oversight

HUD's Monitoring of Public Housing Authority Demolition and Disposition Projects Was Not Always Adequate to Ensure Data in IMS/PIC Was Accurate

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-06-11.

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

 OFFICE OF AUDIT
  D
 REGION 2
 NEW YORK-NEW JERSEY




               U.S. Department of Housing
                and Urban Development
                     Washington, DC

         Monitoring of Public Housing Demolition
             and Disposition Unit Inventory
                    Data in IMS/PIC




2014-NY-0002                                JUNE 11, 2014
                                                  Issue Date: June 11, 2014

                                                  Audit Report Number: 2014-NY-0002




TO:            Donald Lavoy
               Deputy Assistant Secretary for the Real Estate Assessment Center, PX

               Dominique G. Blom
               Deputy Assistant Secretary for the Office of Public Housing Investments, PI

               Lindsey Reames
               Acting Deputy Assistant Secretary for Field Operations, PQ

               Craig T. Clemmensen
               Director, Departmental Enforcement Center, CV

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

SUBJECT:       HUD’s Monitoring of Public Housing Authority Demolition and Disposition
               Projects Was Not Always Adequate to Ensure Data in IMS/PIC Was Accurate

    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General (OIG), final audit report on our review of HUD’s controls to ensure the
reliability of public housing authority inventory data in HUD’s Inventory Management System /
Public and Indian Housing Information Center (IMS/PIC).

    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.
                                 June 11, 2014

                                 HUD’s Monitoring of Public Housing Authority
                                 Demolition and Disposition Projects Was Not Always
                                 Adequate to Ensure Data in IMS/PIC Was Accurate



Highlights
Audit Report 2014-NY-0002


 What We Audited and Why                   What We Found

We audited the U.S. Department of         HUD’s process for monitoring public housing
Housing and Urban Development’s           authority (PHA) units approved for demolition and
(HUD) Inventory Management System-        disposition was not always adequate to ensure that
Public and Indian Housing Information     IMS/PIC data was accurate. We attribute this
Center (IMS/PIC) inventory data related   condition to a lack of standardized field office
to public housing demolition and          procedures, inadequate guidance to PHA officials for
disposition projects. The objective of    reporting the status of their demolition and disposition
the audit was to determine whether        projects, and HUD’s failure to correct PHA-reported
HUD adequately monitored the              unit inventory errors in a timely manner.
demolition and disposition projects to    Consequently, HUD field office staff was not always
ensure the reliability of IMS/PIC         aware of the status of PHA demolition and disposition
inventory data and awarded appropriate    projects, IMS/PIC did not always have up-to-date
Capital Fund program funding related to   information on PHA units approved for demolition and
these projects.                           disposition, and HUD officials did not identify that
                                          some PHAs incorrectly certified the number of their
 What We Recommend                        standing units, resulting in 8 of the 14 PHAs reviewed
                                          overstating the number of units eligible for Capital
                                          Fund program funding and receiving $554,714 to
We recommend that HUD officials (1)       which they were not entitled.
clarify guidance to public housing
authorities (PHA) for reporting on the
status of demolition and disposition
projects and updating inventory data in
IMS/PIC upon the completion of the
projects, (2) strengthen controls in
IMS/PIC to ensure that HUD field
offices have adequate information to
monitor the projects and related
inventory data, (3) strengthen controls
to ensure that reported data errors are
adequately resolved, and (4) establish
procedures to ensure field offices
properly monitor the projects and
determine if PHA-certified inventory
data is accurate.
                            TABLE OF CONTENTS

Background and Objective                                                           3

Results of Audit

Finding: HUD’s Monitoring of Public Housing Authority Demolition and Disposition
         Projects Was Not Always Adequate to Ensure IMS/PIC Data Was Accurate      5

Scope and Methodology                                                              11

Internal Controls                                                                  13

Appendixes
A.    Schedule of Questioned Costs                                                 15
B.    Auditee Comments and OIG’s Evaluation                                        16
C.    PHA Reporting Deficiencies                                                   17




