oversight

The Buffalo Municipal Housing Authority Did Not Always Adequately Support Legal Expenses and Police Service Cost Allocation

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-02-24.

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

  Buffalo Municipal Housing Authority
             Buffalo, NY
      Legal Fees and Police Services Hotline Complaint




Office of Audit, Region 2       Audit Report Number: 2015-NY-1003
New York-New Jersey                              February 24, 2015
To:            Lisa Pugliese, Director
               Office of Public Housing, Buffalo Field Office, 2PH
               //SIGNED//
From:          Karen A. Campbell-Lawrence
               Acting Regional Inspector General for Audit, 2AGA
Subject:       The Buffalo Municipal Housing Authority Did Not Always Adequately Support
               Legal Expenses and Police Service Cost Allocation




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our audit of the Buffalo Municipal Housing Authority’s legal
and police service expenses charged to its Federal programs.
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.
                    Audit Report Number: 2015-NY-100X
                    Date: February 24, 2015

                    The Buffalo Municipal Housing Authority Did Not Always Adequately
                    Support Legal Expenses and Police Service Cost Allocation




Highlights
What We Audited and Why
We audited the Buffalo Municipal Housing Authority’s legal and police service expenses in
response to a hotline complaint. The complainant alleged that Authority officials paid outside
legal counsel for work that should have been done by its own legal staff and paid for police
services below the baseline level of services that should have been provided under a cooperation
agreement with the City of Buffalo.

What We Found
The allegation in the hotline complaint pertaining to outside legal expenses charged by the
Authority to its Federal programs had merit. Authority officials made payments for outside legal
services without documenting that these services could not be performed by the Authority’s
internal general counsel and without ensuring full and open competition. While the complaint
that Authority officials paid for police services already provided under a cooperation agreement
is without merit, Authority officials did not charge police service costs to the Authority’s asset
management projects in an equitable manner in relation to the services provided.

What We Recommend
We recommend that the Director of the U.S. Department of Housing and Urban Development’s
Buffalo Office of Public Housing instruct Authority officials to (1) provide documentation to
support the need for $211,216 paid for assistance from outside legal and that the services were
obtained through full and open competition; (2) establish procedures to ensure that they do not
procure outside legal services that should be provided by Authority officials; (3) provide
documentation showing that legal services for which $79,244 was paid were obtained through
full and open competition; (4) strengthen procedures to ensure that legal services provided by
outside firms are obtained in accordance with Federal procurement requirements; and (5)
establish procedures to ensure that a reasonable basis is used for allocating police contract costs
to Authority projects.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: Authority Officials Did Not Adequately Support Legal Expenses and
         Police Service Cost Allocation ......................................................................................... 4

Scope and Methodology ...........................................................................................8

Internal Controls ......................................................................................................9

Appendixes ..............................................................................................................11
         A. Schedule of Questioned Costs .................................................................................. 11

         B. Auditee Comments and OIG’s Evaluation ............................................................. 12




                                                                2
Background and Objective
The Buffalo Municipal Housing Authority was established on April 3, 1934, based on a
resolution of the Common Council of the City of Buffalo. The Authority’s creation was later
confirmed by an act of the New York State Legislature. Since its establishment, the Authority
has been recognized as a public corporation with its own independent status. The Authority is
currently governed by a board of seven members: five appointed by the mayor and two elected
at large from the tenant population. Administration of day-to-day operations is the responsibility
of the Authority’s executive director. The Authority has 29 housing developments with 4,332
low-rent units. It received more than $20.4 million and more than $21.1 million in U.S.
Department of Housing and Urban Development (HUD) Public Housing Operating Subsidy
program funds in fiscal years 2013 and 2014, respectively.

In March 2014, the Office of Inspector General (OIG) received a complaint alleging that
Authority officials paid outside legal counsel for work that should have been done by its own
legal staff. The complainant alleged that outside counsel had cost the Authority $1.2 million.
The complainant further alleged that the Authority had a contract with the Buffalo Police
Department to provide above baseline protection to housing residents, but only vehicle and
traffic citations were provided, thus offering little protection to the residents of the Authority.
The complainant alleged that this contract had cost the Authority more than $1.9 million since
2010.

