oversight

The Chicago Housing Authority, Chicago, IL, Did Not Always Make Payments for Outside Legal Services in Compliance With Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-04-20.

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

                                              U.S. DEPARTMENT OF
                              HOUSING AND URBAN DEVELOPMENT
                                       OFFICE OF INSPECTOR GENERAL



                                              April 20, 2015
                                                                                            MEMORANDUM NO:
                                                                                                 2015-PH-1805


Memorandum
TO:            William A. Wilkins
               Director, Office of Public Housing, Chicago Field Office, 5APH

               //signed//
FROM:          David E. Kasperowicz
               Regional Inspector General for Audit, Philadelphia Region, 3AGA

SUBJECT:       The Chicago Housing Authority, Chicago, IL, Did Not Always Make Payments for
               Outside Legal Services in Compliance With Requirements


                                          INTRODUCTION

We conducted a review of the Chicago Housing Authority’s payments for outside legal services
in conjunction with an ongoing internal audit of the U.S. Department of Housing and Urban
Development’s (HUD) oversight of public housing agencies’ expenditures for outside legal
services. Our review objective was to determine whether the Authority made payments for
outside legal services in compliance with applicable requirements.

                               METHODOLOGY AND SCOPE

The Authority was one of three Moving to Work housing authorities we selected for review as
part of our ongoing internal audit. To accomplish our review objective, we identified payments
that the Authority made from October 1, 2007, through September 30, 2012, for outside legal
expenses. We determined that the Authority incurred outside legal expenses in two ways. It
made payments directly to outside law firms for services rendered, which we classified as direct
payments. It also authorized private property management firms to make payments on its behalf
for outside legal services. We classified those payments as indirect payments.

We determined that the Authority made $2.1 million in direct payments related to 503 invoices
and $5.4 million in indirect payments related to 10,038 invoices for outside legal services during
the review period. We statistically selected 81 sample invoices totaling $774,601 for the direct
payments and 110 sample invoices totaling $141,475 for the indirect payments. We requested


                                                    Office of Audit Region 3
                                             The Wanamaker Building, Suite 10205
                                      100 Penn Square East, Philadelphia, PA 19107-3380
                              Visit the Office of Inspector General Web site at www.hudoig.gov.
the Authority provide the documentation supporting its payment of the sample invoices. In
addition, we obtained and reviewed the following:

           •   Relevant HUD regulations and requirements.

           •   Invoices, canceled checks, contracts, and purchase orders related to direct
               payments that the Authority made to 12 outside law firms.

           •   Invoices, canceled checks, contracts, purchase orders, general journal entries, and
               general ledger entries related to indirect payments made on behalf of the
               Authority by property management firms to 11 outside law firms.

           •   The Authority’s record retention policy, private property management procedural
               manual, and private property management financial policy manual.

           •   The Authority’s Moving to Work agreement and its administrative plans with
               Moving to Work certifications.

We also held discussions with HUD program officials and Authority officials.

We used statistical sampling procedures to estimate the potential unsupported payments related
to the universes for direct and indirect payments based on issues identified.

Our review covered transactions and events that occurred during the period October 1, 2007,
through September 30, 2012. This was a limited scope review. Therefore, it was not performed
in accordance with generally accepted government auditing standards.

                                        BACKGROUND

The U.S. Housing Act of 1937, as amended, initiated the Nation’s public housing program. That
same year, the City of Chicago established the Chicago Housing Authority under Illinois laws to
provide decent, safe, and sanitary housing. The Authority’s main administrative office is located
at 60 East Van Buren Street, Chicago, IL. The Authority is governed by a 10-member board of
commissioners. The board is responsible for overseeing the Authority’s operations as well as the
review and approval of its policies. The Authority is the Nation’s third largest public housing
authority and owns and operates approximately 21,200 public housing units. The Authority’s
chief executive officer is appointed by the mayor and is responsible for supervising and
managing all of the Authority’s operations, programs and activities.

