oversight

The Richmond Housing Authority, Richmond, CA, Mismanaged Its Financial Operations

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-06-03.

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

          Richmond Housing Authority,
                Richmond, CA
         Public Housing and Housing Choice Voucher
              Programs – Financial Management




Office of Audit, Region 9      Audit Report Number: 2016-LA-1006
Los Angeles, CA                                      June 3, 2016
To:            Gerard Windt, Director, San Francisco Office of Public Housing, 9CPH
               Dane Narode, Associate Counsel for Program Enforcement, CACC
               Craig Clemmensen, Director, Departmental Enforcement Center, CACB
               //SIGNED//
From:          Tanya E. Schulze, Regional Inspector General for Audit, 9DGA
Subject:       The Richmond Housing Authority, Richmond, CA, Mismanaged Its Financial
               Operations




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-1006
                    Date: June 3, 2016

                    The Richmond Housing Authority, Richmond, CA, Mismanaged Its Financial
                    Operations




Highlights

What We Audited and Why
We audited the Richmond Housing Authority due to a complaint alleging that the Authority
submitted falsified documentation to the U.S. Department of Housing and Urban Development
(HUD) and allowed the City of Richmond to use the Authority’s HUD funds and the Authority’s
assets and that the City charged the Authority for rent and services at an unreasonable price. Our
audit objective was to validate complaint allegations regarding whether the Authority spent HUD
funds and used its assets in accordance with HUD requirements.

What We Found
The complaint allegations had merit. The Authority mismanaged its financial operations and did
not spend HUD funds and use its assets in accordance with HUD requirements. We attributed
these deficiencies to the Authority’s disregard for HUD requirements and its agreement with
HUD, the lack of independence in the relationship between the Authority and the City, and a
weak internal control environment. As a result, the Authority misspent $2.2 million in HUD
funds, had $944,910 in unsupported costs, and incurred other questionable transactions that
unnecessarily limited its resources and effectiveness with its public housing program.

What We Recommend
We recommend that the Associate General Counsel for Program Enforcement determine legal
sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies
Act for submitting misleading documentation to HUD. We recommend that the Director of the
Departmental Enforcement Center take the appropriate administrative actions against Authority
officials for submitting misleading documentation to HUD. We recommend that the Director of
the San Francisco Office of Public Housing require the Authority to (1) repay more than $2
million for the ineligible use of HUD funds, $53,347 for duplicate charges, and $60,000 for a
City-initiated management audit; (2) support $80,890 of the executive director’s salary spent on
Authority activities and $180,000 spent on office rent; (3) determine the proper use of the
Authority’s former maintenance building property; and (4) develop and implement financial
policies and procedures for the current operating environment. We also recommend that the
Director of the San Francisco Office of Public Housing work with HUD headquarters on
corrective actions to improve the Authority’s control and accountability regarding its finances
and operations, including but not limited to HUD receivership and separating the Authority’s
finances from those of the City.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding: The Authority Mismanaged Its Financial Operations .................................. 5

Scope and Methodology .........................................................................................13

Internal Controls ....................................................................................................14

Appendixes ..............................................................................................................15
         A. Schedule of Questioned Costs and Funds To Be Put to Better Use ...................... 15

         B. Auditee Comments and OIG’s Evaluation ............................................................. 16

         C. Criteria………………………………………………………………..…27




                                                            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 assist 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


The Authority was designated as troubled by HUD’s Real Estate Assessment Center for the
fiscal year ending June 30, 2011. As a result, HUD and the Authority entered into a recovery
agreement and action plan on February 5, 2013. The plan is a binding contract required by
Federal statute that describes performance outcomes, timelines, and reporting requirements that
must be strictly followed as well as remedies to achieve agreed-upon performance levels. If the
Authority fails to comply with any measureable outcome, HUD may impose sanctions, up to and
including the contracting out of the Authority’s management operations. The agreement was
amended April 30, 2015, and is effective until June 30, 2016. The amended agreement removed
items that had been closed under the original agreement.



