oversight

The Housing Authority of the County of Salt Lake Did Not Always Procure Goods and Services in Accordance With Applicable Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-08-17.

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

     Housing Authority of the County of
       Salt Lake, Salt Lake City, UT
                     Public Housing Capital Funds




Office of Audit, Region 8            Audit Report Number: 2016-DE-1001
Denver, CO                                              August 17, 2016
To:            Janice Rodriguez, Office of Public Housing, 8APH
               //signed//
From:          Ronald J. Hosking, Regional Inspector General for Audit, 8AGA
Subject:       The Housing Authority of the County of Salt Lake Did Not Always Procure
               Goods and Services in Accordance With Applicable 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 Housing Authority of the County of Salt Lake,
UT.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at
913-551-5870.
                    Audit Report Number: 2016-DE-1001
                    Date: August 17, 2016

                    The Housing Authority of the County of Salt Lake, Salt Lake City, UT Did
                    Not Always Properly Procure Its Capital Funds




Highlights

What We Audited and Why
We audited the Housing Authority of the County of Salt Lake Public Housing Capital Fund
grants for fiscal years 2011-2014. We initiated this audit due to the amount of funding the
Authority received during our review period. The Authority is the highest funded public housing
agency in the State of Utah. The objective of our audit was to determine whether the Authority
properly followed HUD’s and its own procurement requirements when entering into contracts.

What We Found
The Authority did not properly procure its goods or services. All of the Authority’s 25 contracts
that were greater than $2,000 from 2011 to 2014 lacked evidence of most if not all parts of the
procurement process. The Authority had over $734,000 in unsupported procurement actions.

What We Recommend
We recommend that the Director of the Denver Office of Public Housing require the Authority to
(1) provide support for $734,074 in procurement actions executed without proper documentation
or repay the unsupported amounts from non-Federal funds, (2) develop and implement detailed
policies and procedures to ensure that staff and management properly complete all aspects of the
procurement process, and (3) obtain procurement training for its staff to improve proficiency in
the procurement processes.
Table of Contents
Background and Objectives ....................................................................................3

Results of Audit ........................................................................................................4
         Finding 1: The Authority Did Not Properly Procure Its Goods and Services ........... 4

Scope and Methodology ...........................................................................................7

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

Appendixes ..............................................................................................................10
         A. Schedule of Questioned Costs .................................................................................. 10
         B. Auditee Comments and OIG’s Evaluation ............................................................. 11
         C. Contract Discrepancies ............................................................................................. 13
         D. Criteria ....................................................................................................................... 17




                                                                     2
Background and Objectives
The Housing Authority of the County of Salt Lake serves Salt Lake County, UT, by providing and
developing quality affordable housing opportunities for individuals and families. The Authority
provides services to more than 3,000 households and approximately 8,000 individuals. Its mission
is to provide and develop quality affordable housing opportunities for individuals and families while
promoting self-sufficiency and neighborhood revitalization. It provides services to low-income and
extremely low-income individuals using a variety of programs, such as the Housing Choice
Voucher program, public housing program, and Supportive Housing Program. The Authority’s
office is located at 3595 South Main Street, Salt Lake City UT.




HUD’s Office of Public and Indian Housing, Office of Capital Improvements, provides the
Authority a capital grant annually for the development, financing, and modernization of public
housing developments and management improvements. The table below shows the Authority’s
capital grant funds for 2011, 2012, 2013, and 2014.

                Housing Authority of the County of Salt Lake capital funding

      Year                 2011                 2012                2013                 2014

     Amount              $815,264            $730,154             $647,334             $711,802
      Total                                            $2,904,554

Our audit objective was to determine whether the Authority properly followed HUD’s and its
own procurement requirements when entering into contracts.




                                                  3
Results of Audit

Finding: The Authority Did Not Properly Procure Its Goods and
Services
The Authority did not properly procure its goods or services. This condition occurred because
the Authority lacked proper training for its management and personnel performing procurements
and did not have adequate procurement procedures. As a result, it was unable to support that it
procured more than $734,000 in goods and services at the most reasonable price, all interested
parties may not have had an equal opportunity to participate in Authority business, and the
procurement violations placed Federal funds at risk.