The Authority is a participant in HUD’s Moving to Work Demonstration program. In 1996,
Congress authorized the Moving to Work Demonstration program as a HUD demonstration
program. This program allowed certain housing authorities to design and test ways to promote
self-sufficiency among assisted families, achieve programmatic efficiency, reduce costs, and
increase housing choices for low-income households. Congress exempted participating housing
authorities from much of the United States Housing Act of 1937 and associated regulations as
outlined in the Moving to Work agreements. Participating housing authorities have considerable

                                                2
flexibility in determining how to use Federal funds. In February 2000, the Authority signed its
Moving to Work agreement with HUD and was accepted into the program. In June 2008, HUD
entered into a new 10-year Moving to Work agreement with the Authority. The new agreement
expires in December 2018. The Authority’s fiscal year begins on January 1.

                                    RESULTS OF REVIEW

The Authority did not always make payments for outside legal services in compliance with
applicable requirements. It paid for legal services that were not within contract terms and did not
always maintain adequate documentation to support payments for legal services. These
problems occurred because the Authority lacked controls to ensure that it adequately verified
invoices before payment and followed Federal requirements, contract terms, and its own internal
record retention policies. As a result, it made $503,744 in unsupported payments for outside
legal services. The unsupported payments included $362,549 in direct payments (see appendix
C for details) and $141,195 in indirect payments.

The Authority Paid for Legal Services That Were Not Billed in Accordance With Contract
Terms

The Authority made $259,596 in direct payments for legal services that were not billed in
accordance with contract terms. It paid for services rendered by unapproved personnel and
services based on block billing, general billing descriptions, and unbillable charges that were
explicitly prohibited. Regulations at Office of Management and Budget Circular A-133, subpart
C.300(c), required the Authority to comply with laws, regulations, and the provisions of
contracts or grant agreements related to each of its Federal programs. Regulations at 24 CFR
(Code of Federal Regulations) 85.36 required the Authority to ensure that contractors performed
in accordance with the terms, conditions and specifications of their contracts. Also, the
Authority’s outside billing guidelines, which were part of each individual contract, indicated that
law firms would be paid only for allowable and reasonable expenses and that the Authority
would not pay for certain expenses, such as, intraoffice conferences, duplication of legal services
by multiple staff, and improper billing of professionals’ time. The Authority lacked controls to
ensure that it adequately verified invoices before payment and followed Federal requirements
and contract terms and as a result, made $259,596 in direct payments for legal services that were
not billed in accordance with the contract. The following paragraphs provide details.

The Authority Paid for Legal Services That Were Performed by Unapproved Personnel

According to article 2, section 2.03, of the contractual agreement between the Authority and
outside law firms, key personnel needed to be approved by the Authority’s Office of General
Counsel before performing legal services, and the Authority would not pay for legal services
performed by personnel who were neither listed in the contract nor approved by its Office of
General Counsel. However, of the 81 invoices associated with direct payments reviewed, 37
totaling $159,985 reflected legal services performed by unapproved personnel. The Authority
stated that it could not always comply with the contracts because it did not always know what
personnel would be available to perform legal services. However, as a result of our review, the
Authority stated that it would include a provision in future contracts to require any personnel not


                                                 3
listed in the contract to be added to a task order before performing legal work. To resolve this
issue, the Authority needs to provide additional documentation to HUD to support the payments
totaling $159,985 or repay applicable programs for any costs that it cannot support.

The Authority Paid for Legal Services Based on General Descriptions of Services

The Authority’s outside billing guidelines stated that the use of vague or generally described
activities on an invoice was unacceptable and would not be compensated. However, we
identified 24 invoices totaling $55,669 that reflected general descriptions of services. The
general descriptions included line items such as “setting up meeting” or general discussions that
lacked detail. A sample excerpt from an invoice reflecting general descriptions of services
performed is shown in appendix F. To resolve this issue, the Authority needs to provide
additional information and documentation to HUD to support the payments totaling $55,669 or
repay applicable programs for any costs that it cannot support.

The Authority Paid for Unbillable Charges

The Authority’s outside billing guidelines stated that it would not pay for certain expenses, such
as intraoffice conferences, duplication of legal services by multiple staff, and improper billing
for professionals’ time. However, we identified eight invoices totaling $32,429 that reflected
charges for intraoffice conferences, duplication of services by multiple staff, legal services
without required advance approval, and improperly billed legal services due to incorrect billing
rates. A sample excerpt from an invoice reflecting an unbillable charge for intraoffice
conferences is shown in appendix D. To resolve this issue, the Authority needs to provide
additional documentation to HUD to support the payments totaling $32,429 or repay applicable
programs for any costs that it cannot support.

