oversight

Southern Nevada Regional Housing Authority, Las Vegas, NV, Did Not Always Follow Requirements for Its Operating Funds and Public Housing Assets

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-04-17.

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

OFFICE OF AUDIT
REGION 9
LOS ANGELES, CA




      Southern Nevada Regional Housing Authority
                    Las Vegas, NV

               Public Housing Operating Funds




2014-LA-1002                                    APRIL 17, 2014
                                                        Issue Date: April 17, 2014

                                                        Audit Report Number: 2014-LA-1002




TO:            Jesse Wu, Acting Director, Office of Public Housing, San Francisco, 9APH

               //SIGNED//
FROM:          Tanya E. Schulze, Regional Inspector General for Audit, Los Angeles Region,
               9DGA


SUBJECT:       Southern Nevada Regional Housing Authority, Las Vegas, NV, Did Not Always
               Follow Requirements for Its Operating Funds and Public Housing Assets


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

    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
213-534-2471.
                                           April 17, 2014
                                           Southern Nevada Regional Housing Authority, Las
                                           Vegas, NV, Did Not Always Follow Requirements for Its
                                           Operating Funds and Public Housing Assets



Highlights
Audit Report 2014-LA-1002


 What We Audited and Why                    What We Found

We audited the Southern Nevada             We determined that the allegations in the complaint
Regional Housing Authority’s use of        had merit. The Authority did not always use its public
U.S. Department of Housing and Urban       housing operating funds in accordance with HUD
Development (HUD) public housing           requirements. Specifically, it used funds to pay for
operating funds. We audited the            ineligible expenses and did not comply with HUD
Authority based on a complaint alleging    procurement regulations. It also did not have adequate
that the Authority (1) failed to           inventory procedures in place to maintain effective
competently oversee the Federal dollars    control of and accountability for its assets. As a result,
entrusted to it and (2) did not have       the Authority paid more than $507,000 in operating
inventory controls in place to prevent     funds for ineligible costs, and HUD had no assurance
the fraudulent use of supplies. Our        that more than $187,000 paid for janitorial services
audit objective was to determine           was the best value. Further, we were unable to locate
whether the Authority used its operating   appliances, valued at $5,500, during our review.
funds in accordance with HUD
requirements.


 What We Recommend

We recommend that HUD require the
Authority to (1) reimburse its operating
fund $507,459 for ineligible costs; (2)
develop policies and procedures and
provide staff with training on operating
funds, procurement, contracting, and
inventory controls; (3) issue a new
janitorial services request for proposal
and provide support that the $187,731
paid for janitorial services represented
the best value to HUD or reimburse its
operating fund from non-Federal funds;
and (4) locate the missing appliances or
reimburse its operating fund $5,500
from non-Federal funds.
                           TABLE OF CONTENTS

Background and Objective                                                         3

Results of Audit

      Finding 1:    The Authority Did Not Always Administer Its Public Housing
                    Operating Funds in Accordance With HUD Regulations           4
      Finding 2:    The Authority Did Not Maintain Effective Control of and
                    Accountability for Its Assets                                9

Scope and Methodology                                                            12

Internal Controls                                                                13

Appendixes
A.    Schedule of Questioned Costs                                               15
B.    Auditee Comments and OIG’s Evaluation                                      16
C.    Criteria                                                                   27




                                            2
                      BACKGROUND AND OBJECTIVE

On January 1, 2010, the Housing Authority of the City of Las Vegas and the Clark County
Housing Authority combined to form the Southern Nevada Regional Housing Authority. The
Authority absorbed the North Las Vegas Housing Authority on January 1, 2011. The Authority
has a 13-member board of commissioners that has fiduciary responsibility as well as
responsibility for establishing and overseeing policy for the agency. The Authority’s main
administrative office is located at 340 North 11th Street, Las Vegas, NV.

