oversight

The Richmond Housing Authority, Richmond, CA, Did Not Always Procure Services and Manage Rents in Accordance With HUD Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-04-28.

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

          Richmond Housing Authority,
                Richmond, CA
      Public Housing Program – Procurement and Rent




Office of Audit, Region 9     Audit Report Number: 2016-LA-1004
Los Angeles, CA                                    April 28, 2016
To:            Jesse Wu, Acting Director, San Francisco Office of Public Housing, 9CPH

               //SIGNED//
From:          Tanya E. Schulze, Regional Inspector General for Audit, 9DGA
Subject:       The Richmond Housing Authority, Richmond, CA, Did Not Always Procure
               Services and Manage Rents in Accordance With HUD 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 Richmond Housing Authority.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at
213-534-2471.
                    Audit Report Number: 2016-LA-1004
                    Date: April 28, 2016

                    The Richmond Housing Authority, Richmond, CA, Did Not Always Procure
                    Services and Manage Rents in Accordance With HUD Requirements




Highlights

What We Audited and Why
We audited the Richmond Housing Authority due to a complaint alleging that the Authority
violated procurement requirements related to legal and accounting services and wrote off tenant
debts improperly. The objective of the audit was to determine whether the Authority procured
goods and services and managed tenant rents for its public housing program in accordance with
U.S. Department of Housing and Urban Development (HUD) requirements.

What We Found
The complaint allegations had merit. The Authority did not conduct procurement procedures for
eviction legal and accounting services until October-November 2014. When it conducted
procurement procedures, its procurements had deficiencies and its contracts omitted the
mandatory Federal clauses. In addition, the Authority wrote off tenant accounts without using
alternative methods of collection. These conditions occurred because the Authority disregarded
HUD procurement requirements. Also, the Authority did not have adequate policies and
procedures for rent collection. As a result, it could not support that the use of $541,651 in HUD
funds for legal and accounting services were best for the Authority. It also lost revenue by
improperly managing its rent collection process, not collecting on debts owed, and improperly
writing off $109,770 in rents and other charges.

What We Recommend
We recommend that the Acting Director of the San Francisco Office of Public Housing require
the Authority to (1) provide documentation showing that $304,921 paid for eviction legal
services and $236,730 paid for accounting services were best for the Authority or repay its public
housing program from non-Federal funds, (2) amend its eviction legal services contracts to
include all required clauses, (3) submit a list of all procurement contracts over $10,000 and its
most recent 12-month vendor payment history to HUD for review annually for 3 years, and (4)
develop and implement policies and procedures to address the deficiencies in rent collection.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding 1: The Authority Did Not Always Comply With HUD Procurement
         Requirements..................................................................................................................... 4
         Finding 2: The Authority Did Not Effectively Manage Its Tenant Rents .................. 7

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

Internal Controls ....................................................................................................11

Appendixes ..............................................................................................................12
         A. Schedule of Questioned Costs .................................................................................. 12
         B. Auditee Comments and OIG’s Evaluation ............................................................. 13
         C. Criteria ....................................................................................................................... 19




                                                                     2
Background and Objective
The Richmond Housing Authority, Richmond, CA, was formed in 1941 as a separate legal entity
under the provisions of the Housing Act of 1937. The Authority was established to rehabilitate
local deteriorated housing and subsidize low-income families in obtaining decent, safe, and
sanitary housing. Although the Authority is a separate legal entity from the City of Richmond, it
is an integral part of the City. The City exercises significant financial and management control
over the Authority. Members of the city council and two tenant commissioners serve as the
governing board of the Authority. The financial statements of the Authority are included in the
City’s general-purpose financial statements.
The U.S. Department of Housing and Urban Development (HUD) established the public housing
program to provide decent and safe rental housing for eligible low-income families, the elderly,
and persons with disabilities. HUD provides funds to local housing agencies that manage
housing for low-income residents at rents they can afford. The Public Housing Operating Fund
provides operating subsidies to housing agencies to assist with operating and maintenance
expenses. The Public Housing Capital Fund provides funds to housing agencies to modernize
public housing developments.
HUD provides funds to housing agencies under the Housing Choice Voucher program to assist
very low-income families, the elderly, and the disabled in obtaining decent, safe, and sanitary
housing in the private market.
HUD authorized the Authority the following assistance for its Operating Fund, Capital Fund, and
Housing Choice Voucher programs for fiscal years 2013, 2014, and 2015.

