oversight

The Sanford Housing Authority, Sanford, NC, Did Not Comply With Procurement and Financial Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-07-19.

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

             Sanford Housing Authority,
                    Sanford, NC
               Procurement and Financial Operations




Office of Audit, Region 4          Audit Report Number: 2016-AT-1008
Atlanta, GA                                              July 19, 2016
To:            Michael A. Williams, Director, Public and Indian Housing, Greensboro, NC,
               4FPH
               Craig T. Clemmensen, Director, Departmental Enforcement Center, CACB


               //signed//
From:          Nikita N. Irons, Regional Inspector General for Audit, 4AGA
Subject:       The Sanford Housing Authority, Sanford, NC, Did Not Comply With
               Procurement and Financial Requirements


Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of the Sanford Housing Authority’s procurement and
financial operations.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at
404-331-3369.
                    Audit Report Number: 2016-AT-1008
                    Date: July 19, 2016

                    The Sanford Housing Authority, Sanford NC, Did Not Comply With
                    Procurement and Financial Requirements




Highlights

What We Audited and Why
We audited the Sanford Housing Authority’s procurement and financial operations. We selected
the Authority based on concerns from the U.S. Department of Housing and Urban
Development’s (HUD) North Carolina State Office of Public Housing, following a technical
assistance review performed. The technical assistance review identified issues with the
Authority’s procurement practices and financial operations, among other items. The executive
director had assessed the Authority’s operation systems and identified 35 issues. Additionally,
our audit is in keeping with our annual audit plan to ensure that public housing agencies
sufficiently administer HUD’s programs in accordance with regulations and guidance. Our audit
objective was to determine whether the Authority’s performance in the areas of procurement and
financial operations met HUD requirements.

What We Found
The Authority did not comply with HUD’s regulations when administering its procurement and
financial operations. Specifically, it (1) failed to adequately procure nine contracts, totaling
more than $408,000 (2) lacked adequate controls over its financial records, (3) used more than
$7,000 in Federal funds for improper expenses, (4) made more than $3,000 in undocumented
purchases with its credit cards and lines of credit, and (5) failed to obtain HUD’s approval to
convert a portion of its maintenance shop into a one-unit homeless shelter using $650 in Federal
funds. These conditions occurred because the Authority either did not have policies and
procedures or they were not adequate to provide proper guidance. In addition, the former
executive director and former accounting managers did not follow HUD’s regulations.

What We Recommend
We recommend that the Director of Public and Indian Housing require the Authority to (1)
support the cost reasonableness of nine contracts or reimburse its programs $408,958 from non-
Federal funds, (2) reimburse its programs $7,851 from non-Federal funds, (3) provide adequate
support for disbursements or reimburse its programs $3,588 from non-Federal funds, and (4)
implement its revised policies and procedures to ensure that the Authority’s staff complies with
HUD regulations when administering procurement and financial operations. We recommend
that the Director of the Departmental Enforcement Center, in coordination with the Director of
the Greensboro HUD Office of Public Housing, take appropriate enforcement action against the
former Authority officials responsible for the noncompliance with Federal regulations.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: The Authority Did Not Comply With Procurement and Financial
         Requirements..................................................................................................................... 4

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

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

Appendixes ..............................................................................................................13
         A. Schedule of Questioned Costs .................................................................................. 13
         B. Auditee Comments and OIG’s Evaluation ............................................................. 14