Public housing was established to provide decent and safe rental housing for eligible low-income
families, the elderly, and persons with disabilities. The U.S. Department of Housing and Urban
Development (HUD) provides funds to local housing agencies that manage the housing for low-
income residents at rents they can afford. The public housing operating fund was developed
under section 9(3) of the Housing Act of 1937. Operating funds are available to public housing
agencies for the operation and management of public housing.

HUD authorized the Authority the following financial assistance for its public housing operating
fund program for calendar years 2012 and 2013.


                      Calendar year            Public housing program
                                                  authorized funds
                           2012                     $12,484,607
                           2013                      $12,629,081
                           Total                     $25,113,688

Our objective was to determine whether the Authority used its operating funds in accordance
with HUD requirements.




                                               3
                                 RESULTS OF AUDIT


Finding 1: The Authority Did Not Always Administer Its Public
           Housing Operating Funds in Accordance With HUD
           Regulations
The Authority did not always administer its public housing operating funds in accordance with
HUD regulations. Specifically, it (1) inappropriately paid for a large landscape project, (2) used
funds for other ineligible expenses, (3) did not ensure that it received the best value when
procuring janitorial services, and (4) did not follow procurement and contracting requirements
for security services. These deficiencies occurred because Authority personnel lacked sufficient
knowledge of public housing operating fund regulations and chose not to follow procurement
requirements. As a result, the Authority used more than $507,000 in operating funds for
ineligible costs and could not support that more than $187,000 spent for janitorial services
represented the best value to HUD. Also, the Authority inappropriately restricted competition
and did not ensure that all bidders received fair, impartial, and equitable treatment.


 The Authority Inappropriately
 Used $485,190 in Operating
 Funds for Landscaping
 Redevelopment

               The Authority inappropriately used $485,190 in operating funds for desert
               landscaping redevelopment at one of its public housing developments. The
               Housing Act of 1937, as amended, states that operating funds are for the operation
               and management of public housing. The Act also states that capital funds are
               available to carry out capital and management activities, such as the development,
               financing, and modernization of public housing projects, including the redesign,
               reconstruction, and reconfiguration of public housing sites and buildings. Since
               the desert landscaping project was a complete redesign of the public housing
               development’s landscape, the Authority should have used capital funds to pay for
               the project. However, the Authority’s director of finance misunderstood HUD’s
               operating fund requirements. The director stated that he believed the Authority
               could use operating funds to pay for the desert landscaping redevelopment project
               because it was deferred maintenance. However, the project was more than
               deferred maintenance and not an eligible use of operating funds. As a result, the
               Authority’s use of $485,190 in operating funds for the desert landscaping
               redevelopment was ineligible.




                                                4
The Authority Used $22,289 in
Operating Funds for Other
Ineligible Expenses

           The Authority used $22,289 in operating funds for other ineligible expenses. For
           example, it used operating funds for employee bottled water and miscellaneous
           entertainment expenses related to resident activities, including food, supplies, and
           tickets to a sporting event. The following table identifies the amount spent on
           ineligible activities.

                   Ineligible expense                     Amount
             Bottled water for employees                  $12,520
             Entertainment and social                      $6,650
             events
             Holiday celebrations                          $2,494
             Meals at resident meetings                      $625
                                      Total               $22,289

           HUD regulations at 2 CFR (Code of Federal Regulations) Part 225 state that
           entertainment costs—including amusement, diversion, and social activities and
           any costs directly associated with such costs, such as tickets to sports events and
           meals—are ineligible. Also, costs of goods or services for the personal use of the
           governmental unit’s employees are ineligible. Therefore, the costs associated
           with the bottled water, entertainment, social events, and holiday celebrations were
           an ineligible use of operating funds. Also, according to Public and Indian
           Housing Notice 2013-21, the Authority may provide refreshments and light
           snacks at resident meetings. However, the Authority provided meals, rather than
           light snacks, at some of its resident meetings.