Based on the concerns identified in the complaint, we focused our audit on the eligibility and
reasonableness of both internal and outside legal and police service expenses charged by the
Authority to its federally funded programs. We audited payments made from federal sources to
seven outside attorneys or law firms between October 2011 and July 2014. Authority officials
paid more than $1.4 million in funds from all sources to these attorneys or law firms during this
time, including more than $890,000 to the firm responsible for legal services pertaining to the
abatement, demolition, and redevelopment of an Authority-owned, non-federal property. About
$28,000 was paid to this firm with HUD Operating Subsidy program funds; the remaining
amount was paid with Central Office Cost Center and other non-federal funds. We also audited
the two payments made to the City of Buffalo under the contract for police services, which
totaled $1.3 million and was paid with HUD Operating Subsidy program funds.

The objective of the audit was to determine whether the issues identified in a hotline complaint
were valid; specifically, whether the legal and police service expenses charged by the Authority
to its Federal programs were allowable and reasonable.




                                                  3
Results of Audit

Finding: Authority Officials Did Not Adequately Support Legal
Expenses and Police Service Cost Allocation
The allegation in the hotline complaint pertaining to outside legal expenses had merit; however,
the allegation pertaining to police services did not. Authority officials paid for outside legal
services that should have been provided by the Authority’s internal general counsel and without
ensuring full and open competition. While the police services provided were above the baseline
level of services required by the Authority’s cooperation agreement and thus allowable, the cost
of these services was not allocated to the Authority’s asset management projects based on the
actual services provided at each project. We attribute these deficiencies to Authority officials’
not knowing which legal services should be performed by the Authority’s counsel, unfamiliarity
with Federal procurement requirements, and not maintaining documentation to ensure equitable
cost allocation. As a result, $290,460 was paid for outside legal costs for services that were not
procured in accordance with Federal procurement regulations, of which $211,216 related to
general Authority legal services that were not adequately justified. Also, because Authority
officials did not allocate police service costs to the Authority’s asset management projects based
on the actual services provided at each project, these costs were not equitably allocated.

Allegations Made in the Hotline Complaint
In March 2014, OIG received a complaint alleging that Authority officials paid outside legal
counsel fees for work that should have been done by its own legal staff, which consists of a
general counsel, assistant counsel, and paralegal. The complainant alleged that the in-house
legal staff cost the Authority about $250,000 per year, while outside counsel cost the Authority
$1.2 million. The complainant further alleged that the Authority had a contract with the Buffalo
Police Department to provide above baseline protection to housing residents at a cost of
$650,000 per year; however, only vehicle and traffic citations were provided, thus offering little
protection to the residents. The complainant alleged that this contract had cost the Authority
more than $1.9 million since 2010.

Unsupported Legal Costs
Authority officials made payments for outside legal services without adequate support that the
services could not have been provided by the Authority’s internal general counsel. Authority
officials paid more than $1.4 million in funds from all sources to seven outside attorneys or law
firms between October 2011 and July 2014. Three of these firms provided general litigation
services similar to legal services generally provided by the Authority’s general counsel staff.
The four other firms reviewed provided specific legal services that were not the responsibility of
the Authority’s internal general counsel.
According to the general counsel’s duty statement, the general counsel is responsible for the
prosecution and defense of all legal matters concerning the Authority, including but not limited
to all Federal and State lawsuits, landlord or tenant matters, personal injury claims, claims of



