oversight

The Stromsburg Housing Authority Did Not Fully Comply With Procurement Requirements and Spent Funds for Ineligible Expenses

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-08-20.

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

         Stromsburg Housing Authority,
                Stromsburg, NE
                            Public Housing Program




Office of Audit, Region 7                Audit Report Number: 2015-KC-1007
Kansas City, KS                                              August 20, 2015
To:            Denise Gipson, Director, Office of Public Housing, 7DPH
               //signed//
From:          Ronald J. Hosking, Regional Inspector General for Audit, 7AGA
Subject:       The Stromsburg Housing Authority Did Not Fully Comply With Procurement
               Requirements and Spent Funds for Ineligible Expenses


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 Stromsburg 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
913-551-5870.
                    Audit Report Number: 2015-KC-1007
                    Date: August 20, 2015

                    The Stromsburg Housing Authority Did Not Fully Comply With
                    Procurement Requirements and Spent Funds for Ineligible Expenses




Highlights

What We Audited and Why
We audited the Stromsburg, NE, Housing Authority’s procurement and expenditures for its U.S.
Department of Housing and Urban Development (HUD) public and Indian housing programs.
We selected the Authority for review based on data analysis showing that the Authority’s
executive director was listed as the executive director of two additional housing authorities and
the fee accountant for all three. Our audit objective was to determine whether the Authority
followed HUD rules and regulations and its own policies and procedures for procurement and
expenditures.

What We Found
The Authority did not properly procure the company that provided both executive director and
fee accounting services or the cost to prepare the agency plans paid to the fee accountant.
Additionally, it did not require contractors to comply with contract provisions. This condition
occurred because the Authority lacked detailed operating procedures that included steps for
implementation, such as checklists. As a result, HUD could not be assured that the Authority
received the best value for the $41,133 spent for the purchase of goods and services.
Additionally, HUD and the Authority lacked assurance that the contractors would comply with
all program requirements, including prevailing wage requirements.

Additionally, the Authority spent $4,171 of its capital funds for ineligible expenses. This
condition occurred because the Authority lacked detailed operating policies and procedures for
the review and approval of expenditures. As a result, the Authority did not have $4,171
available to spend on other Public Housing Capital Fund projects.

What We Recommend
We recommend that HUD require the Authority to (1) reprocure its executive director and fee
accounting services, using the appropriate policies and procedures to justify the amount spent on
these services during our audit period; (2) justify the amount paid to the fee accountant for the
agency plans; (3) collect and repay ineligible expenses made from its Capital Fund program; and
(4) develop and implement policies and procedures to address the deficiencies noted.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding 1: The Authority Did Not Fully Comply With Federal and Local
         Procurement Requirements ............................................................................................. 4

         Finding 2: The Authority Spent Capital Funds for Ineligible Expenses .................... 8

Scope and Methodology .........................................................................................10

Internal Controls ....................................................................................................12

Appendixes ..............................................................................................................13
         A. Schedule of Questioned Costs .................................................................................. 13

         B. Auditee Comments and OIG’s Evaluation ............................................................. 14

         C. Criteria ....................................................................................................................... 22




                                                                     2
Background and Objective
The City of Stromsburg, NE, created the Stromsburg Housing Authority in 1967. The
Authority’s mission is to offer decent, safe, comfortable, and affordable housing to low-income
elderly and handicapped persons in a caring community. A five-member board of
commissioners governs the Authority, and a company providing executive director services
manages the daily operations. The Stromsburg City Council appoints the board members to
serve a 5-year staggered term. The Authority’s central office is located at 517 East 7th Street,
Stromsburg, NE.

The Authority maintains 35 low-rent units, for which the U.S. Department of Housing and Urban
Development (HUD) provides an annual subsidy through its Public Housing Operating Fund
program to assist with the operating and maintenance costs. The Authority received $41,582 and
$32,928 in operating subsidy payments in 2013 and 2014, respectively.

Additionally, the Authority receives an annual Public Housing Capital Fund grant from HUD.
The Capital Fund provides funds to housing authorities to modernize public housing
developments. The Authority received $30,468 and $30,548 in capital funds in 2013 and 2014,
respectively.

Our objective was to determine whether the Authority followed HUD rules and regulations and
its own policies and procedures for procurement and expenditures.