                                                                    2
Background and Objective
The Sanford Housing Authority was established on September 8, 1961, in accordance with State
and Federal laws. The Authority’s mission is to promote adequate and affordable housing,
economic opportunity, and a suitable living environment free from discrimination. The
Authority is responsible for administering 448 low-income public housing units and 741 housing
choice vouchers.
The Authority is governed by the provisions of a consolidated annual contributions contract
between it and the U.S. Department of Housing and Urban Development (HUD). The Authority’s
oversight is the responsibility of a seven-member board of commissioners, appointed by the mayor
of Sanford, NC. The board of commissioners selects the executive director. The board is
responsible for the operational, financial, and compliance oversight of the Authority. The executive
director is responsible for the day-to-day activities at the Authority.
Under the Authority’s consolidated annual contributions contract, it receives a Public Housing
Operating Fund subsidy for the operation and maintenance of its low-income housing projects.
The Authority’s consolidated annual contributions contract is amended annually to provide the
Authority with a Public Housing Capital Fund subsidy to carry out major renovations and
management activities for its housing units. The Authority is permitted to combine 20 percent of
its capital funds into operating funds and may use its capital funds under the Operating Fund
requirements. HUD awarded the Authority more than $2.4 million in operating funds and more
than $1.1 million in capital funds for fiscal years 2014 and 2015.
The Authority’s former executive director left the Authority on November 12, 2014. The current
executive director began on January 1, 2015. The current executive director assessed the
Authority’s operation systems and identified significant issues. HUD then performed a technical
assistance review of the Authority’s public housing and Housing Choice Voucher programs in
August 2015.
HUD’s North Carolina Office of Public Housing in Greensboro, NC, is responsible for
overseeing the Authority.
Our audit objective was to determine whether the Authority’s performance in the areas of
procurement and financial operations met HUD requirements.




                                                 3
Results of Audit

Finding: The Authority Did Not Comply With Procurement and
Fianancial Management Requirements
The Authority did not comply with HUD’s regulations when administering its procurement and
financial operations. Specifically, it (1) failed to adequately procure nine contracts totaling more
than $408,000, (2) lacked adequate controls over its financial records, (3) used more than $7,000
in Federal funds for improper expenses, (4) made more than $3,000 in undocumented purchases
with its credit cards and lines of credit, and (5) failed to obtain HUD’s approval to convert a
portion of its maintenance shop into a one-unit homeless shelter using $650 in Federal funds.
These conditions occurred because the Authority either did not have policies and procedures or
they were not adequate to provide proper guidance. In addition, the former executive director
and former accounting managers did not follow HUD’s regulations. As a result, the Authority
used HUD funds to pay more than $7,000 in improper disbursements and more than $412,000
without proper documentation.

Contracts Were Not Adequately Procured
The Authority did not adequately procure the contracts for 9 procurements totaling more than
$408,000 of the 13 procurements selected valued at more than $415,000. Of the 13
procurements, 4 procurements worth more than $6,000 were procured by the current executive
director and contained no violations. The remaining nine procurements were procured under the
prior executive director and lacked key documentation. The 24 CFR (Code of Federal
Regulations) 85.36 identifies the requirements and key documentation needed for a proper
procurement. These items include complete bid documents, 1 an executed contract, 2 independent
cost estimates, 3 full and open competition, 4 and adequate procurement history. 5 The prior
executive director’s procurement policy did not comply with the regulations. Effective May
2015, the board of commissioners approved the current executive director’s procurement policy,
which complies with the regulations. Table 1 shows the procurement deficiencies and the
contract amounts that were not supported.




1
  Regulations at 24 CFR 85.36(d)(2) and (d)(3) provide the items needed for complete bid documentation.
2
  Regulations at 24 CFR 85.36(b)(9) state that the grantee will maintain sufficient details of the procurement history,
including a contract.
3
  Regulations at 24 CFR 85.36(f)(1) state that grantees must make independent cost estimates before receiving bids
or proposals.
4
  Regulations at 24 CFR 85.36(c)(1) state that all procurements will be conducted in a manner providing full and
open competition.
5
  See footnote 2.