                                                3
In 2009, we issued audit report 2009-LA-1020, which determined that the Authority did not
follow procurement requirements and had internal control weaknesses. All of the
recommendations related to this audit were closed; however, as part of our audit objective, we
addressed a complaint alleging that the Authority submitted “falsified” documentation to HUD
regarding its finances, including documentation submitted to HUD to close recommendations
from that audit. In addition, we issued audit report 2016-LA-1004, which determined that the
Authority did not always procure services and manage rents in accordance with HUD
requirements. All recommendations remained open as of the publication of this report.
We received complaint allegations that the Authority submitted falsified documentation to HUD
and allowed the City to use the Authority’s HUD funds and the Authority’s assets and that the
City charged the Authority for rent and services at an unreasonable price. After interviewing the
complainant and reviewing documentation obtained in the survey phase of audit report 2016-LA-
1004, we determined that the allegations appeared to have merit and needed further review.
Therefore, we initiated this second audit of the Authority. Our audit objective was to validate
complaint allegations regarding whether the Authority spent HUD funds and used its assets in
accordance with HUD requirements.




                                                4
Results of Audit

Finding: The Authority Mismanaged Its Financial Operations
The Authority did not manage its financial operations in accordance with HUD requirements.
Specifically, it

    •    Submitted misleading documentation to HUD that violated its agreement with HUD,
    •    Did not review and approve transactions initiated by the City,
    •    Inappropriately paid for City expenses,
    •    Overpaid salary expenses for its executive director,
    •    Did not negotiate rental costs,
    •    Did not obtain HUD approval for its general liability insurance, and
    •    Could not trace all expenses.


We attributed these deficiencies to the Authority’s disregard for HUD requirements and its
agreement with HUD, its lack of independence in the relationship between the Authority and the
City, and a weak internal control environment. As a result, the Authority misspent $2.2 million
in HUD funds, incurred $944,910 in unsupported costs, and incurred other questionable
transactions. These deficiencies added to the already strained financial condition of the
Authority and limited its resources and effectiveness with its public housing program.
The Authority Misled HUD
The complaint alleged that the Authority submitted “falsified” documentation to HUD regarding
its finances. This complaint had merit because the Authority submitted documentation to HUD,
which misrepresented material facts, to close out findings

     •   In a prior HUD Office of Inspector General (OIG) audit report 1 and
     •   In its public housing authority recovery and sustainability (PHARS) agreement with
         HUD.
On February 5, 2013, HUD and the Authority entered into a PHARS agreement. According to
the PHARS agreement, proceeds from the sale of the non-Federal property (Westridge) would be
used to pay off the remainder of questioned costs identified in HUD OIG audit report 2009-LA-
1020 and to pay off City debt. The agreement further stated the Authority could not use HUD
program revenue to pay principal or interest on any obligation that the City considered owed for
past financial transactions (appendix C).
RHA Properties, a joint venture between the Authority and the City, owned the Westridge
property. The proceeds from the Westridge sale were used to pay more than $7.7 million in debt
that was assumed by RHA Properties, which included the remaining amount of its repayment

1
    Audit report 2009-LA-1020


                                                5
agreement from the prior OIG audit. The City agreed to deposit more than $2 million of the
funds into the Authority’s account with the understanding that the Authority would transfer the
funds back to the City. The Authority submitted documentation to HUD to show that on May
23, 2014, the Authority used the $2 million to repay its public housing and Housing Choice
Voucher programs for the questioned costs identified during the previous OIG audit. 2 However,
HUD was not informed that 4 days later (May 27, 2014) the funds were withdrawn from the
HUD program bank accounts and transferred back to the City. The Authority was also in
violation of its PHARS agreement with HUD because it used funds to pay off debt for services
provided by the City before the PHARS agreement. These violations occurred due to the
Authority’s disregard for HUD requirements and the PHARS agreement and the relationship
between the Authority and the City. If the Authority had not transferred the $2 million back, it
could have used the funds for operations since its operating expenses exceeded its operating
income. See the figure below.
                                                                           The City sends $2
                                   Start/Finish: The                         million in non-
                                   City receives $2                        Federal funds with
                                   million from the                        the understanding
                                      Westridge                            that the Authority
                                    complex sale.                           will transfer the
                                                                              funds back.