                                                3
Results of Audit

Finding 1: The Authority Did Not Fully Comply With Federal and
Local Procurement Requirements
The Authority did not properly procure goods and services or require contractors to comply with
contract provisions. This condition occurred because the Authority lacked detailed operating
procedures that included steps for implementation, such as checklists. As a result, HUD could
not be assured that the Authority received the best value for the $41,133 spent for the purchase of
goods and services. Additionally, HUD and the Authority lacked assurance that the contractors
would comply with all program requirements, including prevailing wage requirements.

The Authority Did Not Properly Procure Goods and Services
The Authority did not properly procure executive director services, fee accounting services, or
the completion of its agency plans.

       The Authority Did Not Properly Procure Executive Director or Fee Accounting Services
       The Authority did not properly procure its executive director or fee accounting services
       and did not maintain sufficient documentation as required by HUD Handbook 7460.8,
       REV-2, section 3.3, and its own procurement policy. HUD Handbook 7460.8, REV-2,
       section 3.3, states that the Authority must maintain records sufficient to detail the
       significant history of each procurement action, including the rationale for the method of
       procurement, solicitation, and information regarding contractor selection or rejection.

       The Authority should have maintained written supporting documentation in its
       procurement file. However, the contracts between the executive director and fee
       accounting services provider and the Authority were the only procurement documents
       that the Authority maintained to detail the procurement of the two services. The
       Authority signed its first contract with the executive director services provider in January
       2015, but the company had been acting as the executive director services provider since
       July 2007. The fee accounting services provider signed a 2-year contract in November
       2010 and signed an addendum to the contract in November 2014, extending services for 2
       more years. The Authority did not document the solicitation process or information
       regarding contractor selection or rejection.

       The Authority signed contracts with a company to provide executive director and fee
       accounting services without attempting to procure the services from another source. The
       Authority’s procurement policy required the Authority to collect three written bids for
       purchases between $2,000 and $100,000. The Authority paid $34,226 and $4,507 from
       operating funds for executive director and fee accounting services, respectively, from
       August 2011 through December 2014. The combined amounts required the Authority to
       receive written bids from three sources for the executive director and fee accounting
       services. The Authority did not attempt to obtain a bid from any source other than the


                                                 4
       executive director and fee accounting service company that it signed contracts with. The
       following tables detail the monthly and combined fees paid to the executive director and
       fee accounting services company during our audit period.


                  Executive director services             Monthly fee      Combined
             August 1, 2011, through July 31, 2013                 $824       $19,776

             August 1, 2013, through December 31,                   850        14,450
                              2014

                             Total                                            $34,226



                    Fee accounting services               Monthly fee      Combined
          August 1, 2011, through December 31, 2012                $107         $1,819

          January 1, 2013, through December 31, 2014                112          2,688

                             Total                                              $4,507


       The Authority Did Not Properly Procure the Completion of Its Agency Plans
       The Authority paid $1,200 to its fee accounting services company on two occasions for
       the completion of its 2012 and 2014 agency plans. The Authority’s procurement policy
       required it to obtain one quote, if the quote was reasonable, for purchases of $2,000 or
       less. The Authority’s fee accountant stated that the Authority’s board members approved
       the completion of the agency plans after she completed them and submitted invoices for
       this service to the board. The Authority did not receive a quote from the fee accounting
       service provider before she completed the agency plans. The invoices the Authority
       received did not include details on how the fee accountant calculated the $1,200 fee for
       the 2012 annual agency plan or the 2014 5-year and annual agency plans. While the
       Authority received a benefit by having the mandatory agency plans completed, the
       service expense was not supported by a proper procurement or detailed invoice.

The Authority Did Not Require Contractors To Comply With Contract Provisions
The Authority did not include in its executive director and fee accounting services contracts
provisions required by HUD Handbook 7460.8, REV-2, section 5.10 or table 5.1. The executive
director services contract did not include the required termination clause, a 3-year record
retention clause, or ownership and proprietary interest language. The fee accounting services
contract did not include the required 3-year record retention clause or ownership and proprietary
interest language.




                                                5
Additionally, the Authority did not execute a contract for the Capital Fund project to replace
flooring in the Authority’s community room. HUD Handbook 7460.8, REV-2, section 5.10,
states that the Authority must incorporate the clauses contained in form HUD-5370-EZ, General
Conditions for Small Construction/Development Contracts, into its construction contracts greater
than $2,000 but not more than $100,000. Without a contract in place, the Authority did not
require contractors to comply with these provisions. Authority staff told us that the Authority
did not always execute contracts with contractors. The Authority based its decision on the type
of work and its familiarity with the contractor.