                                                           4
                                       Table 1 - Procurement deficiencies

Type of contract          Amount      Incomplete Lack of    Lack of    Lack of full                            Lack of
                                          bid    executed independent   and open                             procurement
                                      documents contract cost estimate competition                              history
 Replacement of              $118,689                X         X           X                                       X
       doors
Replace windows               $71,560            X               X            X                  X                  X
       Lawn                   $55,259            X                            X                  X                  X
   maintenance
       Lawn                   $33,008            X                            X                  X                  X
   maintenance
  Cleaning and                $45,943            X                            X                  X                  X
unit turnaround
      Carpet                  $18,384            X                            X                  X                  X
 installation and
unit turnaround
  Renovation of               $38,490            X                            X                  X                  X
    eight units
       Legal                  $21,375            X               X            X                  X                  X
   Pest control                $6,250            X               X            X                  X                  X
       Total                 $408,958

   We identified the following violations during our review:

            •   The Authority did not provide a signed contract, cost estimate, proof of full and open
                competition, and a procurement history as required by 24 CFR 85.36 and HUD
                Handbook 7460.8, REV-2, chapter 14, 6 for the replacement of doors procured totaling
                more than $118,000.
            •   The Authority did not provide bid documentation, cost estimates, proof of full and
                open competition, a signed contract, and a procurement history as required for the
                replacement of windows procured totaling more than $71,000.
            •   The Authority did not provide the bid documents, cost estimates, proof of full and
                open competition, and a procurement history as required by 24 CFR 85.36 and the
                Authority’s procurement policy7 for the two lawn maintenance contracts totaling
                more than $88,000.




   6
     Paragraph 14.2.A.1 of HUD Handbook 7460.8, REV-2, states that the Authority must compare the consortium to
   the open market to ensure that it is the most economic and efficient method. Also, paragraph 14.2.A.5 states that the
   Authority must have an agreement between it and the State or local government.
   7
     Section I.C of the Authority’s procurement policy states that the executive director shall ensure that contracts and
   modifications are in writing and are supported by sufficient documentation regarding the history of the procurement



                                                             5
         •   The Authority did not provide the bid documents, cost estimates, proof of full and
             open competition, and a procurement history for the cleaning and unit turnaround
             contract procured totaling more than $45,000.
         •   The Authority did not provide the bid documents, cost estimates, proof of full and
             open competition, and a procurement history for the carpet installation and unit
             turnaround contract procured totaling more than $18,000.
         •   The Authority did not provide the bid documents, cost estimates, proof of full and
             open competition, and a procurement history for the renovation of eight units
             procured totaling more than $38,000.
         •   The Authority did not provide the bid documents, an executed contract, cost
             estimates, proof of full and open competition, and a procurement history as required
             by 24 CFR 85.36 and the Authority’s procurement policy 8 for the legal contract
             totaling more than $21,000.
         •   The Authority did not provide the bid documents, a signed contract, cost estimates,
             proof of full and open competition, and a procurement history for pest control
             procured totaling more than $6,000.

Financial Records Controls Were Inadequate
The Authority did not maintain adequate controls over its financial records. The former
executive director did not maintain a general ledger for the Authority’s general funds.
Additionally, the former fee accountant prepared only journal vouchers, which served as the
Authority’s general ledger; therefore, Federal funds could not be properly tracked. We
attempted to trace interfund transfers and determined that transfers were made from different
bank accounts to the general fund. However, we were not always able to determine how the
Authority’s former fee accountant determined the transfer amounts. The financial information
was not maintained within the Authority’s software but, rather, within the former fee
accountant’s own system. Although this violated the requirements at 24 CFR 85.20(b)(2) 9 and
section 9(C) of the consolidated annual contributions contract, 10 the former executive director
stated in a letter to the Authority's board of commissioners that he was very confident in his
accounting knowledge and skills, checked all financials each and every month, and made all final
decisions. As such, the former executive director violated HUD regulations and the consolidated
annual contributions contract. The current executive director started working at the Authority in
January 2015, and the current fee accountant began working there in June 2015. The fee




and an independent cost estimate is prepared before solicitation issuance. Section I.F states the Authority shall seek
full and open competition in all of its procurement transactions.
8
  See footnote 7.
9
  Regulations at 24 CFR 85.20(b)(2) state that grantees and subgrantees must maintain records, which adequately
identify the source and application of funds provided for financially assisted activities.
10
   The Authority shall maintain records that identify the source and application of funds in such a manner as to allow
HUD to determine that all funds are and have been spent in accordance with each specific program regulation and
requirement.