Fiscal year             Operating Fund              Capital Fund          Housing Choice
                                                                          Voucher program
2013                      $2,088,528                  $753,815              $17,470,172
2014                       2,180,254                   782,201               17,879,201
2015                       1,556,894                   775,701               18,705,723
Total                     $5,825,676                $2,311,717              $54,055,096


Our objective was to determine whether the Authority procured goods and services and managed
tenant rents for its public housing program in accordance with HUD requirements.




                                                3
Results of Audit

Finding 1: The Authority Did Not Always Comply With HUD
Procurement Requirements
The Authority did not always follow HUD requirements or its own procurement policy.
Specifically, it did not perform procurement procedures for legal services (unlawful detainer-
eviction) and financial consulting services until October-November 2014. When it conducted
procurement procedures, its procurements had deficiencies. These conditions occurred because
the Authority’s executive director disregarded HUD procurement requirements and the
Authority’s procurement policy. As a result, the Authority paid $304,921 for legal services and
$236,730 for financial consulting services without conducting procurement procedures. These
deficiencies resulted in the Authority’s misuse of $541,651 in public housing funds.

Procurement Activities Were Not Conducted for Legal Services (Unlawful Detainer-
Eviction) and Financial Consulting Services Before October-November 2014
The Authority obtained legal services (unlawful detainer-eviction) from three law firms and
financial consulting services from an accounting firm without conducting the required
procurement procedures. It could not provide adequate documentation to support that it provided
full and open competition and that the services were procured at a fair and reasonable price.
Despite having attended a procurement and contract management training course in 2011, the
executive director disregarded procurement requirements and continued to assign work to the
three law firms under expired contracts 1 and hired the accounting firm without following
required procedures for procurements totaling more than $100,000. The Authority did not have
valid contracts with the three law firms and the accounting firm and did not have adequate
documentation to justify its selections. As a result, the Authority was unable to show that paying
the law firms $304,921 and the accounting firm $236,730 from July 2012 to October-November
2014 was best for the Authority.




1
    The Authority previously procured for legal services in 2005, but the resulting contracts expired in 2006.


                                                           4
                                                                                  Financial
                                                                                  consulting
                            Period                       Legal services            services
                Fiscal year 2013                          $178,072                $126,482
                (July 2012 to June 2013)
                Fiscal year 2014                             111,041                 87,521
                (July 2013 to June 2014)
                Fiscal year 2015                              15,808 2               22,727 3
                (July 2014 to October-
                November 2014)
                Total                                      $304,921               $236,730


Procurements for Legal Services and Financial Consulting Services in October-November
2014 Had Deficiencies
The Authority conducted procurements for legal services and financial consulting services in
October-November 2014. However, these procurements had a combination of deficiencies,
which included discrepancies in contract term and price among procurement documents and the
omission of mandatory Federal clauses from contracts. For example, the financial consulting
services request for proposals stated that the contract would cover the current fiscal year with
four annual renewals. However, the Authority awarded a 3-year contract with two optional 1-
year extensions. For the legal services procurement, the Authority’s independent cost estimate
showed that it estimated the services to cost $159,000 per year and specified in the request for
proposals that it would enter into a 1-year contract, not to exceed $150,000. Yet the Authority’s
board approved awarding contracts of $200,000 per year to three law firms. In addition, the
legal services contracts prepared by the city attorney’s office were missing the mandatory
Federal clauses. 4
Conclusion
The Authority did not always comply with HUD requirements or its own procurement policy.
This condition occurred because the Authority’s executive director disregarded these
requirements. As a result, the Authority was unable to support that $304,921 paid for legal
services and $236,730 paid for financial consulting services without proper procurement were
best for the Authority. These deficiencies resulted in the Authority’s misuse of $541,651 in
public housing funds.




