oversight

                                                              U.S. DEPARTMENT OF
                                             HOUSING AND URBAN DEVELOPMENT
                                                       OFFICE OF INSPECTOR GENERAL




                                                 September 26, 2014
                                                                                                    MEMORANDUM NO:
                                                                                                         2014-BO-1801

Memorandum
TO:                Jennifer Gottlieb
                   Program Center Coordinator, Hartford Field Office, 1EPH

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

SUBJECT: The Housing Authority of the City of Stamford, CT Took Appropriate Action To
         Resolve a Complaint While Complying With Procurement Regulations

                                                 INTRODUCTION

We audited the Housing Authority of the City of Stamford, doing business as Charter Oak
Communities. We received an anonymous complaint against the Authority related to an alleged
improper procurement. The complainant alleged that Authority officials awarded a contract to
an employee’s spouse without following procurement and conflict-of-interest requirements. In
addition, a previous audit at the Authority 1 found that Authority officials did not maintain
adequate documentation to demonstrate that they properly awarded and administered their
contracts and purchase orders in accordance with Federal requirements and their own
procurement policy. Therefore, our objective was to determine whether the complaint had merit,
and whether procurement and conflict-of-interest rules and regulations were violated.


                                      METHODOLOGY AND SCOPE

We conducted our audit between January and April 2014, at the Authority’s office located at 22
Clinton Avenue, Stamford, CT. Our audit covered the period July 2012 through September 2013
and was extended when necessary to meet our audit objective. To accomplish our audit
objective, we



1
    Audit report   number 2012-BO-1002 issued March 14, 2012.
                                                  Office of Audit, Boston Region
                                    10 Causeway Street, Room 370, Boston, MA 02222-1092
                                           Phone: (617) 994-8380; Fax: (617) 565-6878
                                Visit the Office of Inspector General Web site at www.hudoig.gov.
             Reviewed program requirements, including Federal laws, the Code of Federal
              Regulations, public housing handbooks, and the annual contributions contract
              between the U.S. Department of Housing and Urban Development (HUD) and the
              Authority.

             Interviewed key staff members at the Authority to understand the procurement
              processes and related policies and procedures.

             Reviewed the internal actions taken by Authority officials in response to the
              complaint to determine whether Authority officials’ took appropriate action to
              properly resolve the complaint issues.

             Obtained the contract register and selected a nonstatistical sample of five small
              purchase contracts, not exceeding $100,000, and three large purchase contracts,
              exceeding $100,000 from a universe of 15 Federal contracts made during the
              audit period, with a total contract not to exceed amount of $15.7 million. The
              eight contracts amounted to $13.7 million representing 87 percent of the total
              contract not to exceed amount of 15.7 million.

             Determined whether the eight contracts selected were procured in accordance
              with Federal regulations at 24 CFR 85.36 and the Authority’s own procurement
              policy, and whether the complaint had merit.

             Obtained and reviewed all Federal disbursements for the contracts in our
              procurement sample, which consisted of 28 disbursements totaling $76,948.

Our work was not conducted in accordance with generally accepted government audits standards
as we only examined the procurement controls and did not consider the Authority’s information
systems and other controls.

                                       BACKGROUND

The Authority is an independent municipal entity created by the City of Stamford in 1939 under
State law and the National Housing Act of 1937. The Authority operates under a board of
commissioners form of government to provide safe and decent housing for eligible low- and
moderate-income families and elderly individuals. The board is comprised of five members, all
Stamford, CT, residents, appointed by the mayor of Stamford.

The Authority was awarded more than $51 million in Section 8 assistance, Public Housing
Operating Fund subsidies, and Public Housing Capital Fund grants for fiscal years 2012 and
2013, as follows:




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                         Section 8
                                           Operating         Capital          Total
             Year        program
                                           subsidies       Fund grants       awarded
                         assistance
             2012        $22,414,598       $1,524,636       $2,820,600      26,759,834
             2013        $22,282,712       $1,644,317       $1,003,454      24,930,483
             Total       $44,697,310       $3,168,953       $3,824,054      51,690,317