                                                           6
accountant prepared the financial statements beginning March 1, 2015, and a general ledger
going forward from March 1, 2015, within the Authority’s software system.
Federal Funds Were Used for Improper Expenses
The Authority used more than $7,000 in Federal funds for improper expenses involving
disbursements and travel. We reviewed 14 statistically sampled disbursements totaling more
than $90,000, covering both the former and current administrations, and determined that 4 of the
14 sampled disbursements, or more than $1,200, were inappropriate. Two of the improper
disbursements were under the former executive director, and two were under the current
executive director.
Under the former executive director, the Authority improperly used $180 in Federal funds to pay
its information technology contractor to retrieve text messages from a personal cell phone, and
paid $200 for services from an open-ended contract, dating back to 2009, to a resident each
month to pick up trash around one of the Authority’s properties. Both instances occurred
because the former executive director and former accounting manager violated 2 CFR Part 225 11
and HUD Handbook 7460.8, REV-2 12, respectively.
Under the current executive director, the Authority paid $614 to Duke Energy Progress and $230
to PSNC Energy for utilities at the Boys and Girls Club using Federal funds instead of non-
Federal funds, which was a violation of its agreement. On October 14, 2004, HUD approved the
Authority’s leasing the Gilmore Terrace Community Center to the Club. The Authority entered
into an agreement with the Club on September 24, 2007 13. HUD was aware of the agreement in
which the Club paid $1 rent each month and the Authority maintained the upkeep of the center,
including the utilities, from non-Federal funds.
Also, we reviewed all utilities paid on behalf of the Club from October 1, 2013, to September 30,
2015, based on the improper utility payments identified in the disbursement sample. The
Authority used more than $4,900 14 in Federal funds to pay the gas, electricity, phone, and
Internet bills for the Club, a violation of the Authority’s agreement with HUD. Although both
executive directors made it clear that the funds were to come from non-Federal sources, the
former accounting managers continued to charge the asset management project.
Additionally, we selected three of six Authority trips under the previous executive director,
based on HUD’s technical assistance review, and the only trip completed under the current
executive director. The three trips under the previous executive director contained issues, while
the one trip under the current executive director did not. Two of the trips under the former



11
   According to 2 CFR Part 225, attachment A(C)(1)(a), costs must be necessary and reasonable for proper and
efficient performance and administration of Federal awards.
12
   According to Chapter 10.8(C)(2) of HUD Handbook 7460.8, contracts shall not exceed a period of five years,
including options for renewal or extension.
13
   The lease agreement, dated November 4, 2004, stated that the agreement will be from September 18, 2007, to
September 17, 2008. However, the Club’s president did not sign the agreement until September 24, 2007, almost
three years later.
14
   Utility costs identified during the disbursement review were not included in this total to avoid double counting.



                                                           7
executive director included flights for a board member’s traveling companion. Although the
Authority purchased a board member’s traveling companion two airline tickets for two separate
trips, the board member reimbursed the Authority for each ticket. The other travel included
Authority employees traveling to the beach with Authority residents. The Authority improperly
spent more than $1,000 for two employees to take residents on a trip to Myrtle Beach, SC, in
2014. The Authority’s former travel policy was insufficient. It allowed travel for other than
official business. The current executive director implemented a new policy, which was approved
by the board of commissioners and became effective October 13, 2015.
Purchases Were Not Properly Documented
Under the former executive director, the Authority made undocumented purchases with its credit
cards for more than $3,000. The Authority purchased gift cards for its staff and food for its
independent public auditor, which violated 2 CFR Part 225. 15 Although the amounts were
documented as having been paid from non-Federal funds, we could not determine whether non-
Federal funds were used because the Authority’s interfund transfer amounts were not properly
supported. Also, the Authority was not able to provide documentation from the former executive
director’s administration showing that it tracked Federal funds in the general account, a violation
of section 9(C) of the consolidated annual contributions contract. 16 Additionally, the Authority
was not able to provide documentation to support $107 in credit card and line of credit purchases
from both the former and current administrations as required by 24 CFR 85.20(b)(6) 17 and 2 CFR
Part 225 18 Therefore, the Authority did not properly support more than $3,000 of the expenses.
Further, the Authority did not have a credit card policy in place before the current executive
director’s arrival. The current executive director implemented a financial policy, including a
credit card use policy, which was approved by the board of commissioners and became effective
on February 22, 2016.
HUD’s Approval Was Not Obtained
Under the previous executive director’s administration, the Authority improperly converted a
portion of its maintenance shop into a one-unit homeless shelter. The tenants were selected from
applications received from a local agency that services the homeless. There was no
documentation provided to show that the conversion of the maintenance shop was approved by
HUD. The former executive director stated
in a letter to the Authority’s board of
commissioners that he did not obtain HUD        “It was appropriate to focus on
approval because the unit was a non-            performance over compliance for
dwelling unit and was converted for the         accountability.” – former executive
good of housing. He stated that getting
                                                         director.


