                 19
Significant Deficiency

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

                  Authority officials did not have adequate controls to ensure that program
                   objectives were met, that they complied with laws and regulations, and that
                   they safeguarded resources when they (1) overcharged for management and
                   book-keeping fees; (2) improperly charged insurance, legal, auditing, and
                   consulting costs to asset management projects; (3) improperly transferred
                   cash; (4) did not adequately manage maintenance employees’ overtime
                   costs; and (5) did not follow their procurement procedures (see findings 1
                   through 3).




                                             20
                                      APPENDIXES

Appendix A

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

 Recommendation                          Unsupported      Funds to be put
                      Ineligible 1/
     number                                  2/           to better use 3/
             1A             $582,562
             1B              $88,290

              1I            $225,000
              1K                             $771,000
              1L                              $19,555
              2A                                                  $45,276

          Totals            $895,852         $790,555             $45,276


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.

3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an 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 instance, if Authority officials implement our
     recommendation to stop the practice of a 5-day work schedule with scheduled overtime
     on weekends and go to a 7-day rotating work week in accordance with the Authority’s
     union contract (2A), they can assure HUD that at least $45,276 in excess costs will not be
     charged to Federal projects and will be put to better use.




                                             21
Appendix B

           AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                                Auditee Comments 18




18
  The complete text of the auditee’s comments was too voluminous for inclusion in the report since it was
embedded throughout our draft report; therefore, we extracted the responses. The auditee’s original submission will
be provided to HUD and can be obtained upon request.

                                                        22
Ref to OIG Evaluation                      Auditee Comments

             Finding 1

             RESPONSE FOR WORK ORDER CLERK:
             Respectfully we disagree with the ineligible findings resulting in the cost
             allocated in regards to the Work Order Clerk, during the time period sited the
             Work Order Clerk and Maintenance Service was a Frontline Expense (24 CFR
             Part. 990), Table 7.2 – Front Line costs and Fee Costs under the Operating
             Fund Rules are eligible costs as shown under Front-Line Expenses. All repair
Comment 1    and maintenance costs for the AMP including centralized Work Order
             processing provided under a fee for services arrangement, provided cost are
             reasonable and necessary. We will provide all of the Work Order Clerk’s time
             allocation by Work Orders per AMP that were opened and closed. Therefore,
             the finding should be changed from ineligible to unsupported.

             RESPONSE FOR HVAC TECHNICIAN
             Respectfully we disagree with the ineligible findings resulting in the cost
             allocated in regards to the HVAC Technician, during the time period sited the
             HVAC Technician and Maintenance Service was a Frontline Expense (24 CFR
             Part. 990), Table 7.2 – Front Line costs and Fee Costs under the Operating
Comment 2    Fund Rules are eligible costs as shown under Front-Line Expenses. All repair
             and maintenance costs for the AMP including centralized maintenance
             processing provided under a fee for services arrangement, provided cost are
             reasonable and necessary. We will provide all of the HVAC’s Technician time
             allocation by Work Orders/Time card per AMP that were opened and closed.
             Therefore, the finding should be changed from ineligible to unsupported.
             CENTRAL MAINTENANCE COORDINATOR
                We are in agreement with the ineligible misallocation of cost and will
Comment 3         reimburse the AMPs. This should have been a Front-Line cost and we cannot
                  support this. These costs are Front-Line expenses per 24 CFR Part 990, Table
                  7.2 and therefore should be moved from ineligible to unsupported however
                  we cannot document.
             SWEEPER OPERATOR:
                Portion of cost ineligible related to warehouse operations, we agree a portion
Comment 4         of costs related to vehicle maintenance, deliveries, -
                Vehicle expense (maintenance, gasoline and repairs) for site-based vehicles.
                  These costs are Front-Line expenses per 24 CFR Part 990, Table 7.2 and
                  therefore should be moved from ineligible to unsupported.




                                             23
Ref to OIG Evaluation                     Auditee Comments


             From the FY2010 audit, the $158,880 seems correct. We reviewed the
             management and bookkeeping fees for the overcharge of $183,193 and
             $14,538. We agree that BHA overcharged as entries into the records were
             based on VisualHomes and never reconciled with PIC. There were times
Comment 5    where PIC numbers were delayed or inaccurate therefore BHA relied on the
             VisualHomes numbers. Doing an initial review of the reconciliation it looks
             likes Presidential Village was not factored in the overage calculation which
             could result in a reduction of about $45,000 of the overage. Please provide us
             additional information and documentation to reference your calculations and
             finding.