                                            2
                      BACKGROUND AND OBJECTIVE

The Office of Public and Indian Housing (PIH) developed and implemented the Public and
Indian Housing Information Center (PIC) on December 15, 1999, to facilitate a more timely and
accurate exchange of data between public housing authorities (PHA) and the U.S. Department of
Housing and Urban Development (HUD) by allowing PHAs to submit information to HUD over
the Internet. PIC has eight modules and a series of submodules that maintain detailed
information on PHAs. PIC has evolved into the PIH Inventory Management System (IMS), now
referred to as IMS/PIC, which is responsible for gathering and maintaining data on PIH’s
inventory of PHAs, including developments, buildings, units, agency officials, HUD offices and
staff, and IMS/PIC users.

IMS/PIC records detailed building and unit inventory data on 1.1 million public housing units
and tenant family data for 3.3 million households assisted under HUD’s low-rent and Housing
Choice Voucher programs. IMS/PIC is also used for various HUD administration functions,
including determining PHA annual Public Housing Capital Fund program formula grant funding.
HUD’s Real Estate Assessment Center manages IMS/PIC and provides technical assistance for
the system.

Our audit focused on the Housing Inventory module and its two submodules, the Development
and Inventory Removals submodules, because the information in this module affects the amount
of a PHA’s annual Capital Fund formula grant.

The Development submodule is used by PHA officials to provide building and unit information
to HUD. Once approved by the field office, these data represent a PHA’s official unit inventory.
PHA building and unit data began to be entered into IMS/PIC in October 2000. Summary
building and unit data and detailed demolition and disposition data had previously been
maintained in HUD’s predecessor system, the Integrated Business System. HUD has taken
many actions since transition to IMS/PIC to ensure that PIH inventory data have been
successfully migrated from the Integrated Business System. Further, in an effort to increase
confidence in the accuracy of the Development submodule data, since 2007, HUD has required
PHA officials to certify annually as to the accuracy of the building and unit data they have
submitted to HUD through the CAPFUND B&U Certification page located in the Development
submodule.

The Inventory Removals submodule is used by PHA officials to apply to HUD’s Special
Application Center for approval to demolish or dispose of buildings and units and to remove the
buildings and units from their housing inventory maintained in IMS/PIC upon the completion of
demolition or disposition. Field offices are responsible for monitoring the progress of Special
Application Center-approved demolition and disposition projects for the PHAs in their
jurisdiction and approving the removal of the buildings and units from IMS/PIC inventory data
upon completion of the projects. The Capital Program Division of Public Housing Investments
administers the Capital Fund program, which provides funding annually via a formula to


                                               3
approximately 3,200 PHAs for development, financing, modernization, and management
improvements. The formula calculation is extensively based on the inventory data in IMS/PIC.

The objective of the audit was to determine whether HUD adequately monitored the demolition
and disposition projects to ensure the reliability of IMS/PIC inventory data and awarded
appropriate Capital Fund program funding related to these projects.




                                              4
                                 RESULTS OF AUDIT


Finding: HUD’s Monitoring of Public Housing Authority Demolition
         and Disposition Projects Was Not Always Adequate to Ensure
         IMS/PIC Data Was Accurate
HUD’s process for monitoring PHA units approved for demolition and disposition was not
always adequate to ensure that IMS/PIC data was accurate. We attribute this condition to a lack
of standardized field office procedures, inadequate guidance to PHA officials for reporting on the
status of approved demolition and disposition projects, and HUD’s failure to correct PHA-
reported unit inventory errors in a timely manner. Consequently, HUD field office staff was not
always aware of the status of PHA demolition and disposition projects, IMS/PIC did not always
have up-to-date information on PHA units approved for demolition and disposition, and HUD
officials did not identify that some PHAs incorrectly certified the number of their standing units,
resulting in 8 of the 14 PHAs reviewed overstating the number of units eligible for Capital Fund
program funding and receiving $554,714 to which they were not entitled.