15
   See footnote 9.
16
   The Authority shall maintain records that identify the source and application of funds in such a manner as to allow
HUD to determine that all funds are and have been spent in accordance with each specific program regulation and
requirement.
17
   The accounting records must be supported by such source documentation as canceled checks, paid bills, payrolls,
time and attendance records, contracts, and subgrant award documents.
18
   According to 2 CFR Part 225, attachment A(C)(1)(j), costs must be properly documented to be allowable costs.



                                                          8
families out of cold cars and saving lives was the bottom line. He further stated that it was
appropriate to focus on performance over compliance for accountability. This action violated
section 7 of the Authority’s annual contributions contract. 19 The current executive director
discontinued this service when she learned that HUD approval had not been obtained. The
Authority installed a shower in the bathroom using $650 in Federal funds. Additionally, the
Authority paid for the unit’s utilities using Federal funds. However, since the utility costs could
not be attributed to only that unit, we could not separate the costs. Therefore, the $650 that the
Authority used to have a shower installed in the unit’s bathroom was improper.
Conclusion
Because of a lack of adequate policies and procedures and the previous attitude of performance
over compliance, the Authority spent more than $7,800 in Federal funds improperly and more
than $412,000 without sufficient documentation. Although the Authority had made progress in
the areas of procurement and financial operations, some areas for improvement remained. Once
the Authority fully implements its policies and procedures, it will be able to assure HUD that it
can properly administer its programs.
Recommendations
We recommend that the Director of HUD’s Greensboro, NC, Office of Public Housing require
the Authority to
         1A.      Support the cost reasonableness of the nine contracts or reimburse $408,958 to the
                  appropriate Operating Fund, Capital Fund, and Housing Choice Voucher
                  programs from non-Federal funds.
         1B.      Reimburse $7,851 spent on ineligible expenses to the appropriate Operating Fund
                  and Housing Choice Voucher programs from non-Federal funds.
         1C.      Provide adequate support for disbursements or reimburse $3,588 to the
                  appropriate Operating Fund and Housing Choice Voucher programs from non-
                  Federal funds.
         1D.      Implement its revised policies and procedures to ensure that its staff complies
                  with HUD regulations when administering procurement and financial operations.
We recommend that the Director of the Departmental Enforcement Center, in coordination with
the Director of the Greensboro HUD Office of Public Housing,
         1E.      Take appropriate enforcement action against the former executive director
                  responsible for the noncompliance with Federal regulations.




19
  Section 7 of the Authority’s annual contributions contract states that the Authority shall not demolish or dispose
of any project or portion thereof, other than in accordance with the terms of the contract and applicable HUD
requirements. The Authority must in no way encumber any such project or portion thereof without the prior
approval of HUD.