                                                                                    The Authority uses $2
                    The Authority sends $2                                          million in non-Federal
                    million in Federal funds                                          funds to repay the
                      back to the City for                                           public housing and
                     payment of Authority                                              Housing Choice
                    debt in violation of the                                         Voucher programs
                      PHARS agreement.                                              based on a 2009 OIG
                                                                                             audit.

                                                          The Authority's
                                                        public housing and
                                                          Housing Choice
                                                        Voucher programs
                                                       receive $2 million in
                                                         funds. The funds
                                                       become federalized.


The PHARS agreement also required that the Authority not incur additional debt with the City
for the remainder of the Authority’s 2013 fiscal year ending June 30, 2013 (appendix C). On
June 11, 2013, the Authority sent HUD a letter stating that it did not incur additional debt with
the City. However, the City charged the Authority $25,000 for its recurring rent allocation and
$64,773 for its recurring indirect cost allocation from February to June 2013. The Authority had
paid only $38,863 of those charges, indicating that it had incurred $50,910 in additional debt,
which contradicted the Authority’s assertion to HUD. In addition, the City typically charged the
Authority for a monthly general liability cost allocation. The City did not charge the Authority
for its general liability policy from February through June 2013 but began charging it again in
July 2013. The PHARS agreement stated that the loan with the City would create additional


2
    Audit report 2009-LA-1020


                                                                      6
financial problems (appendix C). This concern had not been adequately addressed by the
Authority because the Authority continued to accumulate debt with the City and owed the City
more than $4 million as of January 31, 2016.


The Authority Did Not Properly Review or Approve All Transactions Initiated by the City
The complaint alleged that the Authority allowed the City to use HUD funds and charged the
Authority for services not provided. This complaint had merit because the Authority did not
always properly approve transactions initiated by the City, which resulted in

   •   An indirect cost allocation in fiscal year 2015 with outdated expenses from 2011 and
       2012, questionable costs, and duplicate charges and
   •   A $60,000 contract that the Authority did not intend to pay for.


Although the Authority is a separate legal entity, it is treated as component unit of the City. The
City exercises significant control over the Authority’s finances because its board consists of the
city council and two tenant commissioners. Further, HUD’s PHARS agreement from February
5, 2013, included a statement that the Authority’s finance department would be under the control
of the City’s finance department (appendix C). The City charged the Authority indirect costs
through a cost allocation as if it were a department of the City. The City finalized the $370,469
per year indirect cost allocation used in fiscal year 2015 on February 21, 2014, based on
expenditures from 2011 and 2012. Due to the changes in the Authority’s finance department
discussed above, these costs would likely be outdated. On April 29, 2014, the executive director
approved the City’s cost allocation plan. However, despite the approval, our review and
discussions with the Authority disclosed questionable items included in the allocation.
We did not verify all questionable items; however, we did note one that was double charged.
The lease between the City and the Richmond Redevelopment Agency included maintenance,
security, and utilities with the Authority listed as a tenant. The City also included these costs in
its indirect cost allocation. In fiscal year 2015, the City charged both the rent allocation and
indirect allocation to the Authority’s public housing program. As a result, the Authority spent at
least $53,347 in public housing program funds on duplicate charges. The Authority should
properly review the cost allocation to ensure that the City charged only for services received and
that the costs had not been charged through other means.
In addition to the indirect cost allocation issues, the Authority paid for a management and
performance audit that it did not intend to purchase. HUD prohibits housing agencies from
incurring operating expenditures that are not in their approved operating budget. The
management performance audit was initiated, procured, and contracted by the City. The city
council instructed the city manager to hire a consultant to perform a management audit of the
Authority. The City included the cost of this $100,000 management and performance audit in
the city manager’s office budget as shown in the financial impact section of the City’s agenda
report below:



                                                  7
The City awarded and signed the contract with the accounting firm but then allocated the
$60,000 payment on the $100,000 contract to the Authority because the City oversaw the
Authority’s finance staff and they shared the same accounting system.


