oversight

The City of High Point Did Not Properly Administer Its Lead-Based Paint Hazard Control Grants in Compliance With Federal Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-07-09.

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

                  City of High Point, NC
             Lead Based Paint Hazard Control Grants




Office of Audit, Region 4         Audit Report Number: 2015-AT-1005
Atlanta, GA                                              July 9, 2015
To:            Eric Hornbuckle, Director of Programs Division, Office of Healthy Homes and
               Lead Hazard Control, L

               //signed//
From:          Nikita N. Irons, Regional Inspector General for Audit, 4AGA

Subject:       The City of High Point Did Not Properly Administer Its Lead-Based Paint Hazard
               Control Grants in Compliance With Federal 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 City of High Point’s lead-based paint hazard
control grants.

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
404-331-3369.
                     Audit Report Number: 2015-AT-1005
                     Date: July 9, 2015

                     The City of High Point Did Not Properly Administer Its Lead-Based Paint
                     Hazard Control Grants in Compliance With Federal Requirements




Highlights
What We Audited and Why
We audited the City of High Point’s lead-based paint procurement and eligibility operations.
This audit was a result of a referral from the U.S. Department of Housing and Urban
Development’s (HUD) Office of Healthy Homes and Lead Hazard Control. Our audit objective
was to determine whether the City administered its lead-based paint hazard control grants in
accordance with HUD’s regulations and grant requirements for procurement of contracted
services and expense eligibility.


What We Found
The City did not properly manage its procurement activities in accordance with HUD’s
requirements. Specifically, it continued using an expired contract to pay for environmental
services from November 1, 2009, to July 15, 2013. Also, it did not consistently select the lowest
bidder, retain required documentation, and perform cost analyses on change orders. As a result
of the City’s noncompliance, HUD funds were used to pay more than $1 million for ineligible
and unsupported procurement costs.

The City improperly used its grant funds for expenses that did not contain lead-based paint and
for ineligible lead-based paint expenses. As a result, HUD funds were used to pay more than
$9,000 for ineligible costs, which the City was not able to use for other projects.

What We Recommend
We recommend that the Director of the Office of Healthy Homes and Lead Hazard Control
require the City to (1) reimburse $207,097 in ineligible costs from non-Federal funds, (2) support
or reimburse $874,241 in unsupported costs from non-Federal funds, and (3) implement internal
controls to ensure that regulations and procedures are followed. We also recommend that the
Director continue the zero threshold process by reviewing the eligibility of the projects for approval
under the 2011 grant until the grant is completed.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding 1: The City Did Not Comply With Procurement Requirements ................... 4

         Finding 2: The City Used HUD Funds for Ineligible Costs ......................................... 7

Scope and Methodology ...........................................................................................9

Internal Controls ....................................................................................................11

Appendixes ..............................................................................................................12
         A. Schedule of Questioned Costs .................................................................................. 12

         B. Auditee Comments and OIG’s Evaluation ............................................................. 13

         C. Procurement Deficiencies ......................................................................................... 20




                                                               2
Background and Objective
The City of High Point, Community Development and Housing Department, administers the
City’s Lead Safe High Point program. The program is federally funded by the U.S. Department
of the Housing and Urban Development (HUD). The purpose of the program is to identify and
control lead-based paint hazards in eligible privately owned rental or owner-occupied housing.

HUD awarded the City lead-based paint hazard control grants of $5.5 million for grant years
2008 and 2011. As of March 17, 2015, the City had used its entire 2008 grant of more than $2.9
million and more than $755,000 of its more than $2.4 million 2011 grant.

HUD’s Office of Healthy Homes and Lead Hazard Control conducted a review of the City in
May 2013 and identified that the City used grant funds for nonlead components, did not
consistently follow procurement policy and regulations, and had inadequate record keeping.
HUD reviewed the City’s 2008 and 2011 grant and questioned $107,407 of the $588,206 (18
percent) reviewed. Since the review, HUD had placed the City on a zero threshold for approval
of projects under the 2011 grant but had not reviewed later spending for eligibility.

The HUD Office of Healthy Homes and Lead Hazard Control is responsible for overseeing the
City’s program.

Our audit objective was to determine whether the City administered its lead-based paint hazard
control grants in accordance with HUD’s regulations and grant requirements for the procurement
of contracted services and expense eligibility.