2
    The amount paid before the legal service contracts were signed. The legal service contracts were signed on
    November 18, 2014.
3
    The amount paid before the financial consultant contract was signed. The financial consultant contract was
    signed on October 21, 2014.
4
    24 CFR 85.36(i)


                                                         5
Recommendations
We recommend that the Acting Director of the San Francisco Office of Public Housing require
the Authority to
1A.    Provide support to show that $304,921 paid for unlawful detainer-eviction services from
       July 2012 through October 2014 without proper procurement were reasonable and best
       for the Authority or repay its public housing program from non-Federal funds.
1B.    Amend the November 2014 contracts with the three law firms to include the mandatory
       Federal clauses.
1C.    Establish policies and procedures to ensure that all future Authority contracts include
       mandatory Federal clauses.
1D.    Provide support to show that $236,730 paid for financial consulting services from July
       2012 through October 2014 without proper procurement were reasonable and best for the
       Authority or repay its public housing program from non-Federal funds.
1E.    Submit annually to HUD for the next 3 years, a list of all procurement contracts over
       $10,000 (whether ongoing or recently procured contracts) listing the vendor name,
       contract service description or items purchased, and contract amount. HUD will perform
       a review and evaluation of selected contracts.
1F.    Submit to HUD, on an annual basis, for the next 3 years, the Authority’s last 12-month
       vendor payment history.




                                                6
Finding 2: The Authority Did Not Effectively Manage Its Tenant
Rents
The Authority did not effectively manage its tenant rents. This condition occurred because the
Authority did not have adequate policies and procedures for rent collection. As a result, it lost
revenue by improperly managing its rent collection process, was unable to collect tenant debts,
and wrote off $109,770 in rents and other charges.
The Authority Did Not Effectively Manage Its Tenant Rents
We selected a sample of 15 tenants representing $130,756 (21 percent) of the $620,282 in total
writeoffs during our audit period to determine whether tenant accounts were written off in
accordance with its policies and procedures. Although the Authority had policies and procedures
for rent collection, they did not include policies and procedures for writing off tenant accounts.
The Authority did not always take action to collect on delinquent tenant accounts, maintain
adequate records on eviction cases, use alternative methods to collect debts from past tenants,
maintain accurate tenant ledgers, and report debts owed by past tenants in HUD’s Enterprise
Income Verification (EIV) system. It also improperly reduced the balance owed by a tenant
board commissioner. The following table identifies the deficiencies noted for each tenant
account written off.
    Sample     No action Inadequate Alternative Inaccurate          Debts        Total improper
     item       to collect records on collection   tenant           owed             writeoffs
                    on      eviction   methods    ledgers            not         Not       Incorrect
               delinquent     cases    not used                   reported    collected     charges
                accounts                                           in EIV                      not
                                                                                            reversed
     1                                              X                          14,170           -
     2                                              X                X         18,749           -
     3              X                               X       X                   9,261          176
     4              X                               X       X                   8,905          433
     5              X              X                X       X                   8,752          200
     6              X              X                                             769            -
     7              X                               X       X        X          4,315          248
     8                             X                X                           4,394           -
     9              X                               X                X          4,112           -
    10                                              X       X                   4,011           -
11 and 14 5                                                 X                     -          15,645
    12                                                      X                     -           5,222
    13                                                      X                     -           5,530
    15                                                      X                     -           3,779
    16                             X                                            1,099           -
  Total              6             4            9           9        3         78,537        31,233
                                    Grand total                                      109,770