The Authority Paid for Legal Services Based on Prohibited Block Billing

Contrary to its contract terms, the Authority made payments for invoices that reflected block-
billed entries. The Authority’s outside billing guidelines stated that it would not pay for
“blocked time entries,” which include a single time charge for multiple activities. However, we
identified 15 invoices totaling $11,513 that reflected block-billed time entries. This type of
billing does not identify the nature of the work performed; therefore, it was impossible to
identify how much time was spent on an activity to determine the reasonableness, necessity, and
accuracy of the work performed. A sample excerpt from an invoice reflecting block billing is
shown in appendix E. To resolve this issue, the Authority needs to provide additional
information and documentation to HUD to support the payments totaling $11,513 or repay
applicable programs for any costs that it cannot support.

The Authority Did Not Provide Adequate Support for Payments for Outside Legal Services

The Authority failed to provide adequate documentation to support about $102,953 in direct
payments it made for outside legal services. It could not demonstrate that the legal services
invoiced and related payments it made were in accordance with contract terms and HUD
requirements. Regulations at 2 CFR Part 225, appendix (C)(1)(j), state that to be allowable


                                                 4
under Federal awards, costs must be adequately documented. However, the Authority failed to
adequately support its expenditures for outside legal services with the appropriate
documentation. The Authority provided some supporting documents for its expenditures;
however, the documentation lacked one or more of the following elements required by the
respective contracts:

   •   Prior approval of the use of consultants,
   •   Prior approval for legal research hours and cost,
   •   Prior approval from HUD for service extension,
   •   Prior approval for deposition costs and supporting documentation for costs,
   •   Charges for time spent making telephone calls and on correspondence to copy services
       providers,
   •   Support for copy expenses, and
   •   Support for payment approvals.

To resolve these issues, the Authority needs to provide additional documentation to HUD to
support the payments totaling $102,953 or repay applicable programs for any costs that it cannot
support.

The Authority Failed To Maintain Source Documentation for Its Indirect Payments for
Outside Legal Services

The Authority could not provide source documentation for $141,195 in indirect payments it
made for outside legal services. Under its Moving to Work certifications, the Authority certified
that it would comply with regulations at 24 CFR 85.20(b), which state that accounting records
must be adequately supported by source documentation, such as canceled checks, paid bills,
contracts, and subgrant award documents. However, the Authority generally could not provide
complete documentation, including contracts, purchase orders, checks, and other financial
records, for the indirect payments sample, consisting of 110 payments totaling $141,475. It
provided only 80 invoices, 1 contract related to 7 invoices, and 41 purchase orders. Only two
sample payments totaling $280 were completely supported. Because it failed to provide
complete documentation for almost all the sample items, we could not determine whether the
$141,195 that the Authority spent was for allowable and reasonable expenses.

The Authority’s record retention policy required that contracts and agreements be maintained for
12 years and paid bills, invoices, canceled checks, and check registers be maintained for 9 years.
However, the Authority stated that it did not have the documentation we requested because it had
stopped doing business with most of the property management firms that made the payments for
legal services on its behalf. The Authority lacked controls to ensure that it complied with its
record retention policy when it stopped doing business with property management firms. As a
result of our review, the Authority planned to begin monitoring litigation performed on its behalf
by property management firms. The Authority also planned to switch from outside to in-house
counsel for litigation related to evictions.




                                                5
To resolve this issue, the Authority needs to provide additional documentation to HUD to
support the payments totaling $141,195 or repay applicable programs for any costs that it cannot
support.

Conclusion

The Authority did not always make payments for outside legal services in compliance with
applicable requirements. It lacked controls to ensure that it adequately verified invoices before
payment and followed Federal requirements, contract terms, and its own record retention
policies. As a result, it made unsupported payments totaling $503,744 for outside legal services.

Based on our results, we estimated that at least $924,085 of the $2.1 million of the Authority’s
direct payments for outside legal services could be unsupported. Also, we estimated that at least
$4.9 million of the $5.4 million of the Authority’s indirect payments for outside legal services
could be unsupported.