The Authority Did Not Properly Procure Its Goods or Services
The Authority did not properly procure its goods or services. We reviewed 25 contracts, all of
which lacked evidence of most if not all parts of the procurement process. HUD Handbook
7460.8 requires the Authority to use grant money following strict procurement requirements.
Also, the Authority’s policies and procedures require it to competitively bid the best price for
procurements from $2,000 to $50,000 and require sealed bid contracting for any procurement
action greater than $50,000. Appendix D contains a list of the procurement requirements
referenced during the review.

The following are two examples of procurement deficiencies identified during the review. The
remaining contract writeups are located in appendix C.

       CRC Construction
       The Authority did not complete the required independent cost estimate or inspection
       reports for this contract, nor did it have a written contract. In addition, it did not obtain
       sealed bids on this contract, which was required by its policies and procedures for
       procurements greater than $50,000. Finally, it made progress payments but failed to
       conduct the required monitoring of the work performed.

       AMCO American Roofing Company
       The Authority entered into five different procurement actions with AMCO American
       Roofing. It did not perform the required independent cost estimate, competitive bid
       process, or inspections reports for its contracts.

The unsupported contracts table below includes the contracts that contained discrepancies. The
“Discrepancies” column shows the phase of the procurement process that contained issues:
presolicitation (1), solicitation (2), evaluation (3), award (4), and postaward and administration
(5).




                                                  4
                               Unsupported contracts
  Contract        Contract     Contract
                                              Grant year   Discrepancies
   name             date       amount
    CRC
                  08/26/2013   $144,298         2012         1,2,3,4,5
Construction
   AMCO
                  06/19/2014    41,934        2012,2013       1,2,3,5
   Roofing
  McCook
 Boiler and       08/06/2014    11,263          2013         1,2,3,4,5
  Pump Co.
 Top Water
                  12/12/2014     7,100          2012         1,2,3,4,5
  Concrete
     HA
                  11/25/2013     3,885          2012         1,2,3,4,5
Maintenance
    Big T
                  05/19/2015    37,840          2013         1,2,3,4,5
 Recreation
   Morgan
                  06/12/2014    24,300          2013         1,2,3,4,5
  Pavement
 Redi Carpet
                  01/02/2014     7,354          2012         1,2,3,4,5
Sales of Utah
   Simplex
                  12/04/2012    94,568          2011          1,2,3,5
   Grinnell
   Chris &
                  09/19/2014    16,136        2013. 2014     1,2,3,4,5
    Dick’s
 BMC West         06/30/2013     2,418        2011, 2012     1,2,3,4,5
Clear Choice
                  10/01/2015     2,085          2012         1,2,3,4,5
  Windows
 Fibers, Inc.     01/31/2014     5,432          2012         1,2,3,4,5
Glen Paulsen
                  01/31/2014     3,390          2012         1,2,3,4,5
     Co.
    Entry
                  07/31/2015     3,152          2013         1,2,3,4,5
Systems, Inc.
   Exacto
                  07/31/2015     2,580          2013         1,2,3,4,5
  Concrete
Harris Interior   09/05/2014     2,753          2012         1,2,3,4,5
  Olympus
                  01/26/2015    16,388          2013         1,2,3,4,5
   Roofing
S&S Roofing       04/30/2015     5,240          2012         1,2,3,4,5
    Brett
                  06/04/2015     2,935          2013         1,2,3,4,5
 Stringham
  Superior
                  05/19/2015    36,542          2013          1,2,3,5
   Asphalt
    C&R
                  06/24/2014   230,510          2013         1,2,4,3,5
  Coatings


                                          5
   Wasatch
                    3/28/2014         7,877            2012                 1,2,3,4,5
   Roofing
   Harold P
                    Unknown           8,094            2011                 1,2,3,4,5
   Woodruff
   Wilson &
                    Unknown           16,000           2011                 1,2,3,4,5
   Company
     Totals                          734,074


The Authority Lacked Adequate Training and Procedures
The Authority lacked proper training for its management and personnel performing
procurements. We conducted interviews throughout the audit process with management and
procurement staff to determine their level of knowledge of the procurement process. The
supervisor of the Authority’s procurements stated that neither he nor his staff had attended HUD
procurement training. They were generally
unaware of or unfamiliar with the requirements
outlined in 24CFR 85.36, HUD Handbook              Management and procurement staff
7460.8, or their own policies and procedures.      lacked a basic understanding of the
Neither the Authority’s management nor its         procurement process.
procurement staff had a basic understanding of
the procurement process, and they had not had
adequate training to conduct procurement actions according to Federal requirements.