                                                 4
misconduct by or against Authority employees, grievance arbitration hearings, construction
claims, and regulatory matters. However, the engagement letters for the three questioned firms
indicated that outside attorneys were retained to provide general litigation services pertaining to
the Authority, including items in the general counsel duty statement. Authority officials said that
these three outside firms were retained during a general counsel staff transition when additional
general legal services were necessary. However, while the current general counsel began
working for the Authority in March 2012 and an assistant general counsel was hired in January
2013, Authority officials paid $211,216 to these firms from March 2012 through July 2014.
Therefore, Authority officials did not adequately support the need to retain the contracted legal
services. Regulations at 2 CFR (Code of Federal Regulations) Part 225, appendix A, C.1.a,
require that to be paid with Federal funds, costs be necessary and reasonable for proper and
efficient performance and administration of Federal awards. Accordingly, the $211,216 was
regarded as an unsupported cost.
Contracts for Legal Services Executed Without Documentation To Ensure Full and Open
Competition
Authority officials entered into five of seven contracts for outside legal services without
maintaining documentation to ensure that they provided full and open competition, including the
three firms providing general litigation services to the Authority. While Authority officials have
procurement procedures to ensure compliance with Federal regulations, the controls in place did
not ensure compliance with them. Authority officials did not maintain records sufficient to detail
the significant history of the procurement, including the rationale for the method of procurement,
selection of contract type, contractor selection or rejection, and basis for the contract price and
that it was competitive. Regulations at 24 CFR 85.36 and section II of the Authority’s
procurement policy require that all procurement transactions be conducted in a manner that
ensures full and open competion. Authority officials stated that the condition described above
occurred due to an oversight by the prior general counsel. Without adequately documenting the
process for the procurements, Authority officials could not assure HUD of the reasonableness of
the contract costs due to the lack of competition in the award of these contracts. A total of
$290,4601 in operating subsidies was paid for these five contracts from HUD funds.
Costs of Police Services Not Allocated to Asset Management Projects in an Equitable
Manner
Authority officials did not allocate police service costs to the Authority’s asset management
projects based on the actual services provided at each project. In December 2010, Authority
officials entered into a contract with the Buffalo Police Department to provide police services
above the baseline services provided under the Authority’s cooperation agreement with the City.
The contract established a Buffalo Police Housing Unit at the Authority with 18 police officers, 2
lieutenants, and a police captain. The purpose of the unit was to provide supplemental services
to police illegal drug, violent, and criminal activity for the safety and protection of the residents
in the Authority’s housing developments. The cost of the services was $650,000 per year.




1
    This amount includes the $211,216 that we determined to be an unsupported cost.



                                                          5
Authority officials made two payments to the City from HUD funds totaling $1.3 million under
the contract for police services. The Authority had documentation to show that the police
services provided were above the baseline level of service that was required to be furnished
under the cooperation agreement. However, Authority officials did not allocate the costs to the
individual asset management projects based on the level of protective services provided and did
not obtain monthly police activity reports in a timely manner.
Documentation for each of the two payments made to the City disclosed that Authority officials
allocated the first payment costs to 13 of the Authority’s 19 asset management projects at a rate
of $50,000 per project and allocated the second payment costs based on the number of project
units. Regulations at 2 CFR Part 225, appendix A, C.1.j and C.3.a, require that to be paid with
Federal funds, costs be adequately documented and allocable so that the services provided are
chargeable in accordance with the relative benefit received. However, Authority officials did not
document the rationale for the allocation methods used, and neither method used was based on
the actual services provided at each project. For example, for the contract period February 1,
2011, through January 31, 2012, there were no police services provided at one project, yet the
project was charged $50,000 for these services. For the contract period February 1, 2012,
through January 31, 2013, police activity was reported at another project, which was not charged.
In addition, Authority officials did not have procedures to ensure that monthly police activity
reports submitted by the Buffalo Police Housing Unit were timely and in accordance with the
contract. For example, from September through December 2012, no reports were prepared, and
the August 2012 report was not prepared until February 2013. Without timely submission of the
reports, Authority officials could not effectively determine the type and amount of police
services provided and whether they were above the baseline level of service.
Conclusion
Authority officials paid $290,460 in outside legal costs for contracts without documentation
showing that they were procured in accordance with Federal procurement requirements or
supporting that they were needed. Of that amount, $79,244 related to necessary legal services,
and $211,216 related to general Authority legal services. Also, Authority officials did not
allocate police service costs to the Authority’s asset management projects based on the actual
services provided at each project and did not have procedures to ensure that monthly police
activity reports submitted by the Buffalo Police Housing Unit were timely and in accordance
with the contract. We attribute these deficiencies to unfamiliarity with Federal procurement
requirements and weaknesses in maintaining documentation to ensure equitable cost allocation.
As a result, Authority officials lacked assurance that $290,460 paid for legal services was
adequately supported, certain projects underpaid for police services performed, and others
overpaid for these services.