                                   RECOMMENDATIONS

We recommend that the Director of HUD’s Chicago Office of Public Housing require the
Authority to

       1A.     Provide documentation to support the $503,744 in unsupported payments
               identified by the review or reimburse the applicable programs from non-Federal
               funds for any costs that it cannot support.

       1B.     Develop and implement controls to ensure that invoices for legal services are
               adequately verified and ensure that its payments for outside legal services are
               made in accordance with the terms of the related contracts and other applicable
               requirements.




                                                6
                                       APPENDIXES

Appendix A
                 SCHEDULE OF QUESTIONED COSTS


                 Recommendation number            Unsupported 1/

                             1A                      $503,744



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.




                                              7
Appendix B
        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 1

Comment 2

Comment 3




                          8
Comment 4




Comment 5




Comments 4
and 6




             9
Comment 7




Comment 8




            10
Comments 4
and 9




Comments 4
and 10




Comments 4
and 11




             11
Comment 6

Comments 4
and 12




Comments 4
and 13

Comments 4
and 14
Comments 6, 12,
13, and 14


Comment 15




Comment 16




                  12
Comment 17



Comment 18




Comment 19




             13
                           OIG Evaluation of Auditee Comments


Comment 1     The Authority stated that the analysis of the direct and indirect payments should
              be separate and distinct, and the recommendations should follow suit and clearly
              delineate between direct and indirect payments. We properly distinguished
              between the two types of payments in the discussion of the issues identified
              related to the payments. The report clearly identified the deficiencies noted for
              both payment types. Based on the recommended actions, we do not believe that
              separate recommendations are needed for direct and indirect payments. We
              recommended that the Authority provide documentation to support the
              unsupported payments identified by the review or repay any costs it cannot
              support from non-Federal funds; and develop and implement controls to ensure
              that all invoices are adequately verified and all payments are made in accordance
              with the terms of the contract and other applicable requirements. The Authority
              needs to work with HUD to determine and take the specific appropriate action
              required to resolve the issues related to both payment types.

Comment 2     The Authority stated that it provided substantially all of the requested
              documentation for its direct payments. However as explained in the report, the
              review disclosed that it did not provide adequate documentation to support
              $362,549 in direct payments for legal services. The unsupported payments
              represented about 47 percent of the total direct payments reviewed.

Comment 3     The Authority stated that while it acknowledged that there were a few missing or
              unexecuted documents with respect to direct payments, it disputed the need for
              certain additional supporting documentation. It also indicated that it had made
              some improvements related to the transactions associated with the indirect
              payments and the accounting process for those payments after the review period.
              Nevertheless, as discussed in the report, the Authority could not provide adequate
              documentation to support all of the direct and indirect payments it made during
              the review period.

Comment 4 The Authority stated that most of the findings, with respect to direct payments,
          related to the auditor’s interpretation of its contracts for outside counsel legal
          services, the Legal Services Agreements, including billing guidelines. We
          reviewed the Authority’s contracts and outside billing guidelines. However, we
          also reviewed several applicable key Federal requirements. The Authority was
          required to comply with several Federal regulations either directly or by ensuring
          compliance with its contract provisions and related guidelines. Regulations at
          Office of Management and Budget Circular A-133, subpart C.300(c), required the
          Authority to comply with laws, regulations, and the provisions of contracts or
          grant agreements related to each of its Federal programs. The Authority’s
          Moving to Work Certificate of Compliance required it to follow requirements
          from regulations at 24 CFR 85.20 which required that accounting records be


                                              14
            supported by source documentation and adequately maintained. The Authority
            was also required to follow regulations at 24 CFR 85.36 which required it to
            ensure that contractors performed in accordance with the terms, conditions and
            specifications of their contracts. Further, the Authority was required to comply
            with 2 CFR Part 225, appendix (C)(1)(j), which stated costs must be adequately
            documented to be allowable under Federal awards.

Comment 5   The Authority stated that its Office of General Counsel did not lack control and
            had controls in place for the payment of legal services. However as shown in the
            report, the review disclosed that the Authority made $503,744 in unsupported
            payments because it did not adequately verify invoices before payment and follow
            Federal requirements, contract terms, and its own record retention policies.

