oversight

The Adams Metropolitan Housing Authority, Manchester, OH, Generally Used Public Housing Program Funds in Accordance With HUD's and Its Own Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-07-31.

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

OFFICE OF AUDIT
REGION 5
CHICAGO, IL




          Adams Metropolitan Housing Authority
                   Manchester, OH

                  Public Housing Program




2014-CH-1005                                 JULY 31, 2014
                                                        Issue Date: July 31, 2014

                                                        Audit Report Number: 2014-CH-1005




TO:    Shawn Sweet, Director of Public Housing Hub, 5DPH

      //signed//
FROM: Kelly Anderson, Regional Inspector General for Audit, 5AGA

SUBJECT: The Adams Metropolitan Housing Authority, Manchester, OH, Generally Used
         Public Housing Program Funds in Accordance With HUD’s and Its Own
         Requirements

    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 Adams Metropolitan Housing
Authority’s public housing program.

    HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. 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
(312) 353-7832.
                                            July 31, 2014
                                            The Adams Metropolitan Housing Authority,
                                            Manchester, OH, Generally Used Public Housing
                                            Program Funds in Accordance With HUD’s and Its Own
                                            Requirements


Highlights
Audit Report 2014-CH-1005


 What We Audited and Why                     What We Found

We audited the Adams Metropolitan           The Authority generally used public housing program
Housing Authority’s public housing          funds in accordance with HUD’s and its own
program as part of the activities in our    requirements. Specifically, it generally (1) used public
fiscal year 2014 annual audit plan. We      housing program funds for authorized and eligible
selected the Authority based on a           expenditures and (2) complied with HUD’s and its
request from the U.S. Department of         own procurement requirements.
Housing and Urban Development’s
(HUD) management. Our objective
was to determine whether the Authority
used public housing program funds in
accordance with HUD’s and its own
requirements.

 What We Recommend

This report contains no
recommendations, and no further action
is necessary with respect to this report.
                          TABLE OF CONTENTS

Background and Objective                                                        3

Results of Audit
      The Authority Generally Used Public Housing Program Funds in Accordance
      With HUD’s and Its Own Requirements                                       4

Scope and Methodology                                                           6

Internal Controls                                                               8




                                           2
                      BACKGROUND AND OBJECTIVE

The Adams Metropolitan Housing Authority was established in 1974 under the Ohio Revised
Code Section 3735.27 to engage in the acquisition, development, leasing, and administration of a
low-rent housing program. A five-member board of commissioners oversees the Authority.
These members are appointed to a 5-year term and are not compensated for their services. The
mayor of the Village of Manchester, OH, appoints two members. The Adams County Probate
Court, the Adams County Common Pleas Court, and the Adams County Board of
Commissioners each appoint one member.

The board’s responsibilities include setting policies and appointing the Authority’s executive
director. The executive director is responsible for ensuring that policies are implemented and
managing the day-to-day operations of the Authority’s programs. The Authority administers
public housing and Section 8 Housing Choice Voucher programs funded by the U.S. Department of
Housing and Urban Development (HUD). As of May 2014, it operated 141 public housing units
and had 276 Section 8 units under contract and was authorized to receive $916,035 in Section 8
program funds for the fiscal year. HUD also authorized the Authority the following financial
funding for its Public Housing Operating and Capital Fund program grants for fiscal years 2012
and 2013:

                                        Public housing         Capital
                        Fiscal year    operating funds           funds
                           2012               $514,890        $172,983
                           2013                492,586         166,207
                        Total               $1,007,476        $339,190

We selected the Authority based on a request from the U.S. Department of Housing and Urban
Development’s (HUD) management. HUD expressed concern about the Authority’s use of its
public housing operating and capital funds. Our objective was to determine whether the
Authority used public housing program funds in accordance with HUD’s and its own
requirements. Specifically, we wanted to determine whether the Authority (1) used public
housing program funds for eligible expenditures and (2) complied with HUD’s and its own
procurement requirements.




                                               3
                                      RESULTS OF AUDIT


The Authority Generally Used Public Housing Program Funds in
Accordance With HUD’s and Its Own Requirements
The Authority generally used public housing program funds in accordance with HUD’s and its
own requirements. Specifically, it generally (1) used public housing program funds for
authorized and eligible expenditures and (2) complied with HUD’s and its own procurement
requirements.


    The Authority Generally Used
    Public Housing Program Funds
    for Eligible Items


                 We reviewed the Authority’s disbursements of public housing program operating
                 funds for the periods October 1 to December 31, 2011 (261 checks totaling
                 $145,003), and June 1 to September 30, 2013 (355 checks totaling $174,768),
                 along with supporting documentation. The Authority generally used public
                 housing program funds for eligible items.

                 We also reviewed 142 bank credit card purchases totaling $24,703 charged to the
                 Authority’s public housing programs during the period October 2011 through
                 September 2013 to determine whether the purchases were authorized and used for
                 eligible expenses. We reviewed voucher request forms, approvals of requests,
                 receipts, and other documentation supporting the credit card expenditures. The
                 Authority generally used public housing program funds 1 to pay for eligible
                 purchases.