Additionally the Authority’s policies and procedures did not specifically outline how staff would
procure goods and services, how management would review and approve procurements, or how
the Authority would track and maintain all of its procurement actions.

The Authority Could Not Support More Than $734,000 in Procurements
The Authority was unable to support that it procured more than $734,000 in goods and services
at the most reasonable price and is subject to repayment of those funds. Additionally, all
interested parties may not have had an equal opportunity to participate in Authority business.

Recommendations
We recommend that the Director of the Denver Office of Public Housing require the Authority to

       1A.     Provide support for the reasonableness of the cost for the $734,074 in
               procurement actions executed without proper documentation or repay the
               unsupported amounts from non-Federal funds.

       1B.     Develop and implement detailed policies and procedures to ensure that staff and
               management properly complete all aspects of the procurement process.

       1C.     Send its procurement staff to training to improve proficiency in the procurement
               process.



                                                6
Scope and Methodology
Our audit work covered the Authority’s Capital Fund grants for fiscal years 2011-2014. We
performed our work between September and October 2015 at the Authority’s office located at
3595 South Main Street, Salt Lake City, UT.

To accomplish our objectives, we

      Reviewed applicable laws and regulations,
      Reviewed the Authority’s policies and procedures,
      Interviewed Authority staff,
      Interviewed HUD staff responsible for the program, and
      Reviewed all Capital Fund procurements for the review period.

For the procurement testing, we selected all Capital Fund contracts greater than $2,000 from
2011 to 2014. We used 24 CFR 85.36(c)(1) and the Authority’s policies and procedures to
define any purchase over $2,000 as requiring a competitive contract or agreement. The
procurement contracts we reviewed totaled $748,975, or 26 percent of the total grant amounts
highlighted in the Background and Objectives section of this report. The following table shows a
breakdown of the types of contracts and the total amounts of those contracts.


         Contract types                 Number of contracts            Total dollar amount

  Architectural and engineering                      2                        $24,095

        Site improvements                        7                            115,000
       Dwellings structures                      16                           609,880
              Totals                             25                           748,975

We did not use statistical sampling for this review because we reviewed all contracts subject to
the competitive procurement requirements. The results of this audit apply only to the items we
tested and are not projected to the universe.

We did not rely on computer-generated data as audit evidence or to support our audit
conclusions. We used source documentation obtained from HUD and the auditee for background
information purposes. We based all of our conclusions on source documentation reviewed
during the audit.
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


                                                 7
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                                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 objectives:

   Controls to ensure that the Authority follows all requirements in the procurement process.
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:

   The Authority lacked detailed policies and procedures.
   The Authority failed to provide adequate training for its personnel.




                                                  9
Appendixes

Appendix A


                              Schedule of Questioned Costs
                           Recommendation
                                                Unsupported 2/
                               number
                                   1A               $734,074
                                 Totals              734,074


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.




                                              10
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1




                               11
                        OIG Evaluation of Auditee Comments


Comment 1   The Authority agreed to take action to address our recommendations concerning
            its procurement operations. The Authority should continue working with HUD to
            ensure it fully implements the recommendations.




                                           12
Appendix C
                                     Contract Discrepancies
Below are the specific contract discrepancies outlined in the unsupported contracts table in
finding 2.

   1. CRC Construction
             The Authority did not complete the required independent cost estimate or
             inspection reports for its CRC Construction contract. It failed to complete a
             required contract award in writing, and the formal sealed bid process was not
             performed. It made progress payments but failed to conduct the required
             monitoring of the work performed.
   2. AMCO American Roofing Company
             We reviewed five individual contracts the Authority made with the AMCO
             American Roofing Company. The Authority did not complete the required
             independent cost estimate, competitive bid process, or inspection reports for its
             AMCO American Roofing Company contracts. In addition, it did not follow
             Federal requirements or its own policies and procedures when procuring these
             contracts.
   3. McCook Boiler and Pump Company
             The Authority did not competitively bid this contract and the contract file only
             contained a total of 4 documents all of which showed the purchase order and
             payment source. Its policies and procedures state that any contract not
             competitively bid must have HUD approval.
   4. Top Water Concrete, LLC
             The Authority did not complete an independent cost estimate, contract award or
             the competitive bid negotiations for its Top Water Concrete, LLC, contract. It
             lacked all required procurement documentation. In addition, it did not follow
             Federal requirements or its own policies and procedures when procuring this
             contract.
   5. HA Maintenance
             The Authority did not complete the required independent cost estimate, contract
             award document, or final inspection for its HA Maintenance contract. It failed to
             competitively bid this contract, and there was no evidence of advertising to the
             public. In addition, it did not follow Federal requirements or its own policies and
             procedures when procuring this contract.
   6. Big T Recreation
             The Authority did not complete the required contract award document,
             competitive bid negotiations, independent cost estimate, or inspection reports for
             its Big T Recreation contract. The Authority failed to conduct a final inspection
             before making the final payment for this procurement.
   7. Morgan Pavement Maintenance
             The Authority did not complete the competitive bid negotiations, independent
             cost estimate, or inspection reports. The required contract award was not