             RESPONSE FOR NON-FEDERAL MAINTENANCE TECHNICIAN

             Documentation is available for the maintenance and management charges for
             2012. The amount was recorded in the books of Baldwin for FY2012. The
             hours and names are identified for the work of the management (COS) and the
Comment 6    maintenance crew. This amount was booked and paid back to BHA.
                 For the previous years, cash was transferred from Baldwin to the AMPs
                    from 04/1/2010 to 01/4/2011 for work done during 2010 and 2011. The
                    amount of the cash transferred to the AMPs was$40,589. Specifically
                    check #1048 for $1,528.69, Check #1064 for $884.19, check #1070 on
                    10/21/2010 for $5,428.89, check #1088 on 12/21/2010 for $30,818.02.
Comment 7           The COS stopped working on Baldwin in 2012. Therefore, $40,589
                    should be removed from the finding.
                    Finally, either checks were cut from Baldwin or Baldwin was charged
                     directly for Scattered Sites administrative Staff (COS) for mileage and
Comment 8            additional expenses. For example: check #1065 made out to the COS
                     on 9/7/2010 for $108.

             RESPONSE TO INSURANCE OVERCHARGES:

             Upon review of the insurance certificate and the allocation of the Public
             Officials in FY2011 and FY2012, the OIG recognized an error in their
Comment 9    calculation for Public Officials insurance and significantly reduced the
             overcharge amount to approximately $20,000. The exact reduction for public
             officials insurance was from $74,046 to $22,344 with proposed report verbiage
             changes from OIG. The overcharge of public officials insurance was for the
             allocation omitting central office in the journal entry.




                                             24
Ref to OIG Evaluation                      Auditee Comments


                     For the $15,262 Baldwin paid for insurance in FY2011-2013. Baldwin
                      was not billed directly by the Housing Authority. Upon discussions
Comment 10            with the insurance agent, they estimate the Baldwin premium coverage
                      on the property insurance to be $4,000 per year. Since, 2013 costs were
                      charged; we would only need to charge Baldwin for 3 years 2010- 2012
                      or $12,000 and not $15,262. With 2010 being a short year since
                      Baldwin started that year, the amount will be about $10,000 for the
                      three years to charge back to the AMPs.

               RESPONSE TO UNSUPPORTED CHARGES IN FEDERAL
               PROGRAMS:

           We agree that $20,000 out of the $30,000 were not eligible. The fee accountant
Comment 11 was performing the duties in the absence of a CFO. Therefore, we dispute the
           $10,000.

               RESPONSE TO LEGAL COSTS MISTAKENLY CHARGED:
               We agree to the $4,196 in ineligible legal costs.

           RESPONSE TO IMPROPERLY TRANSFERRED CASH:
           Pursuant to 24 CFR 990 paragraph 6.6 Excess Cash and Fungibility, excess
           cash available can be calculated as the PHA closes its books for the year and is
Comment 12 able to make the calculation. At that time excess cash can be used. However,
           the final amount of excess cash available is based on the approved audit
           submission. If the PHA has already moved excess cash over the amount as
           calculated using the audited numbers the receiving AMP or COCC must
           return that money.

               Even though the excess cash was available, BHA transferred the funds after
               the close of the books but before the approved audit transmission. BHA
               concurs that they should pay the funds back from FY2012 although BHA will
               take the transfer of funds in FY2013.




                                             25
Ref to OIG Evaluation                      Auditee Comments


           Furthermore, several AMPs have more than $225,000 in FY2013. For example
           Marina Village AMP002 has $354,034, Trumbull Gardens AMP004 has
Comment 12 $465,245 and Scattered Sites 2 AMP 882 has $411,681. Therefore, we can put
           the transfer back in FY2012 and properly transfer it again in FY2013 without
           affecting any Asset Management Fees charged in FY2013 for any of the
           AMPs.

           RESPONSE TO WORKS COMPENSATION:
           We agree that the original allocation calculation was not completely accurate,
           however we dispute OIG’s allocation rate. BHA did a preliminary review of
Comment 13 FY2010-FY2012 based on insurance rates charges of .27/$100 payroll for
           clerical staff and $10.69/$100 payroll for maintenance staff. This allocation
           resulted in an underpayment of $70,000 for Central Office, an underpayment
           of $5,000 for AMPs and an overpayment of Section 8 by $75,000 for the 3
           year period.