                 As of May 30, 2014, the Authority had expended only $35,128 of its fiscal year
                 2012 capital funds on dwelling equipment. Therefore, we reviewed the
                 Authority’s 5-year and annual plans, drawdowns from HUD’s Line of Credit
                 Control System, invoices, and canceled checks for the expenditures. The invoices
                 showed that the funds were spent on cabinets; electric water heaters; refrigerators;
                 and heating, ventilation, and air conditioning equipment. The funds were spent
                 appropriately.


1
  During our review, we determined that the Authority paid all expenses from its public housing program account
and the Section 8 program reimbursed the program for the expenses allocable to the Section 8 program.

                                                        4
The Authority Generally
Complied With HUD’s and Its
Own Procurement Requirements

          During our audit period, we identified 11 contractors or vendors that received
          payments totaling $135,488. We reviewed the contracts for 3 of the 11
          contractors or vendors that collectively received payments totaling $38,540 (28
          percent of the total) for compliance with HUD’s and the Authority’s small
          purchase procurement requirements. The Authority received an adequate number
          of bids and selected the lowest bid for the contracts reviewed. We also reviewed
          the invoices, canceled checks, and other documentation and determined that the
          costs were adequately supported.

          In reviewing the Authority’s payments to its contractors, we identified one
          contractor that received payments totaling more than $39,438 in fiscal year
          2012. Therefore, we extended our audit period to include that procurement,
          which occurred in April 2011. We reviewed the Authority’s public housing
          plans, invitation to bid, formal public advertisement, bid tabulation sheets, and
          other procurement documentation used to support the selection of the contractor.
          The Authority properly procured the contract. We also reviewed the canceled
          checks and other support documentation and determined that the costs were
          adequately supported.

Recommendations

          This report contains no recommendations and no further action is necessary with
          respect to this report.




                                           5
                         SCOPE AND METHODOLOGY

We performed our onsite audit work at the Authority’s office at 401 East 7th Street, Manchester,
OH, between November 5 and December 13, 2013, and HUD’s Cleveland field office. The audit
covered the period October 1, 2011, through September 30, 2013, but was expanded as
determined necessary.

To accomplish our objective, we reviewed

           •   Applicable laws, regulations, parts A and B of the annual contributions contract
               between the Authority and HUD, HUD’s program requirements at 24 CFR (Code
               of Federal Regulations) Parts 85 and 941, The United States Housing Act of 1937
               as amended, 42 U.S.C. (United States Code); HUD Guidebooks 7485.3G and
               7510.1G, and HUD Handbooks 7475.1 and 7460.8.

           •   The Authority’s declaration of trusts; accounting records; bank statements; check
               register; contract files; policies and procedures; board meeting minutes from April
               2011 through September 2013; organizational chart; 5-year and annual plans; and
               independent auditor reports for fiscal years 2011, 2012, and 2013.

           •   HUD’s files for the Authority.

We also interviewed the Authority’s employees and HUD staff.

We reviewed 100 percent of the Authority’s disbursements of its Public Housing Operating and
Section 8 program funds for the randomly selected periods October 1 through December 31,
2011 (261 checks totaling $145,003), and June 1 to September 30, 2013 (355 checks totaling
$174,768). We also reviewed 100 percent of the Authority’s credit card transactions from
October 1, 2011, through September 30, 2013; thus 142 bank credit card purchases totaling
$24,703. We reviewed the disbursements to determine whether the costs were necessary and
reasonable.

During our audit period October 1, 2011, through September 30, 2013, we conducted an analysis
of the Authority’s check register, and identified 11 contractors or vendors that received payments
in excess of $1,000 but under $25,000 totaling $135,488. We randomly selected for review the
contracts for 3 of the 11 contractors or vendors which collectively received payments totaling
$38,540 (28 percent of the total), for compliance with HUD’s and the Authority’s small purchase
procurement requirements.

We selected another contractor that received payments totaling $39,438 in fiscal year 2012.
Although the procurement occurred in April 2011, since this was the only contractor that
received payments totaling more than $25,000, we reviewed the Authority’s procurement of the

                                                6
contractor for compliance with HUD’s and the Authority’s procurement requirements under the
sealed bids procurement method.

To achieve our audit objective, we relied in part on computer-processed data in the Authority’s
database. We used the computer-processed data to select a sample of client files for review.
Although we did not perform a detailed assessment of the reliability of the data, we did perform
a minimal level of testing and found the data to be adequate for our purposes.

We also provided our discussion draft audit report to the Authority and HUD’s staff during the
audit. We asked the Authority’s executive director to provide written comments on our
discussion draft audit report by June 30, 2014. The executive director chose not to comment on
the report.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                                7
                              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:

               •      Effectiveness and efficiency of operations – Policies and procedures that
                      management has implemented to reasonably ensure that a program meets
                      its objectives.

               •      Reliability of financial reporting – Policies and procedures that
                      management has implemented to reasonably ensure that valid and reliable
                      data are obtained, maintained, and fairly disclosed in reports.

               •      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.

               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.

                                                 8
           We evaluated internal controls related to the audit objective in accordance with
           generally accepted government auditing standards. Our review of internal
           controls was not designed to provide assurance regarding the effectiveness of the
           internal control structure as a whole. Accordingly, we do not express an opinion
           on the effectiveness of the Authority’s internal control.

Separate Communication of
Minor Deficiencies

           We reported minor deficiencies to both HUD and the auditee separately in a
           memorandum.




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