5
     Sample items 11 and 14 were the same tenant.


                                                        7
No Action Taken on Delinquent Tenant Accounts

The Authority failed to take action to collect on delinquent tenant accounts for 6 of the 15 tenant
files reviewed. The Authority’s Admissions and Continued Occupancy Policy states that if a
family fails to pay rent by the fifth working day of the month, a 14-day notice to vacate will be
issued to the resident for failure to pay rent, demanding payment in full or the surrender of the
premises. The Authority’s policy further requires a family that owes an amount to the Authority
to repay the full amount or enter into a repayment agreement (appendix C). However, the 14-day
notices to vacate could not be found in these six tenant files. Also, repayment agreements could
not be found in five of the files. One tenant entered into a repayment agreement in an amount
exceeding the threshold allowed by the Authority’s policy, 6 and the tenant failed to make
payments. Not only did the Authority not attempt to collect on the repayment agreement or refer
the tenant to a law firm for eviction, it later signed another repayment agreement with the tenant,
which again exceeded the threshold allowed. The Authority could not explain why action was
not taken on these cases.
Missing Records on Eviction Cases
We identified three tenants who appeared to have been referred to the law firms for eviction. We
also identified one tenant who should have been referred for eviction for failing to make
payments on a repayment agreement. However, the Authority did not maintain adequate records
to show the details and results of these cases. This condition occurred because a former
supervisor, who was responsible for handling all eviction cases, went on medical leave and then
retired. Eviction cases were left at the former supervisor’s desk and were overlooked. In
addition, the executive director explained that other Authority staff members were unable to do
what the former supervisor did because they were not trained to handle eviction cases.
Alternative Collection Methods Not Used
The Authority failed to use alternative methods to collect debts from nine tenants. According to
its policy, if a family refuses to repay funds owed, the Authority will use other available
collection alternatives, such as collection agencies, small claims court, a civil law suit, and the
State income tax setoff program (appendix C). Instead of using alternative collection methods,
the Authority wrote off these accounts because the tenants had vacated the unit. The Authority
chose not to use alternative collection methods because it believed that these tenant accounts
were uncollectible.
Inaccurate Tenant Ledgers
The Authority kept inaccurate tenant ledgers for 9 of the 15 tenants. It continued to charge rent
after the tenants had moved out. For example, the Authority kept three separate tenant ledgers
for one tenant who moved from one unit to another in November 2013. The Authority continued
to charge rent for the old unit through October 2014 in one tenant ledger and through June 2015
in another. In this case, incorrect rent charges and late fees totaled $15,645 for 28 months. The

6
    The Authority’s Executive Office Directive, Repayment Agreement Policy and Procedures Revisions, dated
    August 30, 2012


                                                       8
Authority improperly wrote off these amounts as uncollectible when it should have reversed
them in its accounting system since these charges were inappropriate. The Authority could not
explain why it continued to charge rent or why the accounts were written off as uncollectible
instead of reversed in its accounting system.
Debts Owed Not Reported in EIV
The Authority failed to report debts owed by tenants in EIV in three cases. HUD’s EIV System
Tip Sheet TIPS 2013-3 requires public housing agencies to enter debt and termination
information into EIV not later than 60 days from the end of participation date. The Authority’s
repayment agreement policy also requires that debts owed by tenants be reported to HUD
(appendix C). Authority staff attributed this deficiency to the same former supervisor who went
on medical leave and then retired. The former supervisor was assigned the task of entering debt
and termination information into EIV. Other Authority staff members did not know why the
information had not been entered. By the time this task was reassigned, the time allowed for
entering the information into EIV had passed.
Improper Writeoffs
As a result of the deficiencies described above, the Authority improperly wrote off tenant
accounts. These improper writeoffs included rents; work orders, damages, and cleaning costs;
repayment agreements; late fees; and security or pet deposits. The Authority did not have
adequate written policies and procedures for rent collection, which included policies and
procedures for writing off tenant accounts. The Authority’s executive director authorized
writing off many of these tenant accounts at the end of a fiscal year because the tenants had
vacated the units. The executive director also reduced the tenant-caused fire damage charge and
back rent owed by a tenant board commissioner without reasonable justification. Other tenant
accounts were written off when incorrect charges should have been reversed. All of the 15
tenant files reviewed contained improper writeoffs.

Conclusion
The Authority did not effectively manage its tenant rents. It did not always take action to collect
on delinquent tenant accounts, maintain adequate records on eviction cases, use alternative
methods to collect debts from past tenants, maintain accurate tenant ledgers, and report debts
owed by past tenants in HUD’s EIV system. As a result, the Authority lost revenue by
improperly managing its rent collection process, was unable to collect tenant debts, and wrote off
$109,770 in rents and other charges.

Recommendations
We recommend that the Acting Director of HUD’s San Francisco Office of Public Housing
require the Authority to

2A.    Develop and implement written policies and procedures for administering its tenant rents,
       including but not limited to a rental collection policy that includes procedures to address
       delinquent accounts, eviction procedures for nonpayment of rents, procedures for writing
       off uncollectible tenant accounts, and procedures for reporting debts owed by past tenants
       in EIV.