Recommendations
We recommend that the Director of the HUD’s Buffalo Office of Public Housing instruct
Authority officials to
       1A.    Provide documentation to support the need for $211,216 paid for assistance from
              outside legal and that the services were obtained through full and open




                                                6
      competition. If such documentation cannot be provided, the costs should be paid
      from non-Federal funds.

1B.   Establish procedures to ensure that they do not procure outside legal services that
      should be provided by Authority officials.

1C.   Provide documentation showing that legal services for which $79,244 was paid
      were obtained through full and open competition. If such documentation cannot
      be provided, the Authority should repay any unnecessary and unreasonable costs
      from non-Federal funds.

1D    Strengthen procedures to ensure that legal services provided by outside firms are
      obtained in accordance with Federal procurement requirements.

1E.   Establish procedures to ensure that a reasonable basis is used for allocating police
      contract costs to Authority projects as required in 2 CFR Part 225, appendix A,
      C.3.a.




                                        7
Scope and Methodology
We performed the audit fieldwork from July through December 2014 at the Authority’s
administrative offices at 300 Perry Street in Buffalo, NY. The audit scope covered the period July
1, 2012, through June 30, 2014, and was extended as necessary. We relied in part on computer-
processed data primarily for obtaining background information on the Authority’s expenditure of
Federal funds. We performed a minimal level of testing and found the data to be adequate for
our purposes. To accomplish our objective, we

     Reviewed relevant HUD regulations, guidebooks, and files.

     Interviewed HUD officials to obtain an understanding of and identify HUD’s concerns with
      the Authority’s operations.

     Reviewed the Authority’s policies, procedures, and practices.

     Reviewed the Authority’s board of commissioners’ meeting minutes and resolutions for our
      audit period.

     Reviewed the Authority’s fiscal years 2012-2015 operating budgets and 2012-2103 audited
      financial statements.

     Reviewed engagement letters and contracts between the Authority and outside entities
      pertaining to our review of legal and police service costs.

     Reviewed payroll records of Authority personnel pertaining to our review of legal and police
      service costs.

     Interviewed key personnel responsible for the accounting and oversight of the legal and
      police service contract costs.

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.




                                                 8
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.

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

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

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

We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:




                                                   9
   Authority officials did not have adequate controls over the effectiveness and efficiency of
    program operations when they lacked adequate support for payments for outside legal
    services (see finding).
   Authority officials did not have adequate controls over laws and regulations when they
    executed contracts without documenting that they were procured in accordance with Federal
    regulations and when they did not allocate police service costs to the Authority’s asset
    management projects based on the actual services provided at each project (see finding).




                                                 10
Appendixes

Appendix A


                             Schedule of Questioned Costs
                           Recommendation
                                             Unsupported 1/
                               number
                                   1A              $211,216
                                   1C              $79,244
                                 Totals            $290,460


1/   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.




                                              11
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




                               12
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG
Evaluation




Comment 1
Comment 2




Comment 3




Comment 4




                               13
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 5




Comment 6




                               14
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 7


Comment 8


Comment 9




                               15
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 9




Comment 9




Comment 10


Comment 11


Comment 12




                               16
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 13




Comment 14




Comment 15




Comment 16




                               17
OIG Evaluation of Auditee Comments

Comment 1   Authority officials state that ceasing all work with outside legal counsel as of the
            date of hire of the Authority’s new general counsel would have been detrimental
            to the operations of the Authority. However, the draft report does not suggest
            ceasing all work with outside legal counsel. We reviewed the contracts of seven
            outside attorneys or law firms providing services to the Authority between
            October 2011 and July 2014 and determined that three of these firms provided
            general litigation services similar to legal services generally provided by the
            Authority’s general counsel staff. The payments to these three firms are
            questionable because Authority officials could not provide documentation to
            support that the services could not have been provided by the Authority’s internal
            general counsel. We note in the draft audit report that payments to four other
            firms provided specific legal services that were not the responsibility of the
            Authority’s internal general counsel. Payments to the other four firms were not
            questioned based on a lack of documentation to support that the services could not
            have been provided by the Authority’s internal general counsel.