 Monitoring of PHA Demolition
 and Disposition Project Data
 Was Not Always Adequate

               Field office monitoring of PHA demolition and disposition projects was not
               always adequate to ensure that IMS/PIC accurately reflected the status of the units
               involved in the PHAs’ demolition and disposition projects. While HUD field
               offices were required to monitor PHA demolition and disposition projects, field
               office staff lacked standardized monitoring procedures. In addition, PHAs did not
               receive adequate guidance for periodically reporting on the status of their
               demolition and disposition projects and requesting removal of affected units upon
               project completion. Further, reported PHA unit errors in IMS/PIC were not
               always resolved in a timely manner.

 Lack of Standard Field Office
 Monitoring Procedures


               PIH Notice 2005-12 requires that HUD field office staff contact PHA officials
               quarterly for information on the status of their demolition and disposition projects
               as part of HUD’s requirements for reporting data to Congress and for routine
               monitoring of PHA program performance. Further, the Special Application
               Center approval letters sent to PHAs for a demolition or disposition project
               provided that the appropriate field office was responsible for monitoring the
               progress of approved projects; however, information, such as project milestones

                                                 5
           and estimated completion dates, which would facilitate monitoring, was not
           always available to the field office in IMS/PIC. Therefore, each field office had
           to establish its own manual system of monitoring. However, none of the three
           field offices reviewed had written procedures for monitoring PHA demolition and
           disposition projects or provided documentation to support that they contacted the
           PHAs quarterly as required to determine the progress of the project. Further, PIH
           Notice 2005-12 stated that HUD would establish a quality assurance protocol,
           including onsite reviews to ensure that data entered into IMS/PIC are accurate.
           However, the protocol has not been established. In general, field office staff
           involvement was limited to giving final approval for the removal of demolished or
           disposed of units from IMS/PIC after the PHA submitted the removal request. In
           addition, although some field office staff members were aware that PHA officials
           did not report adjustments to their inventory in a timely manner, they did not
           determine the reasons for the delay.

           Further, some field office staff were unfamiliar with the PHA procedures required
           to remove units from the inventory. For example, staff at one field office was not
           aware that a PHA should update its inventory in IMS/PIC within 7 days after the
           completion of the demolition or disposition project. Staff at another field office
           was unaware that PHA officials had to complete a two-step process within
           IMS/PIC before the request to remove inventory would be submitted to the field
           office for approval to remove units from a PHA’s inventory. These officials also
           incorrectly believed that PHA units were removed from the PHA’s inventory once
           the Special Application Center approved the demolition or disposition project
           application and that the units automatically became ineligible for Capital Fund
           formula grant funding.

Lack of Guidance for PHA
Reporting on Demolition and
Disposition Project Status

           Regulations at 24 CFR (Code of Federal Regulations) 970.35 require that PHA
           officials report to HUD when a project is completed and other information that
           HUD may require. However, the regulations lack details on the nature and
           frequency of reporting, and HUD did not provide additional guidance. Further,
           although the Special Application Center letter approving the PHA’s application
           for a demolition or disposition project instructed PHA officials to report the status
           of the project to the appropriate HUD field office, it did not specify the details or
           frequency of the reporting. However, there was no documentation showing that
           any of the 14 PHAs reviewed had periodically informed HUD staff (see appendix
           C) of the ongoing status of their demolition or disposition projects. Therefore,
           field office staff was not afforded the opportunity to identify potential problems
           with the implementation of the projects.




                                             6
    Reported Data Errors Not
    Corrected in a Timely Manner

                HUD’s Capital Fund Data Certification Step by Step Instruction Guide (January
                22, 2009, version) provides that PHA officials should report IMS/PIC inventory
                data errors to HUD’s Technical Assistance Center, which is under the Real Estate
                Assessment Center. The Center assigns a ticket number, which is stored in the
                Customer Assistance Subsystem.1 However, errors reported by PHAs were not
                always corrected in a timely manner to ensure that Capital Fund formula grants
                were accurately awarded. For example, when certifying the number of standing
                units for their fiscal year 2007 Capital Fund formula grant, officials at one PHA
                reported that their public housing unit numbers in IMS/PIC for one partially
                demolished development were incorrect. However, while a ticket had been
                assigned, HUD officials did not have records showing how or when this error was
                corrected. While certifying their fiscal year 2008 Capital Fund formula grant for
                the same development, the PHA officials reported that the demolition had been
                completed and asked HUD to correct IMS/PIC data that did not reflect the status
                of the demolished units. However, this error was not corrected until fiscal year
                2011, although the PHA officials continued to report the error every year from
                fiscal year 2008 to 2011. In addition, these PHA officials reported errors with
                public housing unit numbers at another demolition development each year from
                fiscal year 2009 through 2011 when the error had been corrected.