The Authority Lacked Detailed Procedures
The Authority lacked detailed operating procedures that included steps for implementation, such
as checklists. The Authority’s procedures did not ensure that it followed its procurement policy,
along with HUD Handbook 7460.8, REV-2, and requirements at 24 CFR (Code of Federal
Regulations) 85.36.

HUD Lacked Assurance
HUD could not be assured that the Authority received the best value and greatest overall benefit
for $41,133 spent for the purchase of goods and services, including $34,226 for executive
director services, $4,507 for fee accounting services, or $2,400 for agency plan completion.
Additionally, HUD and the Authority lacked assurance that the contractors would comply with
all program requirements, and the Authority put itself at risk by not always executing contracts
that included all required contract provisions, including prevailing wage requirements.

Recommendations
We recommend that the Director of HUD’s Omaha, NE, Office of Public Housing require the
Authority to

       1A.     Reprocure its executive director services using the appropriate policies and
               procedures to ensure properly procured services going forward and use the quotes
               from that procurement to justify the $34,226 spent for executive director services
               from August 2011 through December 2014. For any amount the Authority cannot
               support, HUD should reduce future annual operating funds.

       1B.     Reprocure its fee accounting services using the appropriate policies and
               procedures to ensure properly procured services going forward and use the quotes
               from that procurement to justify the $4,507 spent for fee accounting services from
               August 2011 through December 2014. For any amount the Authority cannot
               support, HUD should reduce future annual operating funds.

       1C.     Justify the $2,400 spent for the 2012 annual agency plan and 2014 5-year and
               annual agency plan. For any amount the Authority cannot support, HUD should
               reduce future annual operating funds.

       1D.     Develop and implement detailed operating procedures, including checklists,
               which fully implement its procurement policy and HUD requirements.



                                                6
1E.   Submit all contracting actions to HUD, including solicitation and contracts, for
      review and approval before executing contracts until the Authority demonstrates
      compliance and HUD determines, based on the information available, that this
      review is no longer necessary.




                                       7
Finding 2: The Authority Spent Capital Funds for Ineligible
Expenses
The Authority spent $4,171 of its capital funds for ineligible expenses. This condition occurred
because the Authority lacked detailed operating policies and procedures for the review and
approval of expenditures. As a result, it did not have $4,171 available to spend on other Capital
Fund projects.
The Authority Spent Capital Funds for Ineligible Expenses
The Authority spent $3,000 of its capital funds for services covered in the executive director
services contract and $1,171 above the contract price without support to install air conditioning
at the Authority’s living units.

       The Authority Spent $3,000 for Services Covered Under Another Contract
       The Authority spent $3,000 of its capital funds for services covered in the executive
       director services contract. According to 2 CFR Part 225, appendix A, part C, for a cost to
       be allowable under a Federal award, it must be reasonable and necessary for proper and
       efficient performance and administration of the project. The Authority paid the executive
       director services provider $1,500 from both the 2011 and 2012 annual Capital Fund grant
       for the administration of the two grants. However, the executive director services
       contract provided for the administration of the annual Capital Fund grant. Therefore, it
       was not necessary to pay the executive director service provider an additional $3,000 for
       services paid for under the executive director services contract.

       The Authority Spent $1,171 Above the Contract Price Without Support
       The Authority spent $1,171 above the contract price without support for the additional
       expense of installing air conditioning at the Authority’s living units. The Authority
       entered into a contract to replace air conditioning units at each of the living units in June
       2010. The contract was awarded for $133,827; however, the Authority paid the
       contractor an additional $1,171 above the contract amount. Regulations at 2 CFR Part
       225, appendix A, part C, require that costs be reasonable and necessary; however, the
       Authority received no additional services or products for the additional $1,171.

       The Authority paid the contractor from both capital funds and operating funds. The
       Authority’s executive director forgot to include the payment made from the operating
       funds in her calculation for the final payment. Therefore, she made the final payment
       from capital funds and exceeded the contract amount by $1,171.
The Authority Lacked Detailed Operating Policies and Procedures
The Authority lacked detailed policies and procedures for the review and approval of
expenditures. It did not have policies and procedures in place to determine expense eligibility
based on requirements at 2 CFR Part 225 before board approval and payment.

Money Was Not Avilable for Other Capital Fund Projects
As a result of the deficiencies noted, the Authority did not have $4,171 available to spend on
other Capital Fund projects.