                                                 9
Scope and Methodology
We performed our audit work at the Authority’s finance office in Richmond, CA, from August
18, 2015, to February 26, 2016. Our audit generally covered July 1, 2012, through June 30,
2015. We expanded our scope as necessary. To accomplish our objective, we performed the
following:

   •       Reviewed applicable HUD requirements,
   •       Reviewed relevant background information related to the Authority,
   •       Reviewed the Authority’s policies and procedures for procurement and rent
           collection,
   •       Reviewed the Authority’s audited financial statements,
   •       Interviewed HUD and Authority staff as appropriate,
   •       Reviewed the Authority’s accounting records,
   •       Reviewed the Authority’s procurement files and contracts, and
   •       Reviewed public housing tenant files.
We selected a nonstatistical sample of two procurements to review. We used a nonstatistical
sample to ensure that we selected the procurements mentioned in the complaint. We reviewed
the Authority’s check registers for fiscal years 2013, 2014, and 2015 with payments totaling
more than $20 million to identify vendors who were paid more than $100,000 which would have
required the Authority to conduct procurement procedures. The complaint alleged inappropriate
procurement practices related to accounting and legal services. We determined that three law
firms were tied to one legal services procurement and that two accounting firms were tied to an
accounting procurement. Therefore, we selected the accounting firms and law firms for
review. Payments for the two procurements totaled $680,582 during our audit period. The
findings pertain to the sample only. Therefore, we did not project the results to the universe.
We selected a nonstatistical sample of 15 tenant files to review. We used a nonstatistical sample
to ensure that we selected the tenant mentioned in the complaint and the tenants with the highest
writeoff amounts. The findings pertain to the sample only. Therefore, we did not project the
results to the universe. We selected our sample based on (1) information provided by the
complainant and (2) the dollar amount and timing of the writeoffs. The 15 tenants selected for
review had a total of $130,756 in writeoffs (21 percent) from a total of $620,282 in writeoffs
during our audit period.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                                10
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:

•   Policies and procedures implemented to reasonably ensure that procurement activities were
    conducted in accordance with applicable requirements.

•   Policies and procedures implemented to reasonably ensure that rents were collected from
    public housing tenants.

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’s controls were ineffective to ensure that procurement activities were
    conducted with full and open competition, and contracts were awarded only to vendors with
    proposals that were best for the Authority (finding 1).

•   The Authority lacked adequate controls to ensure that accurate tenant ledgers were
    maintained, appropriate actions were taken on delinquent tenant accounts, and debts owed by
    tenants were reported in EIV (finding 2).




                                                  11
Appendixes

Appendix A


                             Schedule of Questioned Costs
                           Recommendation
                                             Unsupported 1/
                               number
                                   1A              $304,921
                                   1D               236,730

                                 Totals            $541,651



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. In these instances, the Authority did not support
     the reasonableness of the contract awards.