           The Authority stated that it procured bottled water because the water in the Las
           Vegas area was hard and did not taste good. The executive director was unaware
           that the purchase of bottled water was contrary to HUD’s requirements restricting
           the purchase of goods for the personal use of Authority employees. Also, the
           director of supportive services was not aware of HUD regulations regarding the
           eligible use of operating funds for tenant participation activities. Instead, she
           continued the practices of the former director of supportive services. She stated
           that the finance director had recently given her the regulations and she would
           comply with them. As a result of the Authority’s lack of knowledge of HUD
           requirements, it used $22,289 for ineligible expenses.




                                              5
The Authority Did Not Obtain
Janitorial Services in
Accordance With Procurement
Requirements

           The Authority did not obtain janitorial services in accordance with HUD
           procurement requirements. Specifically, it did not develop a detailed and clear
           description of janitorial services requirements and did not obtain and evaluate
           pricing for option years. The Authority failed to develop a detailed and clear
           description of the scope of work in violation of 24 CFR 85.36 when it did not

           •   Clearly identify which buildings needed cleaning,
           •   Provide the square footage of each building, or
           •   Post questions and answers from site visits for all prospective bidders.

           The lack of details in the scope of work led to confusion among bidders and a
           wide disparity in contractor bids. The contracting officer stated that it was
           difficult to develop a scope of work with which each property manager could
           agree. However, despite this difficulty, the contracting officer failed to identify
           discrepancies in bids and awarded the contract without determining why the bid
           amounts differed so greatly. The contracting officer did not ensure that each
           bidder received fair, impartial, and equitable treatment as required by HUD
           Handbook 7460.8, REV-2. As a result of the lack of detail and clarity in the
           scope of work, the Authority had no assurance that the $187,731 it paid for
           janitorial services represented the best value to HUD.

           The Authority awarded two contracts based on the request for proposal, and each
           contract contained a base year with 4 option years. However, the Authority did
           not receive option-year pricing and did not evaluate the pricing as part of its
           award decision in violation of HUD Handbook 7460.8, REV-2. Contracting
           personnel were aware of the requirement to obtain option-year pricing. However,
           the Authority overlooked this requirement, awarded the contracts, and exercised
           the 2014 option year without obtaining the required pricing.

The Authority Did Not Follow
Procurement and Contracting
Requirements for Security
Services

           The Authority did not follow HUD procurement requirements or its own
           procurement policy when procuring security services. The Authority violated the
           requirements of HUD Handbook 7460.8, REV-2 when it allowed a security
           contract to exceed 5 years. After 5 years, the Authority was required to conduct a
           new procurement. The security contract expired on September 30, 2010. Instead
           of issuing a new request for proposal for the services, the Authority amended the


                                             6
             contract to extend it 1 year beyond the maximum limit to September 30, 2011.
             The Authority then issued purchase orders for another 4 months until it was able
             to competitively award a new contract in February 2012. During our audit period,
             the Authority paid $110,000 to the security contractor after the maximum 5-year
             limit. The Authority was aware of the 5-year requirement. However, the
             Authority’s supervisory contract administrator stated that the contract terms
             expired shortly after the creation of the new regional Authority and there was an
             adjustment period. As a result, instead of issuing a new request for proposal, the
             Authority issued a contract amendment to extend the contract. We compared the
             prices from the new security contract to those paid to the security contractor
             during the period in question and found that the prices paid were comparable to
             those awarded in the new contract. Therefore, we are not questioning the
             reasonableness of the costs paid.

Conclusion

             The Authority did not always administer its public housing operating funds in
             accordance with HUD requirements. It inappropriately used its operating funds
             on a large landscape project and other ineligible expenditures. The Authority also
             did not follow procurement and contracting requirements for janitorial and
             security services. These conditions occurred because Authority personnel lacked
             sufficient knowledge of and chose not to follow HUD requirements. As a result,
             the Authority spent more than $507,000 in operating funds for ineligible
             expenses, and HUD had no assurance that more than $187,000 spent for janitorial
             services represented the best value. Also, the Authority inappropriately restricted
             competition and did not ensure that all bidders received fair, impartial, and
             equitable treatment.

Recommendations

             We recommend that the Acting Director of HUD’s San Francisco Office of Public
             Housing require the Authority to

             1A.    Reimburse its operating fund $485,190 from its capital funds if
                    appropriate or from non-federal funds for the ineligible landscape project.