           RESPONSE TO UNSUPPORTED IN-HOUSE LEGAL FEES:
           Legal department tracks the amount of work performed for each AMP monthly
           and did so during this time frame. We agree that these fees were unsupported
           however; backup documentation will support the work load of cases for each
Comment 14 AMP for this time frame which will exceed the $376, 298 figure as outlined in
           the OIG draft response. This will be broken down on a fee for service basis
           and the amount of time taken to complete each service. Due to the cost
           reasonableness factor it is far more cost effective to charge a flat fee for
           service to the AMP then bill the AMP’s on a hourly basis for legal work
           performed on the AMP’s behalf.

               RESPONSE TO PROPERTY LIBABILITY INSURANCE:
               We agree that these findings are unsupported and will be paid back.




                                              26
Ref to OIG Evaluation                      Auditee Comments

               Finding 2

           RESPONSE TO ROTATING WORK SCHEDULE:
           We agree with the findings and are currently negotiating union contracts that
           will resolve this issue. The 2311 Maintenance Union consists of Janitors,
Comment 15 Maintenance Aides, and Maintenance Mechanics. They have a 7 day work
           schedule in their contract that would avoid some overtime cost, however the
           818-12 Asst. Manager/Foreman position does not allow for the 7 day work
           week and their contract therefore does not provide supervision to the
           maintenance staff. A proposal is on the table for union negotiations to include
           the 7 day work week in the Asst. Manager/Foreman unit.

           RESPONSE TO LACK OF EFFECTIVE METHOD TO MEASURE
           AND MONITOR PRODUCTIVITY:
           We agree that we lacked previous methods to measure and monitor
           productivity, however it is now a requirement that Work Orders must now be
Comment 16 opened for all work performed including grounds, landscaping, snow removal,
           and janitorial work. GPS tracking devices have been placed in all maintenance
           worker cell phones to account for all hours worked. Maintenance staff cell
           phones are also equipped to open and close work orders from the field. Lastly,
           weekly productivity reports are now required by the sites.

               Finding 3

           RESPONSE TO HEALTH INSURANCE WAS NOT COMPETITIVELY
           OBTAINED:
           We agree with the findings and BHA currently has an RFP out for Employee
Comment 15 Benefits Brokerage Services to obtain a broker who will competitively obtain
           the most cost effective health insurance plan. In the current union negotiations,
           a proposal by BHA management is for a HSA plan which can average a 22
           percent reduction in plan costs.




                                              27
Ref to OIG Evaluation                     Auditee Comments


           RESPONSE TO PROCURE LIABILITY INSRANCE:
           We agree with these findings that BHA did not follow procurements standards
Comment 15 however the insurance agent did make an attempt to competitively procure the
           insurance in FY2011-2012. The agent solicited about 15 quotes via email and
           chose the best offer from those. Starting Jan 1, 2013, BHA has contracted with
           Haig, a HUD approved and federally exempt company for procuring
           insurance, for their business liability and auto insurance.




                                            28
                              OIG Evaluation of Auditee Comments

Comment 1       We determined that the work order clerk’s costs are ineligible and require
                repayment. To support charging these costs to the Asset Management Projects
                (AMP), officials would need to show that the services were reasonable and
                necessary in accordance with HUD’s standards, which stipulate: “The norm in
                multifamily housing is that work order processing is a function handled on-site.
                A PHA [public housing agency] may charge the cost of centralized work order
                processing only if the PHA documents/justifies that the cost is reasonable and
                necessary. A prorated front-line administrative function must not cost more than
                what the project would incur if performed on-site. In all instances, front-line
                prorated costs must be reasonable, necessary, and based on services provided.
                AMPs with on-site staff that can provide these functions for themselves may not
                also be charged these services.”19

Comment 2       As indicated in footnote 4, we did not include the heating, ventilation, and air
                conditioning technician’s salaries and benefits in the costs that we questioned as
                ineligible or unsupported. We agree that if properly implemented, fee for service
                billing procedures should ensure that future costs are properly charged.