                                              12
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




                               13
Comment 1
Comment 2


Comment 3




Comment 4




Comment 5




            14
Comment 6


Comment 7




Comment 8




Comment 9



Comment 10




             15
Comment 11




             16
                         OIG Evaluation of Auditee Comments


Comment 1   We disagree. The Request for Proposals (RFP) for unlawful detainer-eviction
            legal services issued in 2005 stated that the Authority will “enter into a one-year
            agreement…which may be extended for an additional year at the option of the
            Authority.” During the audit, the Authority provided the contracts with the same
            three law firms that were effective October 15, 2005. All three contracts had a 1-
            year term with no renewal option. However, after the expiration of these
            contracts, the Authority did not conduct a new procurement for unlawful detainer-
            eviction legal services.
Comment 2   The documents provided with the response were inadequate to justify the
            Authority’s selection of the accounting firm to provide financial consulting
            services. The Authority’s executive director explained in the justification memo
            that Oakland Housing Authority (OHA) recently completed an RFP process for a
            consultant to provide similar services and he calculated that contract to cost
            $125,000 per year. However, we noted that OHA entered into a 2-year contract
            with two 1-year option terms in an amount not to exceed $500,000. OHA
            anticipated the cost of the contract to be higher during the initial year of the
            contract and the cost to be less in subsequent years. The Authority’s justification
            memo stated that it did not anticipate spending as much as OHA, but did not
            specify an estimated amount. Instead of using a more complex procurement
            method as required, the Authority opted to select a firm based on two fee
            schedules. One fee schedule showed hourly rates for the firm’s staff positions and
            their job descriptions. Another fee schedule showed hourly rates for the firm’s
            staff positions and a quote of $3,800 for preparing two HUD forms for four asset
            management projects. These hourly rates and one quote obtained were
            insufficient for comparison to justify the Authority’s selection.
Comment 3   The explanation the Authority provided in its response differs from what was in
            its procurement file; therefore, we did not make any changes to the report.
Comment 4   The payment amounts shown in this table were less than the payment amounts we
            obtained from the Authority’s accounting records during the audit; therefore, we
            did not make any adjustments to the report.
Comment 5   The additional documents provided were insufficient to show that the $304,921
            paid for unlawful detainer-eviction services from July 2012 through October 2014
            without proper procurement were reasonable and best for the Authority. The
            Authority’s executive director asserted that one housing authority’s contract costs
            were $113,000 per year. His assertion appeared to be incorrect. The supporting
            document provided showed that the housing authority requested its board to
            approve increasing the contract to an amount not to exceed $113,000 and
            extending the contract term through June 30, 2012. It appeared that the contract
            term was more than 1 year, because the document mentioned that the board had
            authorized a contract amendment last November that increased contract authority


                                             17
              and extended the term through June 30, 2011. The exact contract term was not
              mentioned, but it appeared to be more than 1 year.
              The Authority’s executive director stated that another housing authority’s contract
              costs with two firms were $340,000 and $282,700, both over a 4-year period.
              This information would not support that the $304,921 that the Authority paid for
              unlawful detainer-eviction services from July 2012 through October 2014 were
              reasonable. The contract costs were not comparable because the other housing
              authority had more than double the Authority’s public housing units. The other
              housing authority had more than 1,600 public housing units, while the Authority
              had 715 public housing units.
Comment 6     The explanation the Authority provided in its response differs from the
              explanation documented in its procurement file; therefore, we did not make any
              changes to the report.
Comment 7     The Authority will need to provide support to HUD during the audit resolution
              process to show that the $236,730 it paid for financial consulting services from
              July 2012 through October 2014 without proper procurement was reasonable and
              best for the Authority or repay its public housing program from non-Federal
              funds.
Comment 8     The Authority will need to provide support to HUD during the audit resolution
              process to show that the $236,730 it paid for financial consulting services from
              July 2012 through October 2014 without proper procurement was reasonable and
              best for the Authority or repay its public housing program from non-Federal
              funds.
Comment 9     We agreed with the Authority. Accordingly, we have revised the table in the
              report to show improper writeoffs separated into two categories: not collected and
              incorrect charges not reversed.
Comment 10 The fire investigation report concluded that the fire was an accident, but it was
           caused by the tenant who left incense burning inside a flower pot. During the
           audit, the executive director explained that he reduced the cost of the fire damage
           for painting the one-bedroom unit by more than $1,000 because the unit had not
           be repainted since the tenant moved in. We disagreed that the reduction was
           reasonable.
Comment 11 The Authority provided attachments with its response. We did not include the
           attachments in the report because they were too voluminous; however, they are
           available upon request.