Comment 2   Authority officials state that HUD OIG did not account for a transition period
            when making the determination that outside legal services were not necessary as
            of the date of hire of the new general counsel and that it is unreasonable to expect
            Authority officials to immediately discontinue the use of outside counsel,
            especially when outside counsel was already providing services on a variety of
            legal issues before the hire of the new general counsel. Authority officials also
            state that it must also be taken into consideration that legal matters involving low-
            income public housing and housing authorities are extremely complex and it is
            not realistic to expect any new general counsel to be able to adequately represent
            the housing authority without assistance from outside legal counsel. However, a
            transition period was considered, and the draft report does not suggest ceasing all
            work with outside legal counsel as of the date of hire of the new general counsel.
            Payments to outside firms for general litigation services continued through July
            2014, more than 2 years after the general counsel began work at the Authority and
            a year and a half after the assistant general counsel was hired. Authority officials
            could not provide documentation to support that the services could not have been
            provided by the Authority’s internal general counsel. In addition, Authority
            officials were not contractually obligated to these firms during this period, as they
            were under a retainer and could have been released at any time.

Comment 3   Authority officials state that they have already taken steps to reduce the need for
            outside counsel. However, they need to establish formal, written procedures to
            ensure that they do not procure outside legal services that should be provided by
            Authority officials.




                                              18
Comment 4 Authority officials concede that procurement documents could not be provided.
          They assert that requiring repayment of the amount in question would be purely
          punitive in nature and create an unnecessary financial burden on the Authority’s
          central office cost center. However, Authority officials may have violated
          Federal regulations and cannot support that the Authority’s selection of these law
          firms was competitive and followed a reasonable method of procurement. If the
          documentation cannot be provided, these funds should be repaid form non-
          Federal funding sources.
Comment 5    Authority officials state that the current general and assistant general counsels are
             well versed in not only Federal procurement requirements, but general municipal
             law and Authority procurement policy as well. However, Authority officials need
             to revise and strengthen the existing Authority procedures to ensure that legal
             services provided by outside firms are obtained in accordance with Federal
             procurement requirements and that proper documentation is maintained to support
             compliance with these requirements. This includes procedures to ensure the
             Authority maintains records sufficient to detail the significant history of the
             procurement, including the rationale for the method of procurement, selection of
             contract type, contractor selection or rejection, and basis for the contract price and
             that it was competitive.
Comment 6    Authority officials state that they will allocate police contract costs in accordance
             with the Authority’s cost recovery distribution plan, which was submitted as part
             of its stop-loss submission to HUD in 2007. However, Authority officials need to
             establish formal, written procedures to ensure that a reasonable basis is used for
             allocating police contract costs to Authority projects as required in 2 CFR Part
             225, appendix A, C.3.a. The cost recovery distribution plan was not provided
             during the audit; however, we will review it as part of the audit resolution process
             to determine whether it provides a reasonable basis for allocating police contract
             costs in accordance with Federal regulations.
Comment 7    Authority officials state that they provided information to OIG supporting the
             necessity and reasonableness of the legal fees paid to various law firms and
             attorneys who provided necessary legal services to operate the Authority’s asset
             management projects. However, while support for the payments to the law firms
             and attorneys was provided, payments to three firms are questionable because
             Authority officials could not provide documentation to support that the services
             could not have been provided by the Authority’s internal general counsel.
             Payments to five firms, including the three already discussed, are questionable
             because Authority officials did not maintain records sufficient to detail the
             significant history of the procurement, including the rationale for the method of
             procurement, selection of contract type, contractor selection or rejection, and
             basis for the contract price and that it was competitive.
Comment 8    Authority officials state that legal services provided to the Authority by law firms
             were related to landlord-tenant matters, complex contract litigation, contract