The Authority Funded City Expenses and Provided a Building Rent Free
The complaint alleged that the Authority owned a building at 360 South 27th Street, Richmond,
CA, which was used by the City at no cost, but the Authority continued to pay for utilities on the
property. This complaint was valid because the Authority

     •   Rented the building to the City for $1 per year, which the Authority did not collect, and
     •   Paid at least $11,850 of its own non-Federal funds on utilities and alarm services in fiscal
         years 2013 and 2014.


The Authority purchased the building in 1957 with HUD funds for the administration of low-rent
public housing projects. The Authority’s administration office moved to a different building in
1986, but the Authority continued to use the building as a primary maintenance facility. In 2006,
the Authority decentralized its maintenance department as part of HUD’s asset management
requirements. The Authority decided to allow the City’s RichmondBUILD program to use the
building with the understanding that its construction students would update the building.
However, the Authority did not obtain HUD approval to allow the City to use the building rent
free. As a result, the Authority’s public housing program did not benefit from this asset.
According to the lease agreement, the City’s RichmondBUILD program was required to pay all
costs associated with the building. However, the Authority paid at least $11,850 in fiscal years
2013 and 2014 for utilities and alarm services for the building. 3 In addition, the $1 rent per year
had not been paid, and the Authority had no intention of collecting rent or renegotiating the
lease. Although the utilities were paid for using non-Federal funds, the Authority should not pay
for City expenses. According to its fiscal years 2013 through 2015 financial statements, the
Authority was in a strained financial condition because its operating expenses exceeded its
operating income. The Authority could have used the funds spent on utilities and received
income from the building for operations.




3
    Due to the Authority’s switching its accounting system in fiscal year 2015, we were not able to determine the
    amount spent on utilities in fiscal year 2015 because the details did not include the building address.


                                                          8
The Authority Paid for the Executive Director To Work on City Activities
The Authority’s executive director had been the City’s acting housing and community
development director since at least August 15, 2015. The Authority paid the executive director’s
full salary of $80,890 from August 15, 2015, to January 31, 2016, without requesting
reimbursement from the City for the portion of the salary related to time spent on City activities.
The executive director’s salary was paid from the Authority’s central office cost center account,
which is considered non-Federal funds; however, according to 24 CFR 990.280(b)(4), project-
specific operating costs include a property management fee charged to each project that is used
to fund operations of the Authority’s central office (appendix C). By not requesting
reimbursement for the portion of the executive director’s salary spent on time supporting the
City’s Housing and Community Development Department, the project management fee charged
to each project was used to fund the City’s central office costs and not those of the Authority as
intended.
Although these issues included non-Federal funds, the Authority should not have paid for City
expenses. According to its fiscal years 2013 through 2015 financial statements, the Authority
had been in a strained financial condition because its operating expenses exceeded its operating
income. The Authority could have used the funds for operations.
The Authority Did Not Negotiate Fair Rental Terms With the City
The complainant alleged that the City charged the Authority excessive amounts to rent City
space for its administrative and finance staffs while it had space at Nevin Plaza, an Authority-
owned building. This complaint had some merit because the rent amount charged by the City
appeared excessive for the square footage occupied by the Authority, but we could not determine
whether the staff should still be located at the Authority’s Nevin Plaza building. According to
Office of Management and Budget Circular A-87, section 37, reasonable rental costs are
allowable, but should be reviewed periodically to determine whether circumstances have
changed.
The Authority’s administrative and finance staff relocated from Nevin Plaza in 2009 to one of
the City’s Civic Center buildings under a sublease with the Richmond Community
Redevelopment Agency. The Redevelopment Agency dissolved in early 2012, and the City, the
successor agency, took over the obligations of the lease. The Authority and the City could not
locate the sublease; however, the lease between the City and the Redevelopment Agency listed
the Authority as a tenant. We reviewed the market conditions for similar office space in the
same zip code, and it appeared that the Authority was charged more than the market rate for its
space.
In addition, the Authority no longer occupied the space identified in the lease agreement. The
Authority’s Finance Department was moved into two Civic Center buildings in cubicles
intermingled with City employees instead of in its own separate space. This arrangement
reduced the amount of square footage occupied by the Authority from 5,000 to 1,744 square feet.
The City and the Authority did not negotiate a new lease based on the current market rate or
changed circumstances. The Authority and the City should renegotiate the terms of the lease and
perform a cost analysis to ensure that the Authority is not paying more than the market rate.
From fiscal years 2013 through 2015, the Authority was charged $180,000 in office rent. If the