                                               18
Appendix C
                                             Criteria


Procurement Criteria
Regulations at 24 CFR 85.36(b)(8) state, “Grantees and subgrantees will make awards only to
responsible contractors possessing the ability to perform successfully under the terms and
conditions of a proposed procurement. Consideration will be given to such matters as contractor
integrity, compliance with public policy, record of past performance, and financial and technical
resources.”
Regulations at 24 CFR 85.36(b)(9) state, “Grantees and subgrantees will maintain records
sufficient to detail the significant history of a procurement. These records will include, but are
not necessarily limited to the following: rationale for the method of procurement, selection of
contract type, contractor selection or rejection, and the basis for the contract price.”
Regulations at 24 CFR 85.36(c)(1) state, “All procurement transactions will be conducted in a
manner providing full and open competition consistent with the standards of §85.36.”
Regulations at 24 CFR 85.36(i) state that the following provisions must be included in a
grantee’s contract:
       (1) Administrative, contractual, or legal remedies in instances where contractors violate
       or breach contract terms, and provide for such sanctions and penalties as may be
       appropriate. (Contracts more than the simplified acquisition threshold)
       (2) Termination for cause and for convenience by the grantee or subgrantee including the
       manner by which it will be effected and the basis for settlement. (All contracts in excess
       of $10,000)
       (3) Compliance with Executive Order 11246 of September 24, 1965, entitled “Equal
       Employment Opportunity,” as amended by Executive Order 11375 of October 13, 1967,
       and as supplemented in Department of Labor regulations (41 CFR chapter 60). (All
       construction contracts awarded in excess of $10,000 by grantees and their contractors or
       subgrantees)
       (4) Compliance with the Copeland “Anti-Kickback” Act (18 U.S.C. [United States Code]
       874) as supplemented in Department of Labor regulations (29 CFR part 3). (All contracts
       and subgrants for construction or repair)
       (5) Compliance with the Davis-Bacon Act (40 U.S.C. 276a to 276a-7) as supplemented
       by Department of Labor regulations (29 CFR part 5). (Construction contracts in excess
       of $2000 awarded by grantees and subgrantees when required by Federal grant program
       legislation)




                                                  19
       (6) Compliance with Sections 103 and 107 of the Contract Work Hours and Safety
       Standards Act (40 U.S.C. 327-330) as supplemented by Department of Labor regulations
       (29 CFR part 5). (Construction contracts awarded by grantees and subgrantees in excess
       of $2000, and in excess of $2500 for other contracts which involve the employment of
       mechanics or laborers)
       (7) Notice of awarding agency requirements and regulations pertaining to reporting.
       (8) Notice of awarding agency requirements and regulations pertaining to patent rights
       with respect to any discovery or invention which arises or is developed in the course of or
       under such contract.
       (9) Awarding agency requirements and regulations pertaining to copyrights and rights in
       data.
       (10) Access by the grantee, the subgrantee, the Federal grantor agency, the Comptroller
       General of the United States, or any of their duly authorized representatives to any books,
       documents, papers, and records of the contractor which are directly pertinent to that
       specific contract for the purpose of making audit, examination, excerpts, and
       transcriptions.
       (11) Retention of all required records for three years after grantees or subgrantees make
       final payments and all other pending matters are closed.
       (12) Compliance with all applicable standards, orders, or requirements issued under
       section 306 of the Clean Air Act (42 U.S.C. 1857(h)), section 508 of the Clean Water Act
       (33 U.S.C. 1368), Executive Order 11738, and Environmental Protection Agency
       regulations (40 CFR part 15). (Contracts, subcontracts, and subgrants of amounts in
       excess of $100,000).
       (13) Mandatory standards and policies relating to energy efficiency which are contained
       in the state energy conservation plan issued in compliance with the Energy Policy and
       Conservation Act (Pub. L. 94-163, 89 Stat. 871).
HUD Handbook 7460.8, REV-2, section 10.3, states, “PHAs should always compare the prices
offered with the ICE [independent cost estimate]. While this initial cost estimate may not be
sufficient for price reasonableness, it can assist the Contracting Officer in determining the extent
to which the offerors understand the PHA’s requirements. Sometimes, the comparison of prices
may point out the need for verification of bids (in sealed bid procurements) or negotiations (in
the competitive proposals methods) if prices of the different offerors vary widely or seem
unusually high (or low) compared to the ICE.”
Richmond Housing Authority Procurement Policy, revised July 19, 2000, section III, part C,
states, “For purchases and contracts in excess of $100,000, the Executive Director or designee
shall invite bids by (1) advertisement in at least one newspaper of general circulation, or (2)
mailing ‘invitations to bid’ to all available dealers and notices posted in public places; or a
combination of such methods.”