                                               3
Results of Audit

Finding 1: The City Did Not Comply With Procurement
Requirements
The City did not properly manage its procurement activities in accordance with HUD’s
requirements. Specifically, it continued using an expired contract to pay for environmental
services from November 1, 2009, to July 15, 2013. Also, it did not consistently select the lowest
bidder, retain required documentation, and perform cost analyses on change orders. These
conditions occurred because the City lacked internal controls over its lead-based paint hazard
control grant and did not ensure that its staff followed HUD’s procurement regulations during
personnel changes. As a result of the City’s noncompliance, HUD funds were used to pay more
than $1 million for ineligible and unsupported procurement costs.

Expired Contract
The City entered into an environmental contract in April 2009 for services rendered from April 1
through October 31, 2009. This contract had expired and was not renewed; therefore, as of
November 1, 2009, the contract was no longer valid. However, the City continued to pay the
contractor under the expired contract through July 31, 2013, which resulted in more than
$197,000 1 (see appendix C) in unallowable costs. The City’s affordable housing manager stated
that the contract was expired when he started working for the City.

Failure To Follow Procurement Requirements
We reviewed a statistical sample of 14 of 287 lead-based paint hazard control grant projects from
the City’s 2008 and 2011 lead-based paint hazard control grants. The City did not adequately
procure the contracts for the 14 projects reviewed totaling more than $877,000 for procurement
activities. In addition, the City did not follow its 2008 and 2011 grant work plans and 24 CFR
(Code of Federal Regulations) 85.36.

               •   The City did not select the lowest bidder. The City would determine the cost
                   estimate amount and the 15 percent margin above and below this amount. It
                   would open the bids after it determined the range. For any bids outside the 15
                   percent range, the City would consider the contractor to be nonresponsive. As a
                   result, it did not select the lowest bidder for 5 of the 14 (36 percent) project bids
                   (see appendix C). Regulations at 24 CFR 85.36(d)(2)(ii) state that the lowest
                   bidder must be selected for sealed bids. The HUD Director of Community
                   Planning and Development was aware that the City used a 15 percent margin to
                   disallow offers outside the margin; however, this practice did not comply with




1
    This amount includes $151,699 from the 2008 grant year and $45,740 from the 2011 grant year.



                                                          4
                 HUD regulations. The City’s community development director stated that this
                 practice was used when he worked for another North Carolina city and it was the
                 practice when he started at the City of High Point.

             •   The City did not retain all procurement documentation, such as signed contracts,
                 notices to proceed, requests for bids and documents, and cost estimates for change
                 orders as required by the City’s work plans. In addition, 24 CFR 85.36(b)(9)
                 states that grantees must provide sufficient procurement history. Also, 24 CFR
                 85.36(f)(1) states that the grantee must perform a cost estimate for every
                 procurement action. All of the 14 projects reviewed lacked at least 2 types of
                 procurement documentation. Upon request, the City could not provide the
                 required documentation for the 14 projects totaling more than $877,000 2 (see
                 appendix C).

             •   The City did not prepare cost analyses on change orders for 6 of the 14 (43
                 percent) projects totaling more than $784,000 as required by 24 CFR 85.36(f) 3
                 (see appendix C). As a result, it did not support the reasonableness of the costs.
                 The affordable housing manager stated that City staff performed cost analyses
                 informally but had not documented them.

Lack of Internal Controls
Although the City had a HUD-approved work plan, the director of the Community Development
and Housing Department did not ensure that City staff followed the requirements. The director
stated that during times of staff turnover and workload increases, staff focused on completing the
work and did not follow the requirements. Between December 2008 and August 2014, the City
had two different affordable housing managers, and the position was vacant from November 17,
2011, to August 13, 2012.

The City’s affordable housing manager stated that as a result of HUD’s May 2013 review, the
City had developed new standard operating procedures for the lead grant program, which
addressed the 15 percent margin issues identified. However, as of March 12, 2015, the newly
developed standard operating procedures had not been dated, signed, or implemented. The
director stated he verbally approved the procedures. The affordable housing manager stated that
some of the staff had been involved in writing the procedures and thought that would be
sufficient to implement the new procedures. The new standard operating procedures no longer
allowed the 15 percent margin as the reason for removing a bid. They also required that the
project manager review the bid with each contractor as if the bid were outside the 15 percent
margin to confirm whether the contractor could perform the work for the price of the bid.
Although City staff could access the standard operating procedures on the City’s shared drive,
the City had not trained its staff on the new procedures.