Comment 6   The Authority stated that there were no applicable regulatory requirements or cost
            principles that required it to pre-approve individual personnel prior to performing
            legal services under a contract. The Authority is correct that there was no
            regulatory requirement for personnel to be pre-approved prior to performing legal
            services. However, there was a regulatory requirement for the Authority to follow
            the terms of its own contract. Regulations at Office of Management and Budget
            Circular A-133, subpart C.300(c), required the Authority to comply with laws,
            regulations, and the provisions of contracts or grant agreements related to each of
            its Federal programs. The contract between the Authority and outside law firms
            specifically stated that no additional key personnel or authorized personnel would
            be added or assigned to provide legal services under the contract without the
            express consent of the Office of General Counsel. The contract also stated that
            the Authority would not pay for any legal services performed by personnel who
            were neither listed on the contract nor subsequently approved by the Office of
            General Counsel. Therefore, the Authority was required to pre-approve personnel
            before having them performing legal services. The review identified several
            instances in which personnel were not pre-approved. During the review, the
            Authority contended that if an attorney was not listed in the contract and pre-
            approved, they would have been listed on the task order for a legal matter;
            however, we found that this was not consistently completed. As a result of the
            review, the Authority stated that it would include provisions in future contracts to
            require any personnel not listed in the contract to be added to a task order before
            performing legal work.

Comment 7   The Authority stated that all of the work specifically identified in the unapproved
            personnel category, was work that it ultimately approved and was critical to the
            defense of its interests. We did not perform an assessment of the legal work that
            was performed. Accordingly, we do not express an opinion on whether or not the
            work performed was critical to the defense of its interests. The issue is that the
            Authority failed to follow applicable Federal requirements that required it to
            comply with the provisions of its contracts.




                                             15
Comment 8     The Authority stated that vague, general descriptions had to be considered in the
              context of the transaction and other entries in the invoice, and that it continued to
              disagree with the audit team’s determination as to what was an acceptable
              description for particular matters. However, the Authority’s outside billing
              guidelines clearly stated that the use of vague or generally described activities was
              unacceptable and would not be compensated. The guidelines also provided
              specific examples of unacceptable entries, such as those simply reflecting
              “discussion with” and “conference with” etc. The costs we classified as
              unsupported were associated with invoices on which we identified time entries
              which reflected these general descriptions of services for which we were unable to
              determine the specific tasks or work completed.

Comment 9     The Authority stated that charges for intra-office conferences were not prohibited.
              We understand that the contract did not prohibit intra-office conferences;
              however, as it acknowledged, its outside billing guidelines stated that it strongly
              discouraged non-essential intra-office conferences, and would only pay for
              reasonable amounts of time expended on such conferences and conferences on
              substantive matters. The guidelines also stated that the Authority would not pay
              for intra-office conferences that were either administrative or educational in
              nature. Although we provided the Authority several opportunities to do so during
              the review, it did not provide sufficient information to demonstrate that the costs
              related to intra-office conferences that we questioned were for substantive matters
              and not for administrative or educational conferences. The related time entries we
              reviewed did not include enough information as to what was discussed among the
              personnel involved. Because we were unable to determine whether the
              conferences were on substantive matters, we classified the related amounts
              unsupported.

Comment 10 The Authority stated that prior approval of legal research in excess of 2 hours was
           not mandatory. The Authority stated that its guidelines only provided that prior
           approval “should be” not “must be” done; but rightly acknowledged that the prior
           approval would minimize disputes as to the necessity for extensive research.
           The Authority’s outside billing guidelines stated that law firms should obtain
           prior approval from the Authority’s designated contact before conducting a legal
           research project that was expected to exceed 2 hours. We agree with the
           Authority’s position that prior approval would minimize disputes related to the
           necessity for extensive research. It is a key control to ensure the efficient use of
           Federal funds. Therefore, the Authority should have ensured that its outside law
           firms followed this key requirement. For the costs we classified as unsupported,
           we were unable to determine whether prior approval was given or if any
           discussions regarding the legal research took place. Also, we were unable to
           determine from the invoices whether the legal research was necessary or for
           routine matters.