                Further, while HUD’s Customer Assistance Subsystem indicated that all of those
                tickets had been closed, HUD officials did not have records showing how the
                tickets were closed and whether the Capital Fund formula grants for the
                corresponding years were properly adjusted based on the correct number of units.
                This condition occurred due to weaknesses in resolving reported IMS/PIC
                inventory errors. As a result, HUD lacked assurance that all reported errors were
                adequately resolved before the due date for certification and that Capital Fund
                formula grants were properly adjusted for any inaccurate unit data.

    Unit Status in IMS/PIC
    Inaccurate and Capital Funds
    Awarded for Ineligible Units

                PHA officials incorrectly reported the status of their demolition and disposition
                projects in IMS/PIC and certified the eligibility for Capital Fund program funding
                of their inventory approved for demolition and disposition. Due to insufficient
                guidance and review of the status of PHA demolition and disposition projects,
                HUD did not identify these errors. Officials at 12 of the 14 PHAs reviewed did
                not report the completion of their demolition or disposition projects in IMS/PIC
                within 7 days of the completion as required, and 5 of the 12 PHAs did not submit
1
  The Customer Assistance Subsystem is HUD’s stand-alone system used to maintain customer (PHA) profile
records, inquiry tracking and management, and ticket escalation for resolution.

                                                      7
                   the second step of the inventory removal approval request to the field office in a
                   timely manner (see appendix C). Officials at another PHA complied with the
                   after-project reporting requirement; however, IMS/PIC incorrectly displayed the
                   unit status and unit numbers, and neither HUD staff nor PHA officials noted this
                   error. As a result, IMS/PIC did not accurately reflect the status of units approved
                   for demolition and disposition at 13 PHAs.

                   PHAs receive Capital Fund program funds based upon an annual certification2 of
                   their standing units. As noted in the table below, 8 of the 133 PHAs with
                   inaccurate inventory data in IMS/PIC also submitted to HUD inaccurate self-
                   certified data on standing units, which are used by HUD to calculate the amount
                   of a PHA’s Capital Fund program formula grant. Since HUD did not identify
                   these inaccuracies, the PHAs received Capital Fund program formula grant funds
                   to which they were not entitled for 1,328 units.

             PHA       Units reported Units reported        Percentage of    Year affected by    Potential amount
                       as standing in in error as            erroneously      the erroneous       of overfunded
                            PIC       standing              reported units      reporting         Capital Fund
                                                                                                      grant
               1          1,611               480                29.8             2011                  TBD4
               2          2,525               180                 7.1             2010                  TBD
                                              178                29.0             2013                $295,623
               3            614
                                                                                  2014                  TBD
               4          8,372               156                 1.9             2012                   TBD
                                              140                35.9             2012                  TBD
               5            390
                                                                                  2013                $182,382
                          1,954               102                 5.2             2008                  TBD
               6
                          1,940                                   5.3             2009                  TBD
                                              60                 14.4             2013                 $61,301
               7            417
                                                                                  2014                  TBD
                                              12                  5.6             2013                 $15,408
               8            250               325                12.8             2014                  TBD
             Total                           1,328                                2013                $554,714
                                                                               Other years              TBD




2
  Unit status is certified as of the reporting date, which was normally September 30 of the previous fiscal year.
However, the reporting date has been June 30 of the previous fiscal year beginning with annual certifications for
fiscal year 2013 funding.
3
  While the remaining five PHAs had inaccurate inventory data in IMS/PIC, their certifications were correct because
the PHA officials corrected the inaccurate inventory data before the annual certification reporting date.
4
  We could not determine the overfunded amount for years before fiscal year 2013 without access to the specifics of
HUD’s complex Capital Fund funding formula because Capital Fund formula grants for those periods were provided
to a PHA in a lump sum at the entity level without apportionment to the development level as has been done since
fiscal year 2013. In addition, HUD officials could not provide such information during our audit because it would
have taken additional time to research how HUD calculated the Capital Fund formula for the years before 2013.
The amount for fiscal year 2014 could not be determined because that year’s Capital Fund funding had not yet been
allocated.
5
  This amount includes the 12 units from the prior year so it is not reflected in the grand total.