2
 This amount is comprised of $460,397 from the 2008 grant and $416,914 from the 2011 grant.
3
 Regulations at 24 CFR 85.36(f) require that grantees and subgrantees must perform a cost or price analysis in
connection with every procurement action, including contract modifications.



                                                         5
Conclusion
The deficiencies discussed above occurred because the City failed to comply with HUD’s
procurement regulations or its own policies to ensure that HUD funds were used for eligible
services and procurements were adequately supported.

Recommendations
We recommend that the Director of the Office of Healthy Homes and Lead Hazard Control
require the City to

        1A.     Reimburse the U.S. Treasury from non-Federal funds $151,699 from the 2008
                grant for ineligible procurement activities using the expired environmental
                contract.

        1B.     Repay the program $45,740 from non-Federal funds from the 2011 grant for
                ineligible procurement activities using the expired environmental contract.

        1C.     Provide adequate support or reimburse the U.S. Treasury from non-Federal funds
                for procurement activities from the 2008 grant totaling $457,327. 4

        1D.     Provide adequate support or repay the program from non-Federal funds for
                procurement activities from the 2011 grant totaling $416,914.

        1E.     Develop and implement internal controls to ensure that it complies with HUD
                procurement regulations and its policies and procedures so that only eligible costs
                are paid using the grant funds and the costs are properly supported.

        1F.     Ensure that City staff is trained on the policies and procedures for HUD
                procurement regulations to ensure that the staff no longer uses the 15 percent cost
                estimate margin.




4
 The actual amount unsupported was $460,397. To avoid double counting, the amount was reduced by $3,070,
which is accounted for in the eligibility section.



                                                      6
Finding 2: The City Used HUD Funds for Ineligible Costs
The City improperly used its grant funds for expenses that did not contain lead-based paint and
for ineligible lead-based paint expenses. These conditions occurred because City staff did not
understand HUD’s requirements or the City’s work plan. As a result, HUD funds were used to
pay more than $9,000 for ineligible costs, which the City was not able to use for other projects.

Ineligible Use of Funds
The City did not properly administer its 2008 grant for work items and expenses for 6 of the 14
(43 percent) projects. The City paid more than $8,000 in lead-based paint expenditures for six
projects that did not comply with the 2008 notice of funding availability 5 (see table). The City’s
project managers stated that during HUD training, they received conflicting information
regarding what was considered an eligible expense. However, they were unable to confirm in
which training they received the conflicting information.

                                               Ineligible use of funds
                       Project
                        name                        Items and issue          Amount
                                               Patch ceiling sheetrock
                                               - The item was not
                    519 North                  listed as a lead paint
                    Centennial                 hazard.                            $ 400
                                               Interior door -The item did
                    201 Edgeworth              not test positive for lead.        $ 700
                                               Remediate siding and trim
                                               - The items were not tested
                    415 Welch                  for lead.                          $3,552
                                               Rear door and bathroom
                    610 Clover                 exhaust fan - The items              $850
                    Drive                      were not tested for lead.            $250
                                               Doors - The doors were not
                    1005 Barbee                tested for lead.                   $2,275
                                               Miniblinds - The item was
                    1912 Wickham               not tested for lead.                  $70
                        Total                                                     $8,097

The City also spent $1,063 for moving expenses that would not be needed according to the
City’s work plan because the contractor would move the furniture to the center of the room and
cover it while completing the work. However, the City paid the moving expenses for one unit.




5
    Notice of Funding Availability 2008 (III C 2a (4))



                                                          7
City staff stated that it was not aware of the work plans. 6 In addition, the City miscoded the cost
of a hot water heater for $498, using lead-based paint funds instead of a community planning and
development grant.

Conclusion
The deficiencies discussed above occurred because the City failed to comply with HUD’s
regulations and its own policies to ensure that HUD funds were used for eligible services.
Specifically the City did not implement internal controls over its lead-based paint grant because
its staff and management did not understand HUD’s requirements and the City’s work plan.
Therefore, HUD’s continuous oversight of the remaining 2011 project grant funds would ensure
the required procedures are implemented.