                                                  8
Recommendations
We recommend that the Director of HUD’s Omaha, NE, Office of Public Housing require the
Authority to

      2A.    Collect from its executive director services provider and repay its Capital Fund
             program the $3,000 that it improperly paid the provider from its capital funds.

      2B.    Collect from the contractor that replaced the Authority’s air conditioning units
             and repay its Capital Fund program the $1,171 that it improperly paid the
             contractor from its capital funds.
      2C.    Develop and implement policies and procedures for the review and approval of
             expenditures to ensure that it fully implements HUD requirements.




                                               9
Scope and Methodology
Our review generally covered the period July 1, 2011, through December 31, 2014. We
conducted our fieldwork from February through April 2015 at the Authority located at 517 East
7th Street, #100, Stromsburg, NE. We also conducted fieldwork at the York Housing Authority
because the executive director at Stromsburg also conducts business in York. The York Housing
Authority is located at 215 North Lincoln Avenue, York, NE.
To accomplish our objective, we

      Interviewed the Authority’s executive director and board chair;
      Interviewed HUD’s Office of Public Housing staff in Omaha, NE;
      Reviewed the Authority’s policies and procedures, procurement files, contracts, and
       financial records; and
      Reviewed Federal regulations and HUD requirements.

Using the Authority’s general ledger for fiscal years 2012-2014, we selected a procurement
sample as well as a separate expenditure sample. We reviewed the general ledgers for
expenditures exceeding the $2,000 micro purchase threshold, including recurring payments to
the same vendor that exceeded this amount, potential ineligible payments, and payments to the
Authority’s executive director and fee accounting services company. We organized the amounts
in an Excel spreadsheet according to the general ledger expenditure description and used the
Excel spreadsheet to select our sample.
During our audit period, the Authority paid the executive director and fee accounting services
provider a total of $54,254, which included the monthly fee for executive director services,
ranging from $824 (August 1, 2011, through July 31, 2013) to $850 (August 1, 2013, through
December 31, 2014), as well as the monthly fee for fee accounting services, ranging from $107
(August 1, 2011, through December 31, 2012) to $112 (January 1, 2013, through December 31,
2014). The Authority spent another $147,578 during the audit period on items and contractors
other than the executive director and fee accounting services provider. Of the total $147,578 in
other expenditures, the Authority paid almost $52,591 using capital funds and the remaining
$94,987 using operating funds. During our audit period, the Authority spent $201,832 ($54,254
+ $147,578) for all services, supplies, repairs, and construction contracts.
For the procurement sample, we reviewed the procurement of the two contractors that received
the largest capital fund expenditures during our audit period. We also reviewed the procurement
of both executive director and fee accounting services.
For the expenditure sample, we reviewed the two largest capital fund expenditures, which
represented 52.5 percent of the total capital fund expenditures during our audit period. We also
reviewed the four largest payments to the executive director and fee accounting services provider
during the audit period.



                                                10
Our results apply to the items reviewed and cannot be projected to the portion of the population
that we did not test.
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.




                                                11
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:
   Controls over the Authority’s procurement.
   Controls over the Authority’s expenditures.

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 Authority lacked detailed processes and procedures for implementing HUD procurement
    (finding 1) and expenditure (finding 2) regulations.




                                                  12
Appendixes

Appendix A


                          Schedule of Questioned Costs
                  Recommendation
                                   Ineligible 1/ Unsupported 2/
                      number
                          1A                                      $34,226
                          1B                                        4,507
                          1C                                        2,400
                          2A                   $3,000
                          2B                       1,171

                        Totals                 $4,171             $41,133



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.




                                              13
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




                               14
             Auditee Comments
Ref to OIG
Evaluation




Comment 1


Comment 2




Comment 1


Comment 3




                            15
             Auditee Comments
Ref to OIG
Evaluation




                            16
             Auditee Comments
Ref to OIG
Evaluation




Comment 4




Comment 5




Comment 6




                            17
             Auditee Comments
Ref to OIG
Evaluation




Comment 7




Comment 8

Comment 9




                            18
                         OIG Evaluation of Auditee Comments


General     The Authority took considerable effort in its response to minimize the efforts of
            the auditors and the audit results identified in the report. HUD and the
            Authority’s Board should take the findings seriously. During our review, we
            found the Authority did not maintain adequate documentation to support
            procurements, nor did it keep a listing of its procurements or contracts. We
            reviewed a small sample of procurements and expenditures using the Authority’s
            general ledger. We reviewed $33,012 of a total universe of $201,832
            expenditures during our 3.5-year audit period – not 4 years as stated in the
            auditee’s comments. Our universe did not come close to the $701,813 of
            expenditures suggested by the auditee, nor can our results be projected to such a
            population. We did not expand the scope of our review because we determined
            that it was likely that we would uncover similar issues as those reported, and it
            would have placed a burden on the Authority to cost justify additional items.