                                                        8
Conclusion

             HUD’s process for monitoring PHA units approved for demolition and disposition
             was not always adequate. Consequently, HUD field office staff was not always
             aware of the status of PHA demolition and disposition projects, IMS/PIC did not
             always have up-to-date information on PHA units approved for demolition and
             disposition, and HUD officials did not identify that some PHAs incorrectly
             certified the number of their standing units, resulting in 8 of the 14 PHAs
             reviewed overstating the number of units eligible for Capital Fund program
             funding and receiving $554,714 to which they were not entitled.

Recommendations

             We recommend that the Deputy Assistant Secretary for the Office of Public Housing
             Investments

             1A.    Establish specific guidance on the nature and frequency of project status
                    information that PHAs with approved demolition or disposition projects
                    should report to HUD, and specify a time limit within which PHA officials
                    must submit demolished or disposed of unit information to the field office
                    for approval after such information is entered into IMS/PIC to provide
                    greater assurance that IMS/PIC reflects unit status.

             1B.    Strengthen controls within IMS/PIC to ensure that HUD field office staff
                    has sufficient information (such as project milestones or approval letters)
                    to adequately monitor the status of approved demolition and disposition
                    projects and receives alerts when PHAs report that units have been
                    demolished or disposed of.

             1C.    Determine whether the Capital Fund formula grants were properly
                    adjusted for the PHA that reported unit data errors in IMS/PIC for two of
                    its developments from fiscal years 2007 to 2011, and 2009 to 2011,
                    respectively, and if the PHA received inaccurate funding, take appropriate
                    action to recoup any overpayment or provide any funds due.

             1D.    Request that officials of the four PHAs that received $554,714 in Capital
                    Fund formula grants to which they were not entitled for fiscal year 2013
                    reimburse HUD from non-Federal funds.

             1E.    Determine the amount of Capital Fund formula grant funds in fiscal years
                    2008 through 2012 and in 2014 that eight PHAs may have incorrectly
                    received and require repayment of any improper amounts to HUD from
                    non-Federal funds.




                                              9
We recommend that the Deputy Assistant Secretary for Field Operations

1F.    Strengthen field office monitoring of approved demolition and disposition
       projects by implementing procedures and providing training to HUD field
       office staff based upon guidance from the Office of Public Housing
       Investments on the process for reporting the completion of demolition and
       disposition projects and identifying improper PHA certifications of
       standing units to provide greater assurance that timely action is taken to
       ensure the reliability of PHA unit data in IMS/PIC.

We recommend that the Deputy Assistant Secretary for the Real Estate Assessment
Center

1G.    Strengthen controls over the management of reported IMS/PIC inventory
       data errors to ensure that errors are adequately resolved in a timely
       manner, and if they are not resolved, that the Capital Program Division of
       Public Housing Investments is notified so it can take action to properly
       adjust the Capital Fund formula grant amount.

We recommend that the Director, Departmental Enforcement Center,

1H.    Determine whether administrative sanctions, including civil monetary
       penalties, should be imposed against any of the eight PHAs that
       incorrectly certified as to their standing units.




                                10
                        SCOPE AND METHODOLOGY

The audit focused on whether HUD had established adequate controls to ensure the reliability of
housing inventory data in IMS/PIC related to PHA demolition and disposition projects and
awarded the appropriate Capital Fund program funding. We performed the audit fieldwork from
February to October 2013 at the HUD field office in Newark, NJ.

To accomplish our objective, we

      Reviewed applicable Federal regulations to gain an understanding of the requirements for
       Federal information systems.