Recommendations
We recommend that the Director of the Office of Healthy Homes and Lead Hazard Control
require the City to

         2A.      Reimburse the U.S. Treasury $9,658 from non-Federal funds for the 2008 grant
                  payments made for ineligible expenses.

         2B.      Develop and implement internal controls to ensure that it complies with HUD
                  regulations and its work plans so that only eligible costs are paid using grant
                  funds.

We also recommend that the Director of the Office of Healthy Homes and Lead Hazard Control

         2C.      Continue the zero threshold process by reviewing the eligibility of the projects for
                  approval under the 2011 grant until the grant is completed.




6
  The 2008 work plan refers to the grantee’s plan for implementing the specific, reasonable, time-phase objectives
for each major program activity in the grant.



                                                          8
Scope and Methodology
We performed our audit from September 2014 and May 2015 at the City’s office located in High
Point, NC, and the HUD Office of Inspector General’s (OIG) Greensboro and Atlanta regional
offices.

To accomplish our objective, we
    •   Interviewed City staff to obtain an understanding of the controls significant to the audit
        objective and assist in our review of City records.
    •   Interviewed HUD staff to obtain background information on the grantee.
    •   Reviewed applicable criteria, including Public Law 102-550, Residential Lead-Based
        Paint Hazard Reduction Act of 1992; 24 CFR Part 35, Lead Base Paint in Residential
        Structures; 24 CFR 85.36, Federal Procurement Regulations; 2008 Lead-Based Paint
        Notice of Funding Availability; 2011 Lead-Based Paint Grant Notice of Funding
        Availability; 2008 City grant agreement, and 2011 City lead-based paint hazard control
        grant.
    •   Reviewed 14 lead-based paint hazard control project files for compliance with
        procurement and eligibility requirements.

The City received $2,808,897 and selected 335 projects to complete using the lead-based paint
hazard control grant funds during our audit period. Since HUD performed a review of the City’s
grants, we removed the 45 projects HUD reviewed from the 335 audit universe. We also
removed an additional three projects; two had zero dollars spent and one had two entries. Our
remaining universe was 287 projects for the City’s 2008 and 2011 grants. From the universe of
287, we develop a statistical sample of 75. We reviewed a statistical sample of 14 projects
totaling $206,455 7, charged to the 2008 and 2011 lead-based paint grants, from 287 projects
completed totaling $2,808,496 for the audit period December 1, 2008, through August 31, 2014,
which was expanded as determined necessary. Of the 14 projects, 12 were from the 2008 grant,
and 2 were from the 2011 grant. Since we reviewed only 14 the 75 sampled projects, the results
of the audit apply only to items selected for review and cannot be projected to the universe or
population. The statistical sample amount is unit based. From the sample of 14 projects, 4
projects were for the same multi-family complex, Oakwood Apartments, and are presented in
Appendix C as one project. Appendix C also contains a line for the environmental contract.
This contract was not included in the total 14 projects selected. This contract was for
environmental reviews completed on each of the lead-based paint projects.



7
  The statistical sample amount is unit based. The unsupported and ineligible procurement costs determined include
the costs on a per project basis and are higher than the sample amount.



                                                         9
We relied in part on computer-processed data contained in the City’s systems to achieve our
audit objective. Although we did not perform detailed assessments of the reliability of the data,
we performed minimal levels of testing and found the data to be adequately reliable for our
purposes. The tests for reliability included but were not limited to comparing computer-
processed data to invoices, project files, and other supporting documentation.

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.




                                                 10
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 the management has implemented to
    reasonably ensure that a program meets its objectives, while considering cost effectiveness
    and efficiency.

•   Relevance and reliability of information - Policies and procedures that management has
    implemented to reasonably ensure that operational and financial information used for
    decision making and reporting externally is relevant, reliable, and fairly disclosed in reports.

•   Compliance with laws and regulations - Policies and procedures that management has
    implemented to reasonably ensure that program implementation 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.

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

•   The City did not properly administer its lead-based paint program (see findings 1 and 2).