Comment 1   The reprocurement of executive director and fee accounting services that the
            Authority plans to use to justify the cost of previous executive director and fee
            accounting services took place after OIG had completed its review. OIG did not
            review any bids for the reprocurement of the services. At the time of the report
            issuance, OIG could not comment on the Authority’s ability to support previous
            executive director and fee accounting service expenses.

Comment 2   The Authority contracted for both executive director and fee accounting services.
            The executive director contract only requires the executive director to be on-site,
            at most, five days per month. However, the Authority’s comments indicate that
            direct tenant services are a high priority. If the Authority is concerned with
            limited staffing capacity, it should consider requiring the executive director
            services provider to be on-site more frequently, allowing tenants to have access to
            the provider more often.

            The Authority failed to comply with HUD requirements. HUD requirements
            include required contract provisions to protect HUD funds, program participants,
            and to ensure compliance with federal rules and regulations, including prevailing
            wage requirements.

Comment 3   In our review of the Authority’s procurement, we identified significant
            deficiencies in the Authority’s procurement. According to HUD Handbook
            7460.8, REV-2, section 12.2(L), solicitation and contracts by any PHA (public
            housing authority) whose procurement procedures or operations fail to comply
            with the procurement standards in 24 CFR 85.36 shall have prior HUD approval.
            We found the Authority did not comply with 24 CFR 85.36 when it failed to
            maintain documentation on the procurement for its executive director and fee
            accounting services or require contractors to comply with the required contract



                                             19
            provisions. Our recommendation that all contracting actions go through the
            Omaha field office still stands.

Comment 4   Our review only included a small sample of the Authority’s expenditures and
            procurements over a 3.5-year audit period – not 4 years as stated in the auditee’s
            comments (see the Scope and Methodology section on pages 10-11). We did not
            review 100% of the funds expended during the audit period. Our limited review
            cannot be projected to the entire population of expenditures. Therefore, it cannot
            be said that the items we did not review were spent in accordance with HUD’s
            rules and regulations.

Comment 5   The Authority did not have a contract in place with the executive director or fee
            accounting services provider that allowed it to pay either provider the ten percent
            capital fund administration draw. If the Authority needed additional assistance
            with the capital fund administration outside of what was already included in the
            executive director contract, it should have properly procured those services.

Comment 6   On December 6, 2011, the Authority received a letter from the contractor that
            installed living unit air conditioning systems. The letter requested that the
            Authority pay the contractor additional fees for various activities, including
            moving tenant furniture to access the air conditioning units. The Authority agreed
            to pay the contractor an additional $3,262 for those services. On April 23, 2015,
            the executive director services provider sent OIG an e-mail stating that she agreed
            the Authority mistakenly overpaid the contractor $1,171 as part of the final
            payment. The additional $3,262 that the Authority paid the contractor is separate
            from the $1,171 that OIG is requesting be repaid.

Comment 7   The calculation of two part-time employees does not include the executive
            director and fee accounting services company that the Authority contracted with
            to carry out the Authority’s day to day operations. If the Authority feels that
            staffing is the cause of the procurement and expenditure issues identified in this
            report, is should require the executive director services provider to be on-site
            more frequently or explore procuring a different provider.

            Policies and procedures are the only way to ensure that the Authority complies
            with HUD rules and regulations and expends funds effectively and efficiently.
            The Authority failed to comply with HUD rules and regulations for its
            procurement and expenditures, as noted in the audit report.

Comment 8   The Authority did not have the $4,171 available to spend on other operating
            expenditures, and the funds could have been spent on other eligible activities or
            moved into the Authority’s reserves for future shortages. Also, our audit period
            was 3.5 years – not 4 years as stated in the auditee’s comments.




                                              20
Comment 9   Audits conducted by the Office of Inspector General have very different scopes
            and objectives than those conducted by HUD. Therefore, it is not uncommon for
            the OIG to identify issues not previously identified by HUD.