             1B.    Reimburse its operating fund $22,289 from non-Federal funds for
                    ineligible expenses.

             1C.    Provide support that the $187,731 it paid for janitorial services was the
                    best value and greatest overall benefit to HUD or repay its operating fund
                    for the costs deemed to be unreasonable.

             1D.    Issue a new request for proposal for janitorial services to ensure that
                    bidders receive fair, impartial, and equitable treatment.


                                              7
1E.   Develop procedures to ensure that it spends operating funds only for
      eligible expenses.

1F.   Provide training to its employees to ensure compliance with HUD
      regulations regarding the eligible use of operating funds and procurement.




                               8
                                 RESULTS OF AUDIT


Finding 2: The Authority Did Not Maintain Effective Control of and
           Accountability for Its Assets
The Authority did not maintain effective control of and accountability for its assets. Specifically,
it did not adequately track appliances from its warehouse to its housing units. This condition
occurred because the Authority lacked adequate inventory controls to account for and safeguard
appliances and Authority personnel did not accurately complete paperwork when taking
inventory from the warehouse or borrowing appliances from a different asset management
project. As a result, the Authority could not account for 12 appliances, valued at $5,500.
Further, there were concerns that additional appliances had been misplaced or misappropriated.


 The Authority Did Not
 Adequately Track Appliances

               The Authority’s inventory procedures were not sufficient to track appliances from
               its warehouse to public housing units. We performed an inspection of
               refrigerators and ranges at the Authority’s central warehouse and four of its asset
               management projects. We sampled 31 of 282 appliances. Of the 31, we found
               issues with 16 of them (51.6 percent); 12 (38.7 percent) were missing, and the
               Authority installed 4 (12.9 percent) in units other than those noted on the
               warehouse inventory log. The following table identifies the missing appliances
               and dollar amounts associated with each appliance.

                     Asset tag number        Type of appliance      Amount
                     R4514                   Refrigerator             $465
                     R4398                   Refrigerator             $465
                     R4403                   Refrigerator             $465
                     R4388                   Refrigerator             $465
                     R4393                   Refrigerator             $465
                     R4351                   Refrigerator             $465
                     R4508                   Refrigerator             $465
                     R4511                   Refrigerator             $465
                     S4578                   Range                    $427
                     S4293                   Range                    $451
                     S4323                   Range                    $451
                     S4337                   Range                    $451
                     Total                                           $5,500

               Regulations at 24 CFR 85.20 state that effective control and accountability must
               be maintained for all grant and subgrant cash, real and personal property, and


                                                 9
            other assets. Grantees and subgrantees must adequately safeguard all such
            property and ensure that it is used solely for authorized purposes. The Authority’s
            inventory procedures were not adequate to ensure that it safeguarded its
            appliances and used them solely for authorized purposes. As a result of this
            weakness, the Authority was unable to locate 12 appliances during our review and
            had variances in its appliance inventories during its end-of-year inventory
            reviews.

Authority’s Inventory Controls
Were Not Adequate

            The Authority’s controls were not adequate to account for and safeguard its
            appliances. The Authority maintained handwritten logs of all assets over $100.
            The logs contained the asset tag numbers, serial numbers, and dates on which the
            Authority received the items. The Authority kept the logs at the warehouse, and
            there were no backup logs in case of loss or damage. The Authority’s work order
            computer system had the capability to record the asset tag numbers and serial
            numbers in searchable fields. This capability would allow the Authority to easily
            identify the unit location of each appliance. However, the Authority entered the
            serial numbers and tag numbers into the comment section of the work order,
            which was not a searchable field and required the property manager to manually
            search through work orders to locate appliances. In one instance during our
            inspection, a property manager searched through work orders but was unable to
            identify where item R4351 was located.