                                                  11
Appendixes

Appendix A


                          Schedule of Questioned Costs
                  Recommendation
                                   Ineligible 1/ Unsupported 2/
                      number
                          1A             $151,699
                          1B             $45,740
                          1C                               $457,327
                          1D                               $416,914
                          2A              $9,658           ________

                        Totals           $207,097          $874,241



1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.
2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.




                                              12
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1




                               13
Ref to OIG   Auditee Comments
Evaluation




Comment 2




Comment 3




Comment 4


Comment 5


Comment 6


Comment 7




                            14
Ref to OIG   Auditee Comments
Evaluation




Comment 8




Comment 9




Comment 10




                                15
Ref to OIG   Auditee Comments
Evaluation




                            16
                         OIG Evaluation of Auditee Comments


Comment 1   The City stated that the agreement between the City and Matrix Health & Safety
            L.L.C was not extended in writing, that paragraph C of the agreement allowed the
            City to renew it unilaterally on an annual basis through December 2011, and such
            extensions were not required by the agreement to be in writing. The City also
            stated that for all periods between 2009 and 2013, both the City and Matrix
            performed under the same terms and conditions provided for in the original
            written agreement. The City was operating under the assumption that the
            Agreement was extended by virtue of the past performance of the parties which at
            all times was consistent with the written terms of the agreement and the fact that
            neither party had given notice to the other that the agreement had been terminated.
            A contract extension based on past performance may be enforced under North
            Carolina law and the City obtained written confirmation from Matrix that the
            agreement was so extended. The City provided a legal opinion as to the
            enforceability of the contract extension and the execution of the contract overall.
            However, paragraph C of the original 2008 contract states that the agreement is
            for services rendered beginning April 1, 2009 through October 31, 2009, and the
            City reserves the right to renew subsequent contracts, on an annual basis in the
            best interest of the City, through December 2011. The City did not provide any
            documentation of the contactors performance for renewal or document the
            renewal of the contract. The contract extension provided by the City is dated June
            9, 2015, which is 2 years after the work was completed. The legal opinion states
            that the agreement itself did not address renewals past December 2011. The City
            continued to pay the contractor under the expired contract through July 31, 2013,
            which resulted in more than $197,000 being expended. The City continued to use
            Matrix until July 31, 2013.
Comment 2   The City stated North Carolina general statutes allow units of government to
            consider quality as a consideration for bid awards. The City also stated the +/-15
            percent bid range was used by the City’s Community Development and Housing
            Department to help ensure the quality of the work that a “responsible” bidder
            would provide.
            We spoke with a State of North Carolina purchasing Officer and she stated that
            she was not aware of this common practice and stated the North Carolina General
            Statute, NC GS 143 Article 8, Public Contracts is the State regulation the City
            should follow. The statute states, the contract shall be awarded to the lowest
            responsible, responsive bidder, taking into consideration quality, performance,
            and the time specified in the bids for the performance of the contract.
Comment 3   The City stated due to concerns expressed during the initial site visit from the
            HUD Lead Office, it discontinued using the +/- 15 percent bid range. In addition,
            the Department has further revised its procurement process by utilizing the City’s



                                             17
            Purchasing Department in securing contractors for rehabilitation work as of
            November 25, 2014.
            We acknowledge the City’s efforts to discontinue using the +/- 15 percent bid
            range and revising its procurement process. However, as of March 12, 2015, the
            newly developed standard operating procedures had not been dated, signed, or
            implemented. Although the City staff had access to the standard operating
            procedures on the City’s share drive, the City had not trained its staff on the new
            procedures. The City should ensure that the staff is trained on the policies and
            procedures for HUD procurement regulations so that the staff no longer uses the
            15 percent cost estimate margin. The Office of Healthy Homes and Lead Hazard
            Control will be responsible for reviewing the staff training on the policies and
            procedures.