                                                 9
Authority does not renegotiate its lease, it will pay annual rent of $60,000, or approximately $1.4
million, from fiscal year 2016 to the end of the lease term, June 30, 2039.
The Authority’s General Liability Insurance Was Not Approved by HUD
The Authority used the City’s $500,000 self-insurance and the City’s general liability policy
through the California Joint Powers Risk Management Authority risk pool without HUD
approval. The Authority’s annual contributions contract with HUD requires the Authority to
have general liability insurance and receive a waiver from HUD to establish a self-insurance
fund in lieu of purchasing insurance. In addition, HUD regulations at 24 CFR 965.205(a) allow
the Authority to purchase insurance from a nonprofit insurance entity owned and controlled by
public housing agencies without open and competitive bidding when approved by HUD
(appendix C). The City was unaware of requirements to obtain approval from HUD for self-
insurance or to be part of a non-HUD-approved risk pool. As a result, there was no assurance
that the liability coverage was adequate or that $684,020 charged for general liability coverage
from fiscal years 2013 through 2015 was reasonable.

The Authority Could Not Trace All Expenses
An Authority employee stated that cost allocation items were recorded against the Authority’s
public housing programs; however, the Authority hired an accountant to adjust the entries at
year end. The Authority could not trace the accountant’s work to determine how much was
recorded against each public housing property as required by 24 CFR 990.280 (appendix C). We
attempted to trace the cost allocation expenses and found that 2013 and 2014 expenses were not
recorded against the Authority’s public housing program as stated. In addition, the amount
recorded in 2013 and 2014 did not match the cost allocation billing statements from the City,
which were much higher. It appeared that the Authority did not record $331,466 of the cost
allocation expenses in fiscal year 2013 and $280,547 of the expenses in fiscal year 2014.

Conclusion
The complaint allegations had merit. Based on all of the issues identified above, we determined
that the Authority mismanaged its financial operations. We attributed these deficiencies to the
Authority’s disregard for HUD requirements and its PHARS agreement with HUD, the lack of
independence in the relationship between the Authority and the City, and a weak internal control
environment. As a result, the Authority misspent $2.2 million in HUD funds, had $944,910 in
unsupported costs, and incurred other questionable transactions. The poor management added to
the already strained financial condition of the Authority and unnecessarily limited its resources
and effectiveness with its public housing program.