                                            21
Appendix C
                                             Criteria

2 CFR 225 – Cost Principles for State, Local, and Indian Tribal Governments
Appendix A
C. Basic Guidelines
   1. Factors affecting allowability of costs. To be allowable under Federal awards, costs
       must meet the following general criteria:
       a. Be necessary and reasonable for proper and efficient performance and administration
           of Federal awards.
       j. Be adequately documented.
   2. Reasonable costs. A cost is reasonable if, in its nature and amount, it does not exceed
       that which would be incurred by a prudent person under the circumstances prevailing at
       the time the decision was made to incur the cost. The question of reasonableness is
       particularly important when governmental units or components are predominately
       federally-funded.

HUD Handbook 7460.8, REV-2 – Procurement Handbook for Public Housing Agencies
Chapter 3 – 3.3 Documentation
  A. General 24 (CFR 85.36(b)(9)). The PHA [public housing agency] must maintain
      records sufficient to detail the significant history of each procurement action. Such
      documentation is particularly important in the event a protest is lodged against the PHA.
      It will also facilitate future purchases of similar supplies or services since it will not be
      necessary to recreate solicitation documents. Supporting documentation shall be in
      writing and placed in the procurement file. These records shall include, but shall not
      necessarily be limited to, the following:
       1. Rationale for the method of procurement selected. For example, the contract file
          would not need to state why the Contracting Officer chose small purchase procedures
          to order a desk but would want to note why noncompetitive proposals was used for a
          roofing contract.
       2. The solicitation.
       3. Selection of contract pricing arrangement, but only if not apparent. For example, the
          contract file would not need to document why a firm fixed-price was used to obtain
          building materials.
       4. Information regarding contractor selection or rejection, including, where applicable,
          the negotiation memo, the source selection panel, evaluation report, cost and price
          analysis, email correspondence (including offers, selections, pertinent pre- and post-
          award discussions and negotiations, etc.)
       5. Basis for the contract price (as prescribed in this handbook), and
       6. Contract administration issues/actions.
          The level of documentation should be commensurate with the value of the
          procurement. A sample contract file checklist is included in Appendix 2.


                                                  22
   B. Record Retention (24 CFR 85.42(a)&(b). PHAs shall retain all significant and material
      documentation and records concerning all procurements they conduct. These records
      must be retained for a period of three years after final payment and all matters pertaining
      to the contract are closed. If any claims or litigation are involved, the records shall be
      retained until all issues are satisfactorily resolved.
Chapter 5 – 5.10 Standardized Forms/Mandatory Contract Clauses
  A. General. Except in the case of bid specifications and contracts for construction or
      maintenance work in excess of $2,000 (see paragraphs B and C, below), small purchases,
      including purchase orders, are subject only to the mandatory clauses contained in Table
      5.1.

       PHAs may be further bound by certain State or local requirements (See Chapter 13).
       Other than these Federal, State or locally-mandated provisions, PHAs should include
       language with any small purchase that is necessary and appropriate, consistent with good
       business practice.

       In addition to Table 5.1, HUD has developed forms which contain the contract clauses
       required for small purchases related to construction and maintenance work. The use of
       the Table and these forms are described in the paragraphs below.

   B. Mandatory Requirements for Construction Contracts greater than $2,000 but not
      more than $100,000. PHAs must incorporate the clauses contained in form HUD-5370-
      EZ, General Conditions for Small Construction/Development Contracts, and the
      applicable Davis-Bacon wage decision. Form HUD-5370-EZ has been designed for
      small construction jobs. PHAs may use form HUD-5370 in lieu of the HUD-5370-EZ if
      the former is more appropriate given the nature of the work.

   C. Mandatory Requirements for Maintenance Contracts (including nonroutine
      maintenance work) greater than $2,000 but not more than $100,000. PHAs must
      incorporate the clauses contained in Table 5.1; Section II of form HUD-5370-C, General
      Conditions for Non-Construction Contracts, and the applicable HUD wage decision.
TABLE 5.1 Mandatory Contract Clauses for Small Purchases Other than Construction
  The following contract clauses are required in contracts pursuant to 24 CFR 85.36(i) and
  Section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation
  and Recovery Act. HUD is permitted to require changes, remedies, changed conditions,
  access and records retention, suspension of work, and other clauses approved by the Office of
  Federal Procurement Policy. The PHA and contractor is also subject to other Federal laws
  including the U.S. Housing Act of 1937, as amended, Federal regulations, and state law and
  regulations.
   Examination and Retention of Contractor’s Records. The PHA, HUD, or Comptroller
   General of the United States, or any of their duly authorized representatives shall, until three
   years after final payment under this contract, have access to and the right to examine any of
   the Contractor’s directly pertinent books, documents, papers, or other records involving