Authority Personnel Did Not
Comply With Authority
Inventory Policies

            Authority personnel did not comply with the Authority’s written inventory
            policies. The warehouse manager stated that maintenance supervisors were
            responsible for identifying the exact address of the asset. The supervisor was
            required to sign off on all assets received. Also, the Authority’s warehouse
            procedures stated that when an item was picked up from the warehouse, the
            employee was required to complete the warehouse inventory log and identify the
            specific installation address for the appliance. However, Authority personnel did
            not always recognize the importance of inventory control. For example,
            Authority personnel did not always identify the address for each appliance or
            identified the incorrect address when taking an appliance from the warehouse.
            Authority personnel also did not always fill out the proper paperwork when they
            borrowed an appliance from a different asset management project. In one
            instance, an Authority maintenance supervisor stated that he took a refrigerator
            with him to put into the maintenance shop when he transferred to a different
            project. The maintenance supervisor did not document the transfer. As a result,
            we were unable to verify the location of the refrigerator.


                                            10
Conclusion

             The Authority did not maintain effective control of and accountability for its
             assets to ensure it used assets for authorized purposes only. This condition
             occurred because the Authority did not have adequate controls in place and
             Authority personnel did not always comply with the Authority’s written policies
             and procedures. As a result, the Authority could not account for all of its assets
             during its end-of-year inventory inspections and could not account for 12
             appliances, valued at $5,500, during our inspection.

Recommendations

             We recommend that the Acting Director of HUD’s San Francisco Office of Public
             Housing require the Authority to

             2A.    Locate the 12 missing appliances or reimburse HUD $5,500 from non-
                    Federal funds.

             2B.    Reconcile the inventory variances in its most recent inventory audit to
                    ensure accountability for all appliances.

             2C.    Develop inventory controls that ensure effective control of, and
                    accountability, for assets.

             2D.    Ensure that all applicable employees are provided training on inventory
                    policies and procedures.




                                              11
                        SCOPE AND METHODOLOGY
Our audit period covered October 1, 2011, to September 30, 2013, and was expanded when
necessary. We conducted our fieldwork at the Authority’s office located at 340 North 11th
Street, Las Vegas, NV, from October 2013 to February 2014.

To accomplish our objective, we

   •   Reviewed HUD regulations and reference materials for public housing operating funds;

   •   Reviewed Authority policies and procedures;

   •   Interviewed Authority and HUD personnel;

   •   Reviewed the Authority’s contract log and contract files;

   •   Reviewed the Authority’s vendor ledger, petty cash fund, and supporting documentation;

   •   Reviewed the Authority’s annual inventory inspection records; and

   •   Performed an inspection of inventory at the central warehouse and four asset
       management projects.

We selected a nonstatistical sample of eight contracts based on dollar amount and our concerns
regarding the eligible use of funds. We used the Authority’s vendor ledger and contract log to
identify all vendors awarded contracts. Our universe included vendors that received more than
$10,000 during our audit period. The Authority paid more than $33.7 million to 164 vendors.
Our sample represented more than $2.4 million, or 7.1 percent of the total amount spent. We
reviewed the contracts to determine whether the Authority complied with HUD procurement
regulations and whether the expenditures were eligible costs under the operating fund program.

The Authority had a total of 21 asset management projects. We nonstatistically selected four
properties based on the variances in appliance inventories reported in the end-of-year inventory
inspection conducted by the Authority. We also selected the warehouse to inspect due to the
large amount of appliances located there. Using the warehouse tracking logs for appliances, we
identified a universe of 282 appliances, from which we selected a nonstatistical sample of 31
appliances. We inspected the location of each appliance in our sample to determine whether the
Authority adequately tracked its appliances.

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




                                               12
                              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:

               •      Policies and procedures to ensure that the Authority uses its public
                      housing operating funds in accordance with HUD requirements.
               •      Policies and procedures to ensure that the Authority maintains effective
                      control of and accountability for its assets to ensure that they are used only
                      for authorized purposes.

               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.

 Significant Deficiencies

               Based on our review, we believe that the following items are significant deficiencies:

               •      The Authority did not use its public housing operating funds for eligible
                      expenses and did not follow HUD procurement regulations (see finding 1).