                                                 13
            documented in the file provided by the Authority. This contract was not secured
            according to Federal requirements and the Authority’s policies and procedures.
8. Redi Carpet Sales of Utah, LLC
            We reviewed two individual contracts the Authority made with the company Redi
            Carpet Sales of Utah, LLC. The contracts lacked all of the required procurement
            documentation for the competitively bid negotiations. The Authority did not
            complete the necessary steps to ensure that these procurements met Federal
            requirements.
9. SimplexGrinnell
            The Authority did not complete an independent cost estimate, solicitation for bids,
            inspection reports for its SimplexGrinnell contract. It did not follow the sealed
            bid requirements and did not maintain inspection reports. In addition, it did not
            follow Federal requirements or its own policies and procedures when procuring
            this sealed bid contract.
10. Chris & Dick’s
            We reviewed two contracts the Authority made with Chris & Dick’s. Both
            contracts’ files lacked documentation for the contract award, solicitation for bids,
            inspection reports, and independent cost estimates. The Authority did not
            complete the required competitive bid negotiations to ensure that the most cost-
            efficient contractor was selected.
11. BMC West
            We reviewed two individual contracts the Authority made with BMC West, Inc.
            The Authority did not complete inspection reports, independent cost estimates, or
            advertisements of bids. It did not competitively bid these contracts. The final
            inspection of the services was not conducted, and the contract file lacked
            justification for why the lowest bidder was not selected.
12. Clear Choice Windows
            The Authority did not complete any of the required procurement procedures for
            its contract with Clear Choice Windows. It failed to maintain records sufficient to
            detail the significant history of this competitive bid procurement action. In
            addition, it did not follow Federal requirements or its own policies and
            procedures.
13. Fibers, Inc.
            The Authority did not complete any of the required procurement steps in
            documenting its contract with Fibers, Inc. It failed to maintain a contract file, and
            there was no contract award issued to Fibers, Inc.
14. Glen Paulsen Company
            The Authority did not maintain a contract file for its contract with the Glen
            Paulsen Company. It did not complete any of the requirements to procure this
            contract or complete a competitive bid negotiation. In addition, it did not follow
            the Federal requirements or its own policies and procedures when procuring this
            contract.
15. Entry Systems, Inc.




                                              14
            The Authority did not complete any of the required steps or maintain a contract
            file for its contract with Entry Systems, Inc. There was no documentation
            showing a contract award, or an independent cost estimate. The Authority
            improperly procured this contract and failed to follow Federal requirements.
16. Exacto Concrete Cutting and Repair
            The Authority did not complete any of the required procurement procedures for
            its Exacto Concrete contract. The contract file was not maintained, and the
            documents needed to establish the contract were not included. The Authority did
            not follow Federal guidelines or its own policies and procedures for this
            procurement.
17. Harris Interiors
            The Authority did not complete the required independent cost estimate,
            competitive bid negotiations, or inspection reports for its Harris Interiors contract.
            The contract file lacked the contract award and solicitation for bids. The
            Authority did not procure this contract properly and did not maintain the
            necessary contract documents.
18. Olympus Roofing
            The Authority did not complete an independent cost estimate or conduct required
            inspections for its Olympus Roofing contract. It did not perform solicitations for
            the bid or the competitive bid negotiations. In addition, it did not follow the
            proper guidelines or procedures for this procurement.
19. S&S Roofing
            The Authority did not complete a contract award, independent cost estimate,
            solicitation for bids. We found no documentation showing the competitive bid
            negotiations or required inspection reports. The Authority failed to maintain the
            detailed documents required for this procurement.
20. Brett Stringham
            The Authority did not complete the competitive bid negotiations, inspection
            reports, or independent cost estimate for its Brett Stringham contract. It failed to
            complete the required contract award and final inspection before the final
            payment. In addition, it did not follow Federal requirements or its own policies
            and procedures for this contract procurement.
21. Superior Asphalt
            The Authority did not complete the independent cost estimate or solicitation for
            bids for its Superior Asphalt contracts. It failed to complete inspection reports
            and did not follow the proper steps for these procurements.
22. C&R Coatings
            The Authority did not complete an independent cost estimate. It did not complete
            the sealed bid process or the solicitation for bids. In addition, it failed to
            document justification for change orders and failed to complete a new contract.
23. Wasatch Roofing
            The Authority did not complete an independent cost estimate or solicitation for
            bids for its Wasatch Roofing contracts. It did not complete contract awards or