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transactions related to this contract for the purpose of making audit, examination, excerpts,
and transcriptions.
Right in Data and Patent Rights (Ownership and Proprietary Interest). The PHA shall
have exclusive ownership of, all proprietary interest in, and the right to full and exclusive
possession of all information, materials, and documents discovered or produced by
Contractor pursuant to the terms of this Contract, including, but not limited to, reports,
memoranda or letters concerning the research and reporting tasks of the Contract.
Energy Efficiency. The Contractor shall comply with all mandatory standards and policies
relating to energy efficiency which are contained in the energy conservation plan issued in
compliance with the Energy Policy and Conservation Act (Pub.L. [Public Law] 94-163) for
the State in which the work under this contract is performed.
Procurement of Recovered Materials
(a) In accordance with Section 6002 of the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act, the Contractor shall procure items designated in
guidelines of the Environmental Protection Agency (EPA) at 40 CFR Part 247 that contain
the highest percentage of recovered materials practicable, consistent with maintaining a
satisfactory level of competition. The Contractor shall procure items designated in the EPA
guidelines that contain the highest percentage of recovered materials practicable unless the
Contractor determines that such items: (1) are not reasonably available in a reasonable
period of time; (2) fail to meet reasonable performance standards, which shall be determined
on the basis of the guidelines of the National Institute of Standards and Technology, if
applicable to the item; or (3) are only available at an unreasonable price.
(b) Paragraph (a) of this clause shall apply to items purchased under this contract where: (1)
the Contractor purchases in excess of $10,000 of the item under this contract; or (2) during
the preceding Federal fiscal year, the Contractor: (i) purchased any amount of the items for
use under a contract that was funded with Federal appropriations and was with a Federal
agency or a State agency or agency of a political subdivision of a State; and (ii) purchased a
total of in excess of $10,000 of the item both under and outside that contract.
Termination for Cause and for Convenience (contracts of $10,000 or more)
(a) The PHA may terminate this contract in whole, or from time to time in part, for the
PHA’s convenience or the failure of the Contractor to fulfill the contract obligations
(cause/default). The PHA shall terminate by delivering to the Contractor a written Notice of
Termination specifying the nature, extent, and effective date of the termination. Upon receipt
of the notice, the Contractor shall: (1) immediately discontinue all services affected (unless
the notice directs otherwise), and (2) deliver to the PHA all information, reports, papers, and
other materials accumulated or generated in performing the contract, whether completed or in
process.
(b) If the termination is for the convenience of the PHA, the PHA shall be liable only for
payment for services rendered before the effective date of the termination.



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   (c) If the termination is due to the failure of the Contractor to fulfill its obligations under the
   contract (cause/default), the PHA may (1) require the Contractor to deliver to it, in the
   manner and to the extent directed by the PHA, any work described in the Notice of
   Termination; (2) take over the work and prosecute the same to completion by contract of
   otherwise, and the Contractor shall be liable for any additional cost incurred by the PHA; and
   (3) withhold any payments to the Contractor, for the purpose of set-off or partial payment, as
   the case may be, of amounts owned by the PHA by the Contractor. In the event of
   termination for cause/default, the PHA shall be liable to the Contractor for reasonable costs
   incurred by the Contractor before the effective date of the termination. Any dispute shall be
   decided by the Contracting Officer.
Stromsburg Housing Authority Procurement Policy
   Small Purchase Procedures
   For any amounts above the $200 Petty Cash ceiling, but not exceeding $100,000, the SHA
   [Authority] may use small purchase procedures. Under small purchase procedures, the SHA
   shall obtain a reasonable number of quotes (preferably three); however, for purchases of less
   than $2,000, also known as Micro Purchases, only one quote is required provided the quote
   is considered reasonable. To the greatest extent feasible, and to promote competition, small
   purchases should be distributed among qualified sources. Quotes may be obtained orally
   (either in person or by phone), by fax, in writing, or through e-procurement. If award is to
   be made for reasons other than lowest price, documentation shall be provided in the
   contract.




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