                                                 13
•   The Authority did not establish inventory procedures to safeguard its assets
    and ensure that assets were used solely for authorized purposes (see finding
    2).




                             14
                                    APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

                   Recommendation
                                         Ineligible 1/    Unsupported 2/
                       number

                           1A                 $485,190
                           1B                  $22,289
                           1C                                    $187,731
                           2A                                      $5,500
                          Total               $507,479           $193,231

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. In this case, ineligible costs were funds that the Authority spent
     on a large landscape project, bottled water, and other miscellaneous ineligible items.

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. In this case, unsupported costs include the
     amount paid for improperly procured janitorial services and the cost of missing
     appliances.




                                             15
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1



Comment 2




                         16
Comment 3




Comment 4




            17
Comment 4




Comment 5

Comment 6

Comment 7




            18
Comment 8




            19
Comment 9




Comment 10




             20
Comment 11




Comment 12




             21
Comment 13




             22
23
                         OIG Evaluation of Auditee Comments

Comment 1   We appreciate that the Authority will address the audit findings and
            recommendations. In our evaluation of the Authority’s response, we reviewed the
            Authority’s supporting documentation in tabs 1 through 5. We did not include
            this in the report because it was too voluminous; however, it is available upon
            request.

Comment 2   The Authority provided an updated response to the audit findings and
            recommendations on April 10, 2014. In our evaluation of the Authority’s
            response, we reviewed the updated response and supporting documentation. We
            also included pages 1 through 7 of the updated response. The attachments
            provided to support the update are not included in this report but are available
            upon request.

Comment 3   The Authority needs to obtain approval from HUD to use its 2013 capital fund
            grant to reimburse its conventional low rent program. We revised
            recommendation 1A for HUD to consider reimbursement from capital funds if
            appropriate.

Comment 4   We are pleased that the Authority has already taken action to train its employees
            regarding the eligible use of HUD funds. The Authority is required to provide
            supporting documentation regarding training of its employees and resident
            councils and policy changes to HUD during audit resolution.

Comment 5   Addendum 1 responded to questions asked during the pre-bid meeting. There is
            no evidence that the Authority posted answers to questions asked during the
            subsequent site visits. Also, we noticed that addendum 1 provided in tab 2 of the
            response was not the same addendum that the Authority posted on its website and
            contained in its contract file.

Comment 6   The Authority provided the square footage in addendum 3 and not addendum 2 as
            stated. Addendum 2 only refers to the submission deadline being extended and
            did not mention the square footage. Addendum 3 dated November 6, 2012,, only
            one day prior to the bid submission date, indicated that at least one potential
            contractor did not receive the square footage. Also, we spoke with two of the
            contractors. One contractor stated that they received the square footage the night
            before the bids were due and did not have time to adjust his bid. The other
            contractor stated that he never received the square footage data.

Comment 7   Section 2.2 of the request for proposal does in fact list all of the Authority’s
            properties. There are 46 total properties listed. These properties included
            administrative buildings, developments and offices, non-housing properties and
            warehouses. In addendum 1 posted on its website, the Authority stated that it had
            a budget for 18 of the properties. However, it did not state which 18 properties
            had budgets. As a result, each contractor bid on different authority properties.



                                            24
Comment 8     Contractors did not submit any questions to the contracting office because the site
              managers responded to their questions. Unfortunately, the Authority did not
              document these questions and answers to ensure all contractors received the same
              information. Section 1.4 of Addendum 1 posted to the Authority’s website states
              that there should be no communications between the bidders and the property
              managers. However, in section 1.5 the Authority instructed bidders to contact the
              property managers to set up site visits. Two of the contractors we spoke to said
              that during the site visits the property managers answered all questions. The
              Authority never posted the questions and answers to ensure that the bidders had
              the same data.

Comment 9     We reviewed all of the bids that the Authority received and found that the bids
              were completely different from one another making it very difficult to compare.
              For example, paragraph 1.10 of addendum 1 required each bidder to submit a bid
              based on a five day cleaning schedule. However, not all bidders submitted bids
              based on the five day schedule. For example, the lowest bidder bid one building
              based on a one day a week schedule. Differences like this caused a large
              discrepancy in the bid amounts and made it difficult to compare one bid to
              another.