                                                  20
Tenant Rents Management Criteria
The Authority’s consolidated annual contributions contract, dated March 8, 1996, section 4 –
Mission of the HA [housing agency] states, “The HA shall at all times develop and operate each
project solely for the purpose of providing decent, safe, sanitary housing for eligible families in a
manner that promotes serviceability, economy, efficiency, and stability of the projects, and the
economic and social well-being of the tenants.”
Regulations at 24 CFR 5.233, Mandated Use of HUD’s Enterprise Income Verification (EIV)
System, state:
       (b) Penalties for noncompliance. Failure to use the EIV system in its entirety may result
       in the imposition of sanctions and/or the assessment of disallowed costs associated with
       any resulting incorrect subsidy or tenant rent calculations, or both.
Notice PIH 2010-19 (HA), Administrative Guidance for Effective and Mandated Use of the
Enterprise Income Verification (EIV) System, states:
       EIV System Tip Sheets (ETS). PHAs are required to comply with guidance provided via
       ETS … ETS is designed to explain effective use of the EIV system to ensure PHAs’
       compliance with the third party verification requirements and reduce administrative and
       subsidy payment errors, so that PHAs may avoid penalties for failure to use the EIV
       system in its entirety.
EIV System Tip Sheet TIPS 2013-3 states:
       Effective April 26, 2010, PHAs are required to:
           •   ENTER Debt and Termination information into EIV not later than 60 days from
               the End of Participation (EOP) date
The Authority’s Admissions and Continued Occupancy Policy, chapter 13, paragraph 13-III.B,
states:
       The PHA will terminate the lease for the following violations of tenant obligations under
       the lease:
       Failure to make payments due under the lease, including nonpayment of rent;
       Repeated late payment of rent or other charges. Four late payments within a 12 month
       period shall constitute a repeated late payment.
The Authority’s Admissions and Continued Occupancy Policy, chapter 13, paragraph 13-III.D,
states:
       If a family owes amounts to the PHA, as a condition of continued occupancy, the PHA
       will require the family to repay the full amount or to enter into a repayment agreement,
       within 30 days of receiving notice from the PHA of the amount owed.



                                                  21
The Authority’s Admissions and Continued Occupancy Policy, chapter 13, paragraph 13-IV.D,
states:
       The PHA will give written notice of 14 calendar days for nonpayment of rent. For all
       other lease terminations the PHA will give 30 days written notice or, if state or local law
       allows less than 30 days, such shorter notice will be given.
The Authority’s Admissions and Continued Occupancy Policy, chapter 16, paragraph 16-III.A,
states:
       When a family refuses to repay monies owed to the PHA, the PHA will utilize other
       available collection alternatives including, but not limited to, the following:
              Collection agencies
              Small claims court
              Civil law suit
              State income tax set-off program
The Authority’s Admissions and Continued Occupancy Policy, chapter 16, paragraph 16-III.B,
states:
       Any amount due to the PHA by a public housing family must be repaid. If the family is
       unable to repay the debt within 30 days, the PHA will offer to enter into a repayment
       agreement in accordance with the policies below.
       If the family refuses to repay the debt, enter into a repayment agreement, or breaches a
       repayment agreement, the PHA will terminate the family’s tenancy in accordance with
       the policies in Chapter 13. The PHA will also pursue other modes of collection.
       The PHA will not enter into a repayment agreement if there is already a repayment
       agreement in place with the family, or the amounts owed by the family exceed the
       Federal or State threshold for criminal prosecution.
The Authority’s Executive Office Directive, Repayment Agreement Policy and Procedures
Revisions, dated August 30, 2012, states:
       As required by 24 CFR 792.103 if a LIPH (Low Income Public Housing) or HCV
       (Housing Choice Voucher) family incurs a debt to the Housing Authority, enters into a
       repayment agreement to repay that debt and breeches the repayment agreement, the RHA
       [Authority] will terminate the assistance upon notification to the family and pursue other
       means of collection which may include but is not limited to:
          •   collection agencies
          •   small claims court
          •   civil lawsuit
          •   State income tax set-off programs
          •   And as required this debt will be reported to the United States Department of
              Housing and Urban Development.


                                                 22
There will be some minor revisions to the current policies to bring them more in line with
federal requirements. The repayment amount ceiling will be reduced from $3,000 to
$2,500. Families will no longer be given three opportunities within a 12-month period to
miss a payment. One missed payment will constitute the issuance of a Notice of
Proposed Termination. The repayment agreement form has also been modified.
Other repayment agreement terms have been modified as follows:
Payment Thresholds
Amounts between $2,000 and $2,500 must be repaid within 30 months.
Amounts between $1,000 and $1,999 must be repaid within 20 months.
Amounts under $1,000 must be repaid within 12 months.




                                         23