      Reviewed user manuals and HUD guidance to obtain an understanding of the IMS/PIC
       system.

      Reviewed applicable HUD regulations and policy regarding the approval and reporting of
       demolition and disposition projects and related inventory data management.

      Reviewed prior U.S. Government Accountability Office and HUD Office of Inspector
       General (OIG) audit reports for any IMS/PIC-related issues.

      Interviewed key personnel from HUD’s Special Application Center in Chicago; Real
       Estate Assessment Center Capital Program Division of Public Housing Investments;
       Office of Field Operations in Washington, DC; and Newark, NJ, Hartford, CT, and New
       York, NY, field offices to gain an understanding of the responsibilities of HUD officials
       in approving and monitoring demolition and disposition projects.

      Interviewed officials of the PHAs selected in our sample to verify the data they entered
       into IMS/PIC and obtain supporting documentation if applicable

      Selected a non-statistical sample of 14 PHAs with 25 demolition or disposition projects
       approved by the Special Application Center as of December 19, 2012, under the
       supervision of the HUD Newark, New York City, or Hartford field offices. Specifically,
       we selected 9 of 19 PHAs from the Newark field office that had 17 demolition or
       disposition projects, 2 of 5 PHAs from the New York City field office that had 2
       demolition or disposition projects, and 3 of 12 PHAs from the Hartford field office that
       had 6 demolition or disposition projects. We selected projects based on the length of
       time between Special Application Center approval of the projects and the reported
       completion dates and projects brought to our attention by HUD field office staff or that
       were of concern in prior OIG audits. The results of this review are applicable only to the
       three field offices reviewed and cannot be applied to other offices.

Our assessment of IMS/PIC data reliability was limited to the inventory data sampled and was
reconciled with information provided by PHA officials and HUD staff; therefore, we did not
assess the reliability of other data in the IMS/PIC system. In addition, we focused on the

                                               11
inventory data related to the demolition and disposition projects. We determined, when possible,
the potential overfunded amount of Capital Fund formula grants.

The audit generally covered the period January 1, 2008, through December 31, 2012, and was
extended as needed to accomplish our objectives.

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.




                                               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:

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

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

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

                     Validity and reliability of data – Policies and procedures that management
                      has implemented to reasonably ensure that valid and reliable data are
                      obtained, maintained, and fairly disclosed in reports.

               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.


                                                 13
Significant Deficiency

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

                  HUD did not have adequate controls over program operations when it did
                   not ensure that valid and reliable data on PHA demolition and disposition
                   unit inventories were obtained, maintained, and accurately used to calculate
                   Capital Fund formula grant amounts (see finding).




                                             14
                                   APPENDIXES

Appendix A

                SCHEDULE OF QUESTIONED COSTS

                    Recommendation
                                                 Ineligible 1/
                        number
                            1D                    $554,714


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.




                                            15
Appendix B

      AUDITEE COMMENTS AND OIG’S EVALUATION

    The auditee agreed with the findings and recommendations, and while not providing
    formal written comments, did provide technical and editorial comments which we
    considered and incorporated in the report as deemed appropriate.




                                          16
Appendix C

                         PHA REPORTING DEFICIENCIES

PHAs with approved demolition and disposition projects are required to comply with various
reporting requirements to keep HUD informed of the status of the projects during the term of the
projects and notify HUD when the projects are completed so the affected units may be removed
from the PHAs’ inventory in IMS/PIC. PHA officials must also certify annually as to the
number of standing units to have their Capital Fund program funding calculated.

Special Application Center approval letters advise the PHA that the status of the approved
demolition or disposition project must be reported to the appropriate field office. Regulations at
24 CFR 970.35 require that PHA officials report in IMS/PIC the completion of a demolition or
disposition project within 7 days of its occurrence. The regulations define the completion date as
the date when final payment is made to the contractor for demolition or when sales or lease
contracts are executed for disposition. The regulations further provide that when a demolition or
disposition project is carried out in stages via multiple contracts, the PHA should record unit
removal information in IMS/PIC as the units are demolished or disposed of at the completion of
each demolition contract.