                                                           9
Scope and Methodology
We performed our fieldwork at the Authority’s office located at 1000 Carthage Street, Sanford,
NC, and at our office in Greensboro, NC. We performed our audit work from October 2015
through March 2016. Our audit period was October 1, 2013, through September 30, 2015. We
expanded the audit period as needed to accomplish our objective.
To accomplish our objective, we
   •   Reviewed HUD’s technical assistance review conducted in August 2015.
   •   Reviewed and obtained an understanding of the Authority’s policies and procedures,
       relevant laws, regulations, bylaws, and consolidated annual contributions contract with
       HUD and HUD’s guidance.
   •   Reviewed the Authority’s board of commissioners meeting minutes for the period
       October 2013 through September 2015.
   •   Reviewed the Authority’s audited financial statements for its fiscal years 2013 and 2014.
   •   Analyzed the Authority’s financial records.
   •   Reviewed a list of Authority contracts.
   •   Interviewed the Authority’s employees, contractors, board members, and former
       executive director and HUD staff.
We developed a randomly selected audit sample based on a universe of 68 procurements during
the period October 1, 2013, through September 30, 2015. We selected 6 procurements totaling
more than $92,000, which included the first 3 procurements federally funded under both
executive directors. In addition, we selected seven procurements, six under the previous
executive director and one under the current executive director, totaling more than $323,000,
based on the current executive director’s assessment and our review of the check register and
contract log. In all, we reviewed 13 procurements totaling more than $415,000.
We developed a statistical audit sample based on a universe of 2,147 Authority transactions
related to low-income public housing funds during the period October 1, 2013, through
September 30, 2015. During that time, the Authority disbursed more than $4 million. The
transactions were grouped into seven categories, based on dollar amount, and two transactions
were statistically selected from each category. Our audit sample totaled 90 transactions. We
selected 14 of the 90 transactions, which totaled more than $90,000.
From six Authority trips totaling more than $12,000 under the previous executive director, we
randomly selected three trips totaling more than $10,000 and the only trip completed under the
current executive director totaling more than $11,000.
The Authority had three credit cards with payments totaling more than $53,000. We selected
two credit cards based on the high dollar amounts. We selected 1 credit card with more than
$29,000 in payments and reviewed 3 of the 24 credit card statements totaling more than $10,000.



                                                 10
Two of the credit card statements were under the former executive director, and one was under
the current executive director. We selected an additional credit card with more than $17,000 in
payments and reviewed one payment totaling more than $1,200. This payment was under the
former administration.
From 12 lines of credit totaling more than $68,000, we randomly selected 3 lines of credits
totaling more than $37,000. We reviewed one payment, randomly selected, from each line of
credit totaling more than $5,000 in payments.
The results of the audit apply only to items selected for review and cannot be projected to the
universe or population.
We relied in part on computer-processed data contained in the Authority’s systems to achieve
our audit objective. Although we did not perform detailed assessments of the reliability of the
data, we performed minimal levels of testing and found the data to be adequately reliable for our
purposes. The tests for reliability included but were not limited to comparing computer-
processed data to vendor payments, financial records, and other supporting documentation.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. 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:

•   Effectiveness and efficiency of operations – Policies and procedures that management has
    implemented to reasonably ensure that procurement, expenditure, and financial reporting
    activities are conducted in accordance with applicable laws and regulations.
•   Reliability of financial reporting – Policies and procedures that management has
    implemented to reasonably ensure that valid and reliable data are obtained, maintained, and
    fairly disclosed in reports.
•   Compliance with applicable laws and regulations – Policies and procedures that management
    has implemented to reasonably ensure that payments to vendors and procurement activities
    comply with applicable laws and regulations.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:

•   The Authority did not comply with procurement and financial management requirements
    (finding).




                                                  12
Appendixes

Appendix A


                          Schedule of Questioned Costs
                  Recommendation
                                   Ineligible 1/ Unsupported 2/
                      number
                          1A                               $408,958
                          1B              $7,851
                          1C                                $3,588

                        Totals            $7,851           $412,546



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




Comment 1




                               14
                         OIG Evaluation of Auditee Comments


Comment 1   We acknowledge the Authority’s agreement with our report concerning its
            procurement and financial operations. The Authority should work with HUD to
            ensure its procedures and controls are fully implemented. Once the Authority
            fully implements its policies and procedures, it will be able to assure HUD that it
            can properly administer its programs.




                                              15