Comment 3       We classified the central maintenance coordinator’s costs as ineligible because the
                majority of her tasks were supervisory central maintenance duties, which are not
                front-line costs and, thus, not chargeable to the AMPs now or in the future.
                However, Authority officials’ planned actions are responsive to our
                recommendation

Comment 4       The majority of this employee’s assigned tasks were for the warehouse, which
                officials agreed were not eligible. However, during the audit resolution process,
                if officials provide documentation showing that billable services were provided to
                the AMPs in accordance with HUD’s asset management rules, we would agree
                that a reasonable amount might not require repayment. When evaluating billable
                services, HUD should consider that the sweeper operator told us that he did not
                repair vehicles or change the oil because these functions were contracted.

Comment 5       Authority officials agree that our calculation of the overcharges of $158,880 in
                fiscal year 2010 is correct, and it is true that we did not include the amount of
                management and book-keeping fees that Presidential Village may have billed for
                in 2012 and 2013. However, if officials want to recompute the overcharged
                amounts for these years, they will have to do so with HUD during the audit
                resolution process, and if needed, we will provide our calculations.

Comment 6       We agree that some records for maintenance and administrative costs were
                maintained for 2012. However, the records did not show all of the maintenance

19
 PIH Notice 2007-09 Supplement - Changes in Financial Management and Reporting for Public Housing Agencies
Under the New Operating Fund Rule (24 CFR Part 990)


                                                   29
               services provided by the projects, and there was no evidence that the Federal
               projects were paid for the services. General ledger entries shown to us on
               December 3, 2013, disclosed that Baldwin paid the Authority’s central operating
               cost center, not the Federal projects, for the services.

Comment 7      Officials provided no records showing that the referenced checks were credited to
               the scattered sites cash account(s); thus, we considered the amounts not paid.
               Regarding the cost of these services, this employee told us she worked for
               Baldwin up to May 2012; however, we found that officials charged these costs up
               to September 2012. Therefore, during the audit resolution process with HUD,
               consideration should be given to removing the portion of costs between June and
               September of 2012 if the appropriate supporting documentation is provided. To
               ensure that the AMPs did not pay for any services between May and September
               2012, the documentation should show who performed these duties for Baldwin
               between May and September 2012 and the source of funds used to pay for the
               services.

Comment 8      We did not review or include mileage and additional expenses in this report.

Comment 9      We agreed and reduced the amount of ineligible public officials’ insurance from
               $74,046 to $11,172 (represents annual cost).

Comment 10 We did not question costs for 2010 and added a footnote to clarify that the
           $15,262 was charged to the AMPs in 2012 and 2013 ($7,965 in 2012 and $7,297
           in 2013). Regarding the 2012 charges; officials provided no basis or support for
           their $4,000 estimate; however during audit resolution HUD may consider the
           estimate and adjust the amount requiring repayment if officials provide an
           adequate basis and support. Regarding the 2013 charges we discussed this issue
           with the chief financial officer, and he told us that he reversed charges to the
           AMPs for 2013 and charged non-Federal Baldwin and Chip DIP properties for
           their share of property insurance for fiscal year 2013. Therefore, during the audit
           resolution process, if documentation is provided to HUD showing the reversed
           charges, the $7,292 that we questioned in fiscal year 2013 will not require
           repayment.

Comment 11 Authority officials agree that the questioned $20,000 is ineligible and should be
           repaid. However, regarding the additional $10,000, since the Federal projects
           paid the Authority a management fee in part to maintain a chief financial officer,
           the $10,000 in additional audit costs incurred as a result of the official’s failure to
           hire a chief financial officer was, in effect, a double payment. Thus, this amount
           is an ineligible cost to the Federal projects that should be repaid.

Comment 12 The Authority agreed to return the ineligible 2012 transfers and proposed to make
           transfers for fiscal year 2013. We agree that the 2013 transfers may be made in
           accordance with HUD’s asset management rules for excess cash. However,
           before the Authority transfers funds in 2013, HUD should ensure that the

                                                30
                Authority properly accounts for Presidential Village’s 2012 income and expenses,
                and properly calculates and reports excess cash for 2012 before it transfers any
                funds from this AMP to another AMP.

Comment 13 Authority officials agree that their allocation of workers compensation premiums
           was not accurate, and they also dispute our computations. However, officials
           need to submit a revised allocation plan to HUD, during the audit resolution
           period, to support their figures or repay the costs.