Further, PIH Notice 2005-126 provides that after the completion of a demolition or disposition
project, PHA officials should follow a two-step process to remove the demolished or disposed of
units from the PHA’s housing inventory in IMS/PIC. First, PHA officials should enter the actual
date of demolition or disposition and information about the demolished or disposed of units into
the IMS/PIC Inventory Removals submodule. Second, the officials should submit this
information to the field office for approval. After this submission, the appropriate field office
would receive an alert to approve the request for unit removal, and once approved, the units
would be recorded in IMS/PIC as having been removed from the PHA’s inventory.

However, as noted in the table below,

           Documentation was inadequate to show that officials at all of the 14 PHAs reviewed
            periodically informed HUD of their projects’ status,

           Officials at 12 of the 14 PHAs did not enter information into IMS/PIC to report
            completion of their projects within 7 days as required, and

           Officials at 5 of the 14 PHAs did not submit the request to approve the removal of
            units to the appropriate field office in a timely manner.


6
 PIH Notice 2005-12, Continuation of Implementation of the Public and Indian Housing Information Center (PIC)
Demolition/Disposition Sub module for Application Submission and Data Collection for Public Housing Unit
Removals

                                                      17
PHA Did not                 Did not            Did not           Reported            Certified
    inform HUD              report             request to        inaccurate          incorrect
    of project              project            remove            inventory           standing unit
    progress                completion         units in a        data in             numbers
    periodically            within 7           timely            IMS/PIC
                            days               manner
  1             X                                                       X                    X
  2             X                  X                                    X                    X
  3             X                  X                                    X                    X
  4             X                  X                  X                 X                    X
  5             X                  X                  X                 X                    X
  6             X                  X                                    X                    X
  7             X                  X                                    X                    X
  8             X                  X                  X                 X                    X
  9             X                  X                  X                 X
 10             X                  X                                    X
 11             X                  X                                    X
 12             X                  X                  X                 X
 13             X                  X                                    X
 14             X
Total           14                 12                 5                 13                   8


PHA Officials’ Unfamiliarity With Requirements Led to Reporting Deficiencies

PHA officials attributed their failure to comply with various reporting requirements to
unfamiliarity with the requirements. Some said they were unaware that the completion of a
demolition or disposition project had to be reported in IMS/PIC, some said they did not know
that there was a 7-day reporting requirement, and some misinterpreted the definition of “project
completion date.” For example, officials at

            PHA 7 demolished 60 units in May 2012, but had not entered this information into
             IMS/PIC. These officials said they were unaware that they needed to use IMS/PIC to
             report the completion of a demolition project.

            PHA 6 disposed of 102 units on November 8, 2006, but officials did not enter the
             disposition into IMS/PIC until February 19, 2009. These officials believed that
             disposed of units should not be removed from the IMS/PIC inventory so that the PHA
             would be eligible for the asset repositioning fee subsidy.7




7
 A PHA that removes projects or entire buildings of a project from its public housing inventory is eligible for an
asset repositioning fee on a sliding scale as part of its operating subsidy.

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   PHA 5 demolished 140 units in January 2011, but did not report the demolition in
    IMS/PIC until February 20, 2013. These officials said they were not able to remove
    the inventory from IMS/PIC and were not aware that they could report the data error
    to HUD’s Technical Assistance Center.

   PHA 4 completed the first step of the IMS/PIC reporting process on October 26,
    2011, reporting in IMS/PIC that 156 units had been demolished as of May 30, 2011,
    but did not complete the second step of submitting the information to the appropriate
    field office for approval until May 2012. These officials were not able to explain the
    cause of the delay because the person who had responsibility had retired and the
    current staff was not familiar with the requirements.

   PHA 1 officials entered data into IMS/PIC within 7 days and submitted in IMS/PIC a
    request to remove 480 units from their inventory; however, IMS/PIC incorrectly
    showed an inventory of 960 units: 480 units as both standing and demolished.
    Lacking knowledge of the IMS/PIC system, the PHA officials certified that these data
    were correct.




                                        19