Comment 4   The City stated that it located one of the executed contracts (519 N. Centennial)
            and forwarded it to the auditors in an email dated March 13, 2015. The executed
            contract for the other project (521 Ashburn) could not be located. However, all
            other documents associated with this project are located in the project file.
            We obtained the executed contract for 519 N. Centennial; therefore, we revised
            appendix C. The City agreed that the executed contract for 521 Ashburn could
            not be located. However, we disagree with the statement that the file contained
            all other documentation as noted in appendix C.
Comment 5   The City stated that in both grant applications, language was included stating that
            the City staff will notify contractors and owners of successful bids and a notice-
            to-proceed will be issued as a part of the bid acceptance process. However, the
            application does not specify the method or form that would be used in a “notice-
            to-proceed.” The executed contract between the homeowner and the contractor
            served as a de facto “notice-to-proceed” for all parties involved.
            As the City stated in both grant applications, language was included stating that
            the City staff will notify contractors and owners of successful bids and a notice-
            to-proceed will be issued as a part of the bid acceptance process. In addition, the
            City’s 2008 and 2011 work plans stated that the contractor and owner must sign
            the lead hazard control work agreement and then a notice-to-proceed will be
            issued. The contract and notice-to-proceed are two separate documents that are
            required to be executed.
Comment 6   The City stated that its staff was able to locate one of the requests for bid (610
            Clover) and forwarded it to the auditors in an email dated March 13, 2015. The
            request for bid for 415 Welch could not be located. However, all other documents
            associated with the completion of the work at 415 Welch are located in the project
            file.




                                              18
             We obtained the requests for bids for 610 Clover; therefore, we revised appendix
             C. The City agreed that the request for bid for 415 Welch could not be located.
             However, we disagree with the statement that the file contained all other
             documentation as noted in appendix C.
Comment 7    The City stated that the deficiency primarily consisted of missing signatures;
             however, bid documents could not be located for one of the projects (1912
             Wickham). All other documents associated with the completion of the work at
             1912 Wickham are located in the project file.

             The City agrees that the bid documents could not be located for 1912 Wickham.
             However, we disagree with the statement that the file contained all other
             documentation as noted in appendix C.
Comment 8    The City stated that the change orders in question constituted less than 7 percent
             of the total contract value. It strongly believes that it is unreasonable to invalidate
             the entire contract based on such a small amount.
             The City was required by 24 CFR 85.35(f)1 to provide documentation of cost
             estimates for change orders. The City was not able to provide any documentation
             of change orders for six contracts. We disagree with the statement that it is
             unreasonable to invalidate the entire contract based on such a small amount. The
             six contracts in question had at least one additional deficiency, associated with the
             contract as noted in appendix C.
Comment 9    We acknowledge the City’s steps to submit HUD documentation (1) of internal
             controls to ensure compliance with HUD procurement regulations and policies &
             procedures so that only eligible costs are paid and costs are properly supported
             and (2) stating the staff members are aware of and trained on Department policies
             and procedures, especially as it related to HUD procurement regulations on or
             before a mutually agreed upon date. The City stated is has already taken steps to
             improve internal controls overall. The Office of Healthy Homes and Lead Hazard
             Control will be responsible for reviewing verifying whether the actions for
             recommendations 1E and 1F are addressed sufficiently.
Comment 10 We acknowledge the City’s comment to reimburse the U.S. Treasury $9,658 from
           non-Federal funds for the 2008 grant payments made from ineligible expenses.
           The Office of Healthy Homes and Lead Hazard Control will be responsible for
           verifying whether the actions for recommendations 2A and 2B are addressed
           sufficiently.




                                                19
Appendix C
                                                Procurement Deficiencies

                                                                          No cost              Lack
                                                                          estimate   Lowest      of
                                                 Lack of     Incomplete      for     bidder   request    Lack of
                   Unsupported     Ineligible    notice to       bid       change      not      for     executed   Expired
Project name         amount         amount       proceed     documents      order    chosen     bids    contract   contract
Lexington
Apartments              $408,364                    X                           X      X
Oakwood
Apartment (4
files reviewed)         $345,330                    X            X              X      X
519 North
Centennial               $30,950                    X                                  X
201 Edgeworth            $23,575                    X            X              X      X
1115 Anderson            $23,300                    X            X
1805 Arden               $16,515                    X                                  X
415 Welch                $13,307                    X                                           X
521 Ashburn               $8,550                    X            X                                         X
610 Clover                $3,695                    X            X              X
1005 Barbee               $2,225                    X                           X
1912 Wickham                $750                    X            X              X
Environmental
         8
contract                             $197,439       X                                                                 X
      Total            $876,561     $197,439        12             6            6      5        1          1          1




8
    This contractor performed the lead testing for all the projects reviewed.



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