Comment 14 Any backup documentation must be provided to HUD during the audit resolution
           process, and HUD should ensure that the Authority’s billing for corporate legal
           services complies with HUD’s requirements20 in that “legal fees must be directly
           related to the operation and management of the AMP, including tenant lease
           enforcement actions, landlord-tenant disputes, and other AMP-related legal
           matters. Also, any charges to a project conducted by Central Operating Cost
           Center legal staff must be based on services received by the project and
           documented by time records.”21 Therefore, any fee for service billing structure
           must be supported with time records to support the charges, and HUD will need to
           evaluate the Authority officials’ corrective actions and determine whether they are
           appropriate.

Comment 15 Authority officials’ actions are responsive to our recommendation; however,
           HUD will need to evaluate these corrective actions and determine whether they
           are appropriate.

Comment 16 We agree that if properly implemented, the actions described should improve
           monitoring of maintenance productivity. However, to fully address our
           recommendations Authority officials need to (1) develop and implement
           procedures to assess the maintenance staff’s abilities, (2) ensure that the staff has
           the necessary skills to perform the required work, and (3) ensure that corrective
           action is taken when productivity goals are not achieved and provide training as
           needed.




20
 24 CFR Part 85, HUD Litigation Handbook 1530.1, REV-5, and PIH Notice 2006-9
21
  PIH Notice 2007-09 Supplement - Changes in Financial Management and Reporting for Public Housing Agencies
Under the New Operating Fund Rule (24 CFR Part 990) (F.01), table 7.2


                                                    31
Appendix C

            OIG ESTIMATE OF WORKERS COMPENSATION
          INSURANCE OVERCHARGES AND UNDERCHARGES



                                           Audited workers compensation insurance cost allocation
                                                         Based on # of staff - # of claims - and claim amount
                                                      (with each factor assigned 1/3 of the total allocation rate)
                                                                                                                                                         Over (under)
                                                    Audited Over (under)                      Audited Over (under)                Audited Over (under)    charged by
                                          Charged   amount    charged    Charged              amount    charged         Charged   amount    charged         program
  Program - entity                         2010      2010       2010      2011                 2010       2011           2012      2010       2012         2010-2012
Asset mangement project # and name -
  702 - Marina Village                    $ 99,452 $ 63,672 $   35,779 $ 77,589 $ 50,650 $                       26,939 $ 132,897 $ 71,205 $   61,692
  705 - P.T. Barnum                         86,467   60,164     26,303   68,940   47,859                         21,081    97,909   67,282     30,626
  706 - Greene Homes                        83,806   77,098      6,708   68,642   61,330                          7,312    69,412   86,219    (16,807)
  707 - Fireside                            46,359   24,979     21,380   35,042   19,870                         15,172    49,961   27,934     22,027
  709 - Harborview Towers                   46,656   55,560     (8,904)  35,042   44,197                         (9,155)   31,526   62,133    (30,607)
  744 - Trumbull Gardens                    71,050   78,753     (7,703)  52,140   62,646                        (10,506)   77,410   88,070    (10,660)
  781 - Scattered Sites I                   55,432   36,597     18,836   49,406   29,112                         20,294    67,371   40,926     26,444
  782 - Scattered Sites II                  91,689   48,362     43,327   70,829   38,471                         32,358   126,848   54,083     72,765
Public housing asset mangement projects                     $ 135,726                    $                      103,494                      $155,482        $394,702
080 - Section 8 program                     40,766  111,629    (70,864)  36,108   88,799                        (52,691)   40,570  124,836    (84,266)       (207,821)
650 - Central operating cost center        $11,874  $76,736   ($64,862) $10,239  $61,042                       ($50,803)  $14,599  $85,815   ($71,216)      ($186,881)



 This table shows how OIG estimated that Authority officials overcharged the Authority’s asset
 management projects $394,702 and undercharged the Section 8 program and central operating
 cost center $207,821 and $186,881, respectively, during fiscal years 2010 through 2012.

This cost allocation plan allocates costs to each entity based on three factors: (1) the
number of staff members in each entity, (2) claims of more than $1,000, and (3) the claim
amount for each entity. We believe this methodology is reasonable because it accounts for
all employees that benefited from the insurance and places equal weight on the factors that
affected the amount of premiums the insurance company charged.




                                                                                  32