Comment 11 The Authority stated that it disagreed with many instances of time entries
           classified as block billing. The Authority’s outside billing guidelines specifically


                                               16
              stated that it would not pay for “blocked entries,” which include a single time
              charge for multiple activities. The outside billing guidelines provided examples
              of an acceptable time charge and what was not an acceptable time charge. The
              examples in the guidelines showed that if multiple tasks were included in one
              time entry, the amount of time spent on each task needed to be identified in
              parentheses next to each component task. During the review, we identified
              several instances of block-billed time entries. The entries did not identify the
              specific nature of the work performed or the amount of time spent on each
              individual component task so we could not determine the reasonableness,
              necessity, and accuracy of the work performed. As a result, we classified the
              related costs as unsupported.

Comment 12 The Authority stated that the use of consultants as expert advisors, or witnesses
           was requisite for the performance of legal services. It also provided an example
           of a consultant that it approved to review and analyze architectural drawings for a
           lawsuit against an architect. The Authority’s outside billing guidelines stated that
           the selection and retention of appraisers, experts, and consultants must be
           coordinated with and approved by the Authority’s designated contact. However,
           the Authority did not maintain adequate documentation to show that any
           approvals were granted for consultants’ work related to the expenses we
           questioned.

Comment 13 The Authority stated that it properly approved questioned deposition costs for the
           Grant firm and that it provided the supporting documentation for the costs.
           However, the Authority failed to properly maintain documentation and did not
           provide adequate support for either questioned cost. The Authority’s outside
           billing guidelines stated that copies of invoices for reimbursable expenses should
           be submitted with the original invoice for professional services. For the
           deposition costs we questioned, the Authority could not demonstrate that it
           approved the costs. It also could not provide a copy of the invoice or receipt for
           one of the costs.

Comment 14 The Authority stated that in-house copying costs did not require a separate
           invoice. However, although a separate invoice might not be required, the costs
           still needed to be supported. The Authority failed to provide supporting
           documentation for in-house copying costs on one invoice. We noted that for in-
           house copying costs, law firms generally attached to their invoices a computer
           system print-out that identified the persons who performed the copying, the
           number of pages, and the dollar amount. However, in the case of the law firm for
           which we questioned the copying costs, this information was not provided.

Comment 15 The Authority acknowledged that there were issues with missing documentation
           related to its indirect payments for legal services. It stated that it had undertaken
           steps to improve record keeping for its indirect payment process, and expressed
           its willingness to work with HUD to at least resolve some of the unsupported
           costs associated with the indirect payments. As stated in the report, to resolve the


                                               17
              issue, the Authority needs to provide additional documentation to HUD to support
              the unsupported indirect payments or repay applicable programs for any costs that
              it cannot support.
.
Comment 16 The Authority stated that legal services for evictions were a legitimate and
           necessary expense. While we generally agree, we did not review the legitimacy
           of the Authority’s expenses for legal services related to evictions; therefore, we
           do not express an opinion on the legitimacy of the expenses.

Comment 17 The Authority stated that with respect to the indirect payments, it had provided
           adequate documentation with very few exceptions. We disagree. Regulations at
           24 CFR 85.20 required that accounting records be supported by adequate source
           documentation such as, cancelled checks, paid bills, and contract documents. As
           discussed in the report, the Authority generally could not provide complete
           documentation, including contracts, purchase orders, checks, and other financial
           records, for the indirect payments sample, consisting of 110 payments totaling
           $141,475. It provided only 80 invoices, 1 contract related to 7 invoices, and 41
           purchase orders. Only two sample payments totaling $280 were completely
           supported.

Comment 18 The Authority stated that it generally complied with the applicable regulatory
           requirements, but the issue was the interpretation of its contract and the
           appropriate application to the performance of required legal services. However,
           as discussed in the report, the Authority did not always comply with or ensure
           compliance with its contract and related billing guidelines as required by Federal
           regulations. The Authority paid for legal services that were not within contract
           terms and did not always maintain adequate documentation to support payments
           for legal services.

Comment 19 The Authority stated that it regretted that its request for additional time to respond
           to the review findings was not granted, limiting the time it had to revisit the audit
           materials. In accordance with our normal practice, we provided the Authority
           ample time to respond to the review findings. From the time the audit team
           provided the preliminary review results to the Authority to the time we requested
           that it provide a written response to the draft report, the Authority had at least 5
           months to respond to the review findings. The audit team maintained open
           communication with the Authority throughout the review and provided it
           numerous opportunities to discuss and resolve the review findings.