Comment 10 We adjusted the report to state that Authority personnel overlooked HUD’s
           requirements. The Authority cited HUD Handbook 7460.8, Rev-2, paragraph
           10.1(C)(3)(iii) as support for not violating HUD regulations. However, this
           paragraph applies to indefinite quantity type contracts. The Authority awarded a
           requirements contract. As a result the reference does not pertain to the janitorial
           contract. Also, section 10.1 of the handbook only refers to the different types of
           contracts and does not provide guidance regarding option years.

Comment 11 We disagree that the Authority followed applicable procurement practices. The
           former Las Vegas Housing Authority awarded contract C06026 for security
           services in May of 2006. The initial year of the contract was from May 24, 2006
           through September 30, 2006. This was part of the contract term and was not short
           gap coverage as stated by the Authority. The Authority then amended the
           contract to exercise four option years with the last option year to expire on
           September 30, 2010. As noted in the audit report, HUD regulations state that
           contracts shall not exceed a period of five years, including options for renewal or
           extension. Contracts that exceed five years are viewed as restrictive of
           competition and in violation of 24 CFR 85.36. Also, HUD regulations state that
           planning is essential to managing the procurement function. Careful advanced
           planning provides the Authority with adequate time to accomplish its procurement
           actions. If the Authority adequately planned its procurement actions, it would
           have awarded the new security contract in a timely manner and would have
           avoided exceeding the five year limit on the previous security contract.




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Comment 12 We are encouraged the Authority has already started to implement procurement
           training to its employees. The Authority must provide support to HUD during the
           audit resolution process for the training it provides.

Comment 13 We disagree that the Authority’s internal control procedures over its inventory
           were sufficient. As stated in the internal controls section of the audit report, a
           significant deficiency in internal controls 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 impairments to effectiveness or efficiency of operations. In this case,
           the Authority was unable to find seven appliances. This is an indication of a
           significant deficiency in its controls over its inventory. We are encouraged that
           the Authority is taking steps to improve its controls.




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Appendix C

                                          CRITERIA

Finding 1

Housing Act of 1937 as amended

Section 9(d)(1), IN GENERAL.—The [HUD] Secretary shall establish a Capital Fund for the
purpose of making assistance available to public housing agencies to carry out capital and
management activities, including (A) the development, financing, and modernization of public
housing projects, including the redesign, reconstruction, and reconfiguration of public housing
sites and buildings (including accessibility improvements) and the development of mixed-finance
projects.

Section 9(e)(1), IN GENERAL.—The Secretary shall establish an Operating Fund for the purpose
of making assistance available to public housing agencies for the operation and management of
public housing.

2 CFR Part 225 – Cost Principles for State, Local, and Indian Tribal Governments

Appendix B, paragraph14, Entertainment. Costs of entertainment, including amusement,
diversion, and social activities and any costs directly associated with such costs (such as tickets
to shows or sports events, meals, lodging, rentals, transportation, and gratuities) are unallowable.

Appendix B, paragraph 20, Goods or services for personal use. Costs of goods or services for
personal use of the governmental unit’s employees are unallowable regardless of whether the
cost is reported as taxable income to the employees.

Public and Indian Housing Notice 2013-21 – Guidance on the Use of Tenant Participation
Funds

Paragraph 7, Allowable and Unallowable Activities. The following is not a comprehensive list of
allowable and unallowable activities. However, this represents a starting framework that PHAs
[public housing agencies] may use in establishing their TP [tenant participation] policies and for RCs
[resident council] to assess the suitability of requests for the use of TP funds. Allowable activities
include reasonable refreshment and light snack costs that are directly related to resident meetings for
the activities discussed in this section.