                                               15
           required inspection reports. In addition, it did not conduct the competitive bid
           negotiations and did not maintain the proper documentation for this procurement.
24. Harold P. Woodruff
           The Authority could not produce a contract for this architectural work.
25. Wilson & Company
           The Authority could not produce a contract for this architectural work.




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Appendix D
                                         Criteria
  1. Independent cost estimates - Grantees must make independent estimates before receiving
     bids or proposals. 24 CFR 85.36 (f)(1)

  2. Individual procurement plan - PHAs [public housing agencies] are required to establish
     and follow a written procurement policy that is consistent with 24 CFR 85.36. The
     policy need not contain detailed working-level procedures, but should require
     establishment of such procedures to carry out the policy. HUD Handbook 7460.8,
     section 2.2, page 23

  3. Solicitation - Invitation for bids will be publicly advertised and bids shall be solicited
     from an adequate number of known suppliers. 24 CFR 85.36(d)(2)(i)(A)

  4. Rejection of bids - Rejection of any bid during the evaluation process shall be fully
     documented, including all reasons for the rejection. HUD Handbook 7460.8, section
     6.12, page 48

  5. Competitive range - After the evaluation committee has evaluated all proposals, the
     Contracting Officer should determine a competitive range. The competitive range
     includes the proposals that have a reasonable chance of being selected for award
     considering their technical evaluation results and their proposed costs or prices. HUD
     Handbook 7460.8.pdf, section 7-6, page 56

  6. Evaluation report of proposals - The PHA shall prepare an evaluation report to document
     the ranking of the proposals by technical merit, using point scores, or similar
     methodology. (If price is included in the point scoring, the evaluation report will also
     include the price or cost analysis, as appropriate.) In addition, a narrative should
     accompany the scores to explain how the scores were derived, detailing the significant
     strengths, weaknesses, and deficiencies in the proposal. HUD Handbook 7460.8.pdf,
     section 7.2, page 56

  7. Record retention - The authority must maintain records sufficient to detail the significant
     history of each procurement action. HUD Handbook 7460.8, Documentation, page 159

  8. Inspection reports - All progress inspections should be documented using an appropriate
     PHA inspection report form. The inspection report should include a description of the
     work completed and a determination as to whether or not the work is acceptable. If
     payment is made on a unit price basis, quantities must be verified. HUD Handbook
     7460.8, section 11.2, page 105

  9. Completion of work - The contractor should provide prompt written notification to the
     PHA when all work is completed. A final inspection of completed work shall then be
     conducted. HUD Handbook 7460.8(2), paragraph 11.2(G)(1)



                                                17
10. Final Inspection - Upon receipt of the contractor’s notification of the date when the work
    has been completed, the PHA should conduct a final inspection within 10 calendar days.
    HUD Handbook 7460.8(2), paragraph 11.2(G)(2)

11. Training - PHAs ensure that their procurement employees have training and experience
    commensurate with the requirements of their duties. PHAs should develop training and
    experience standards for their procurement positions and periodically review their
    procurement operations to ensure that procurement personnel meet those standards.
    HUD Handbook 7460.8, section 2.6, page 24

   Award to the Lowest Responsive and Responsible bidder - After the Contracting Officer
   evaluates each bid, the responsive and responsible bidder that submits the bid whose
   dollar value is lowest overall and meets all specified requirements shall be awarded the
   contract. 24 CFR 85.36(d)(2)(ii)(D)

12. Project modifications - PHAs must submit to HUD for prior approval any proposed
    contract modifications changing the scope of the contract in accordance with the Changes
    clause in the contract, or that increases the contract by more than the Federal small
    purchase threshold. HUD Handbook 7460.8, paragraph 11.4(E), page 113




                                             18