                                               18
Appendix C
   SUMMARY OF DIRECT PAYMENTS BY DEFICIENCY
                  IDENTIFIED




                                                                                                                                                     insufficient documentation (5)
                                              Number of invoices reviewed 1




                                                                                                                          unapproved personnel (1)

                                                                                                                           general description (2)

                                                                                                                           Unbillable charges (3)
                                                                                                     Unsupported amount
                                                                               Total dollar amount




                                                                                                                            No. of invoices with

                                                                                                                            No. of invoices with

                                                                                                                            No. of invoices with

                                                                                                                            No. of invoices with

                                                                                                                                                          No. of invoices with
                                                                                                                              block billing (4)
               Law firm (16)




Kutak Rock, LLP                                17 $271,702 $ 60,700                                                         8    0      0     0               4
Mayer, Brown, Rowe & Maw, LLP                  12 117,582    90,523                                                        12    4      1     2               0
Corboy & Demetrio, P.C.                         6   83,443   83,180                                                         0    0      0     0               6
Charity & Associates, P.C.                      7   56,136   43,168                                                         3    5      0     4               1
Grant Schumann, LLC                             6   54,171    7,311                                                         0    3      1     0               1
Seyfarth Shaw, LLP                              3   37,831   37,368                                                         1    1      2     2               1
Hoogendoorn & Talbot, LLP                       2   37,636   11,299                                                         0    1      2     2               1
Hawkins, Delafield & Wood, P.C.                 2   32,097    5,669                                                         0    1      1     1               0
Johnson, Jones, Snelling, Gibert &
                                                      4                       19,743                 2,600                 2     3      0     0               2
David, P.C.
Pugh, Jones, Johnson & Quant,
                                                      6                       18,414                 3,953                 0     3      0     1               2
P.C. (PJJQ).
Laner, Muchin, Dombrow, Becker,
                                                      7                       13,566                 7,016                 6     0      0     1               1
Levin, and Tominberg, LTD
Varga, Berger, Ledsky, Hayes &
                                                      3                       12,583                 1,826                 3     0      1     0               1
Casey, P.C.
Albert, Whitehead, P.C.                         3   11,491        0                                                         0     0     0      0            0
Brothers & Thompson, P.C.                       1    4,585    4,315                                                         0     1     0      1            0
Schiff Gorman, LLC                              1    3,000    3,000                                                         1     1     0      1            1
Hinshaw & Culbertson, LLP                       1      621      621                                                         1     1     0      0            0
Totals                                         81 $774,601 $362,549                                                        37    24     8     15           21


1
    Some invoices had more than one deficiency.




                                                                               19
(1) Unapproved Personnel:

    Lack of supporting documentation to show that a law firm’s staff was authorized (approved)
    to perform legal services according to the contract.

(2) General Description:

   A general or vague description of legal services performed. These descriptions lack
   specificity. Each invoice should describe the parties, the subject, and the purpose, as
   applicable, for billed services.

(3) Unbillable Charges:

    1. Unallowable charges according to the outside counsel billing guidelines (for example,
       intraoffice conferences or reviewing files not precipitated by an event such as a
       telephone call); or

    2. Inaccurately billed charges (for example, time charges billed at 0.25 of an hour instead
       of the required 0.10 of an hour).

(4) Block Billing:

   1. Only a summary of time charged for each attorney (for example, only attorney name,
      rate, and total hours and amount billed); or
   2. A single time charge for multiple activities performed.

(5) Insufficient Documentation:

   1. An invoice was provided, but there was no documentation to support the amount invoiced
      or paid for services or costs; or
   2. An invoice was provided, but the accompanying documentation did not adequately
      support the amount invoiced or paid.




                                               20
Appendix D
                 EXAMPLE OF UNBILLABLE CHARGES




The highlighted example was related to an intraoffice conference among four lawyers. There
was no description or explanation to show whether the conference was necessary. The
Authority’s outside billing guidelines stated that it would not pay for intraoffice conferences.

                                                21
Appendix E
                        EXAMPLE OF BLOCK BILLING




The highlighted example represented multiple activities billed as a single time charge. There
was no description of the activities performed or indication of the time spent on each activity.



                                                 22
Appendix F
                EXAMPLE OF GENERAL DESCRIPTION




 The highlighted examples did not include clear descriptions of the services performed.




                                               23