24 CFR Part 85 – Administrative Requirements for Grants and Cooperative Agreements to
State, Local, and Federally Recognized Indian Tribal Governments

85.36(c), Competition. All procurement transactions will be conducted in a manner providing
full and open competition…



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85.36(c)(3)(i). Incorporate a clear and accurate description of the technical requirements for the
material, product, or service to be procured. Such description shall not, in competitive
procurements, contain features which unduly restrict competition. The description may include a
statement of the qualitative nature of the material, product or service to be procured, and when
necessary, shall set forth those minimum essential characteristics and standards to which it must
conform if it is to satisfy its intended use. Detailed product specifications should be avoided if at
all possible. When it is impractical or uneconomical to make a clear and accurate description of
the technical requirements, a brand name or equal description may be used as a means to define
the performance or other salient requirements of a procurement. The specific features of the
named brand which must be met by offerors shall be clearly stated.

85.36(d)(1), Procurement by small purchase procedures. Small purchase procedures are those
relatively simple and informal procurement methods for securing services, supplies, or other
property that do not cost more than the simplified acquisition threshold fixed at 41 U.S.C.
[United States Code] 403(11) (currently set at $100,000). If small purchase procedures are used,
price or rate quotations shall be obtained from an adequate number of qualified sources.

HUD Handbook 7460.8, REV-2 – Procurement Handbook for Public Housing Agencies

Paragraph 2.4, Responsibility of the Contracting Officer. Regardless of the authority delegated,
it is the responsibility of the Contracting Officer to:
         A. Use sound judgment in accomplishing the procurement activities of the PHA;
         B. Ensure that bidders and contractors receive fair, impartial, and equitable treatment…

Paragraph 5.3(A), Purchases Above the Micro Purchase Limit. The PHA must solicit price
quotes from an adequate number of qualified sources (generally defined as not less than three,
except in the case of Micro Purchases, below). The PHA’s Procurement Policy shall state any
specific policy (e.g., requirement for three offers).

Paragraph 10.8(C)(1), Price. The option to extend the term of the contract or to order additional
quantities may only be exercised if the contract contained an options clause and if a price for the
additional supplies or services was included. An unpriced option is considered a new
procurement and, therefore, may not be used.

Paragraph 10.8(C)(2), Time and Quantity. Contracts shall not exceed a period of five years,
including options for renewal or extension. (For PHAs still operating under the “old” ACC
[annual contributions contract] – form HUDs-53010 and 53011 – the maximum contract term is
two years.) Contracts, other than energy performance contracts, with terms, plus extensions, that
exceed a total of five years are viewed as restrictive of competition and in violation of 24 CFR
85.36(c). A Field Office may approve contracts in excess of five years if it determines there is
no practical alternative. Energy performance contracts may be for a period not to exceed 20
years in accordance with 24 CFR Part 990 and Public and Indian Housing Notice 2006-6. A
PHA must also follow its own procurement policy and any applicable local or State laws and
regulations. There must be a finite period for a contract, including all options, and a specific
limit on the total quantity or maximum value of items to be purchased under an option.




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Paragraph 10.8(C)(3)(b). If the PHA decides to include options in a solicitation, the pricing of
the options should be evaluated as part of the overall contract award.

Southern Nevada Regional Housing Authority Procurement Policy

Paragraph 4.9(a). SNRHA [the Authority] must solicit at least three offerors for price
quotations.

Finding 2

24 CFR Part 85 – Administrative Requirements for Grants and Cooperative Agreements to
State, Local, and Federally Recognized Indian Tribal Governments

85.20(b)(3), Internal control. Effective control and accountability must be maintained for all
grant and subgrant cash, real and personal property, and other assets. Grantees and subgrantees
must adequately safeguard all such property and must assure that it is used solely for authorized
purposes.

Southern Nevada Regional Housing Authority Warehouse Procedures

Procedure for borrowing/loaning appliances

The appropriate clipboard must be completed for an appliance to be released from the
warehouse.

Record ALL appropriate information on the clip board. It is the AMP’s [asset management
project] responsibility to provide the Unit Number that the item is being issued to. The item
CANNOT be issued if the Unit Number is not provided.




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