                                                19
               revisions, and other matters during a period when the Authority was without a
               general counsel, assistant legal counsel, and paralegal. We determined that these
               services were similar to legal services generally provided by the Authority’s
               general counsel staff and that payments for these services continued through July
               2014, more than 2 years after the general counsel began work at the Authority and
               a year and a half after the assistant general counsel was hired.
Comment 9      Authority officials discuss the assistant legal counsel position during a 15-month
               period from December 2010 to March 2012. Upon the assistant legal counsel’s
               retirement in October 2011, Authority officials retained his services as an outside
               consultant, also in October 2011. While Authority officials state that the services
               were reasonable and necessary and at or below average fees for attorneys
               providing the same services, they did not maintain documentation to ensure that
               they provided full and open competition in the award of the contract. In addition,
               Authority officials made payments to the former assistant legal counsel, retained
               as an outside consultant, for general litigation services without adequate support
               that the services could not have been provided by the Authority’s internal general
               counsel through December 2012.
Comment 10 Authority officials state that they provided a resolution by the Authority’s board
           of commissioners approving the retention of the litigation firm related to
           construction contract litigation at one of the Authority’s Federal buildings. We
           reviewed the resolution; however, Authority officials did not maintain
           documentation to ensure that they provided full and open competition in the
           award of the contract.
Comment 11 Authority officials state that all fees for pending or new matters that the assistant
           legal counsel determined required outside legal assistance were reasonable and
           necessary. However, documentation was not maintained to show that the costs
           were reasonable and necessary or that the services were procured with full and
           open competition.
Comment 12 Authority officials state that payments made to the former assistant legal counsel,
           retained as an outside consultant, were reasonable and necessary. However, they
           did not maintain documentation to ensure that they obtained full and open
           competition in the award of the contract. In addition, Authority officials made
           payments to the former assistant legal counsel, retained as an outside consultant,
           for general litigation services without adequate support that the services could not
           have been provided by the Authority’s internal general counsel through December
           2012.
Comment 13 Authority officials discuss a transition period when the incumbent general counsel
           was hired by the Authority and began service in March 2012. They discuss the
           hiring of additional staff and the legal work done by in-house counsel and that this
           work was no longer done by outside counsel. However, payments to outside
           firms for general litigation services continued through July 2014, more than 2
           after the general counsel began work at the Authority and a year and a half after


                                                 20
              the assistant general counsel was hired. Authority officials could not provide
              documentation to support that the services could not have been provided by the
              Authority’s internal general counsel.
Comment 14 Authority officials state that they provided information to OIG supporting the
           necessity and reasonableness of the legal fees paid to various law firms and
           attorneys who provided necessary legal services to operate the Authority’s asset
           management projects. However, while support for the payments to the law firms
           and attorneys was provided, payments to three firms are questioned as being
           unsupported because Authority officials could not provide documentation to
           support that the services could not have been provided by the Authority’s internal
           general counsel. Payments to five firms, including the three providing general
           litigation services, are questionable because Authority officials did not maintain
           documentation to ensure that they provided full and open competition.
Comment 15 Authority officials state that to be effective, a transition from an Office of General
           Counsel without any staff to a new general counsel could not have been
           conducted quickly. Authority officials also state that it would have been
           irresponsible for the Office of General Counsel to inject itself into ongoing
           litigation and that the reasons for maintaining the services until completion or
           discontinuance were prudent and reasonable. However, the transition to a new
           general counsel was considered. Authority officials could not provide
           documentation to show, on an individual basis, why expenditures for outside legal
           counsel were necessary while also employing an internal general counsel and why
           it took so long for the transition of these services to the internal general counsel.
Comment 16 Authority officials state that all of the outside legal services provided to the
           Authority were absolutely necessary and reasonable to allow the asset
           management projects to conduct their business. However, Authority officials
           could not provide documentation to support that the services of three firms could
           not have been provided by the Authority’s internal general counsel and why it
           was necessary to use these firms through July 2014 when the incumbent general
           counsel was hired in March 2012 and the assistant general counsel was hired in
           January 2013. Also, Authority officials did not maintain documentation to ensure
           that they obtained the legal services through full and open competition.




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