                                    RESULTS OF REVIEW

Although the complaint had merit regarding the procurements and conflict-of-interest issues,
Authority officials took appropriate corrective action to resolve the issues. In addition, contract
files reviewed showed that Authority officials properly procured the Authority’s vendors and
maintained the required documentation to demonstrate such compliance in accordance with 24
CFR 85.36 and their procurement policy. Also, disbursements tested were adequately supported
with the exception of two minor issues, which were discussed with officials, who took corrective
action. The details are described below:

Conflict-of-Interest Issues

The complaint had merit in that there was an apparent conflict-of-interest in the administration of
payments to the automotive repair center mentioned in the complaint. Specifically, the regional
property manager’s husband owned one of the auto repair centers used by the Authority for
vehicle repairs and maintenance. The employee was not involved with the procurement process
but was responsible for secondary approval of the request-for-payment documentation submitted
to the accounting department. In accordance with Authority procedures, there was no contract
with this vendor as the service cost was below the small purchase threshold of $2,000 and thus
considered a micro purchase. In this case as auto services or repairs were needed, Authority
officials would issue a purchase order for the service or repair. A cost-price analysis showed that
labor rates and costs of repairs were comparable between the auto repair center used and two
other local vendors. The auto repair center was used when the regular vendor was unavailable to
perform needed repairs in an acceptable timeframe, emergency repairs were needed, or vehicles
were located on the east side of town, which was closer to the auto repair center used.

Authority officials approved $6,962 in payments to the vendor during our audit period. Of that
amount, $1,424 was paid from Federal funds. Thus, we concluded that an employee was
engaged in an apparent conflict-of-interest by providing secondary approval for payments to her
husband’s company, which violated the annual contributions contract between the Authority and
HUD. However, we believe that the conflict-of-interest was inadvertent due to the fact the
employee did not issue the purchase orders or compile the requests for payment. The employee
provided secondary approval for this and other request for payments from the maintenance
department and ensured that the request matched the information provided on the vendor
invoices and then signed off on the request before submitting it to the accounting department.
Authority officials, once informed, took the proper steps to review the matter and ensure that the
vendor was no longer used. Therefore, no further audit work will be necessary.

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Procurements

Our review of the eight contract files showed that Authority officials properly procured the
Authority’s vendors in accordance with 24 CFR 85.36, and their own procurement policy, and
maintained the required documentation to demonstrate such compliance. Authority officials (1)
hired a procurement manager with several years of procurement experience; (2) conducted
annual procurement training for the board and the Authority’s core staff; (3) provided the board
and core staff with a binder containing the procurement training documents, including the annual
contributions contract, Federal regulations at 24 CFR 85.36, HUD Handbook 7460.8, REV-2,
Authority procurement policies and procedures, and exhibits of required HUD procurement
forms; and (4) centrally filed the original procurement documentation. Officials also maintained
a contract register and adequate procurement files to show the history of the procurements,
including maintaining original procurement documents, evaluations, and independent cost
estimates. They had written agreements for each of the contracts reviewed which included the
total amount of the contract, contract terms, or necessary contract clauses, and were signed by
the contractor and the Authority. Therefore, we had no reportable issues regarding
procurements.

Disbursements

Authority officials were able to support their disbursements and that the payments made were for
services within the corresponding contracts’ scopes of work. We reviewed all Federal
disbursements for the contracts in our sample, which consisted of 28 disbursements totaling
$76,948. We found two minor discrepancies, which were discussed with the Authority officials
during the audit and they agreed to take immediate corrective action. Specifically, (1) Authority
officials incorrectly allocated elevator maintenance services performed at two State Section 8
projects to a Federal low-income property for one of the five payments reviewed, and (2) the
vendor performing the elevator maintenance services overcharged for service calls. Nevertheless,
the potential impact on the Authority’s Federal programs was minimal, as officials took
corrective action to reclassify the misallocated elevator maintenance expenses and corrected the
overcharges with the vendor.


                                        CONCLUSION

Although the complaint had merit, Authority officials took appropriate corrective action to
resolve the issues. In addition, contract files reviewed showed that Authority officials properly
procured the Authority’s vendors and maintained the required documentation to demonstrate
such compliance in accordance with 24 CFR 85.36 and their own procurement policy; therefore
we do not have any recommendations. Also, disbursements tested were adequately supported
with the exception of two minor issues, which were discussed with officials who took corrective
action.




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