                                                 10
Recommendations
We Recommend that the Associate General Counsel for Program Enforcement
1A.    Determine legal sufficiency and if legally sufficient, pursue remedies under the Program
       Fraud Civil Remedies Act for submitting misleading documentation to HUD associated
       with HUD OIG audit report 2009-LA-1020 and its original PHARS agreement.
We recommend that the Director of the Departmental Enforcement Center
1B.    Pursue appropriate administrative actions against Authority officials for the Authority’s
       submission of misleading documentation to HUD associated with HUD OIG audit report
       2009-LA-1020 and its original PHARS agreement.
We recommend that the Director of the San Francisco Office of Public Housing require the
Authority to
1C.    Repay the U.S. Treasury $2,096,528 ($1,637,704 in public housing funds and $458,823
       in Housing Choice Voucher program funds) for its ineligible use of Federal funds for
       payment of debt to the City.
1D.    Reverse the debt of $53,347 for duplicate charges to the Authority’s public housing
       programs included in the indirect cost allocation plan that were included in the rent
       allocation and review the indirect cost allocation for additional duplicate charges.
1E.    Repay its public housing program from non-Federal funds $60,000 plus any additional
       payments made to the City for the management and performance audit initiated by the
       City.
1F.    Work with HUD on a disposition plan for the Authority’s former maintenance building
       including but not limited to selling the property for a fair and reasonable amount or
       entering into a fair market lease agreement that provides the Authority with income from
       the property and ensure the City follows all lease requirements including that the City
       pays for all associated alarm and utility costs.
1G.    Determine what percentage of the executive director’s $80,890 salary from August 15,
       2015, to January 31, 2016, plus the applicable portion of any additional charges from
       February 1, 2016, forward should have been charged to the City for time spent as the
       acting executive director of the City’s Housing and Community Development
       Department and obtain reimbursement for that amount.
1H.    Establish and implement policies and procedures for Authority employees to charge time
       to the City when working on City assignments.
1I.    Provide documentation to support that $180,000 spent on office rent was reasonable or
       repay its public housing program from non-Federal funds.
1J.    Renegotiate its $60,000 per year office space rent to ensure that the Authority obtains a
       fair market price for the reduced space.



                                                11
1K.    Obtain HUD approval for its self-insured general liability policy and its participation in a
       risk pool not approved by HUD.
1L.    Provide support showing that the $684,020 charged by the City for general liability
       coverage was reasonable.
1M.    Develop and implement financial policies and procedures for the current operating
       environment that address the roles of Authority and City employees. The Authority
       should also ensure that there are additional steps for expenses charged by the City to
       ensure proper review and approval.


We recommend that the Director of the San Francisco Office of Public Housing
1N.    Work with HUD headquarters on corrective actions to improve the Authority’s control
       and accountability regarding its finances and operations including but not limited to HUD
       receivership and/or separating the Authority’s finances from those of the City.




                                                 12
Scope and Methodology
Our audit period covered July 1, 2012, to June 30, 2015, but was expanded when necessary. We
conducted our fieldwork at the Authority’s finance office at 450 Civic Center Plaza, Richmond,
CA, between October 2015 and February 2016.
To accomplish our objective, we

   •   Reviewed applicable laws and regulations for public housing agencies.
   •   Reviewed HUD OIG hotline complaint 77639.
   •   Reviewed the Authority’s annual contributions contract with HUD, accounting records,
       independent auditor’s reports, board minutes, 5-year annual plan, one contract file, and
       lease agreements.
   •   Interviewed staff from HUD, the Authority, the City, a City contractor, and the
       complainant.
   •   Performed site visits to the City’s Civic Center space occupied by Authority employees
       and the Authority’s old administrative and maintenance building currently occupied by
       the City’s RichmondBUILD program.
We reviewed documentation submitted to HUD to close out findings from HUD OIG audit
report 2009-LA-1020 and documentation submitted to HUD related to findings in the PHARS
agreements to determine whether the documentation was misleading as stated in hotline
complaint 77639.
We reviewed documentation for the indirect, rent, and general liability cost allocations charged
by the City to the Authority to determine whether the charges were reasonable and necessary
because the hotline complaint stated that the City charged the Authority for space and services
that it did not use. The City charged the Authority more than $1.5 million for the cost allocations
from July 1, 2012, to June 30, 2015. We did not look at the $310,916 in costs included in the
indirect cost allocations for fiscal years 2013 and 2014 to determine whether it appeared
reasonable and necessary because it was no longer effective at the time of our review. However,
we did review the Authority’s general ledgers to verify that the $310,916 was recorded as an
expense. In addition, due to the complicated nature of the indirect cost allocation plan, we were
not able to review all questionable items.
We reviewed a $100,000 contract initiated by the City because the Authority paid $60,000 of the
costs.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.



                                                 13
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:

•   Reliability of financial information submitted to HUD.

•   Ability to trace HUD expenditures in accordance with HUD regulations.

•   Implementation of policies and procedures to ensure that resources and assets are managed
    effectively, adequately safeguarded, and used only for authorized purposes.
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 lack of an independent relationship between the Authority and the City, coupled with
        weak internal controls, allowed the Authority to mismanage its resources (finding).




                                                  14
Appendixes

Appendix A


          Schedule of Questioned Costs and Funds To Be Put to Better Use
        Recommendation                                     Funds to be put
                            Ineligible 1/ Unsupported 2/ to better use 3/
            number
                1B             $2,096,528
                1C               $53,347
                1D               $60,000
                1G                                   $80,890
                 1I                                  $180,000
                 1J                                                       $60,000
                1K.                                  $684,020

              Totals           $2,209,875            $944,910             $60,000



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.
3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an OIG recommendation is implemented. These amounts include
     reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
     implementing recommended improvements, avoidance of unnecessary expenditures
     noted in preaward reviews, and any other savings that are specifically identified. If the
     Authority ensures that it obtains a fair market rate for its space, it will reduce future costs.
     In this instance, $60,000 represents 1 year of office rent that appeared to be higher than
     the market rate. This amount may decrease once HUD and the Authority determine the
     appropriate market rate.


                                                15
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




                               16
Comment 1




Comment 2




Comment 3




            17
Comment 4




Comment 5




Comment 6




            18
Comment 7



Comment 8




Comment 9




Comment 10

Comment 10




             19
Comment 11




             20
Comment 12




             21
Comment 10


Comment 10




Comment 10


Comment 13




             22
Comment 10




Comment 10


Comment 10




             23
                         OIG Evaluation of Auditee Comments


Comment 1   The recommendations referenced in the response was changed to
            recommendation 1A, 1B, and 1C. We acknowledge that the Authority recorded a
            debt to the City for payroll expenses related to its public housing and Housing
            Choice Voucher programs. However, the Authority’s PHARS agreement, dated
            February 5, 2013, stated that the Authority would not use Federal funds to repay
            the City for past financial transactions. The funds became Federal when the
            Authority repaid its HUD programs with the $2 million required by the 2009 OIG
            audit report. The Authority violated its agreement and used the $2 million
            Federal funds in May 2014 for 2011 and 2012 payroll expenses.
Comment 2   The documentation provided does not support that HUD knew that the same $2
            million used to satisfy 2009 OIG audit report recommendations would also be
            used to repay the Authority’s debt to the City. The Westridge sale resulted in net
            proceeds of more than $7 million. The Authority received more than $2 million
            from the sale of Westridge, and the PHARS agreement specifies that the sales
            proceeds will be used to (1) pay off the remainder of questioned costs identified in
            the 2009 OIG audit and (2) repay the City for the balance of the loan. These are
            two separate items of cost. The Authority did not provide documentation to show
            that the same funds were to be used for both costs or that HUD was aware that the
            Authority used the same funds for both costs. The funds became Federal when
            the Authority repaid its HUD programs with the $2 million required by the 2009
            OIG audit report. It is not reasonable for the Authority to assume that HUD knew
            that it would use the $2 million to satisfy OIG recommendations and then almost
            immediately transfer the same amount out to pay off debt owed to the City.
Comment 3   The Authority provided attachments with its response. We reviewed the
            attachments as part of our evaluation of the Authority’s response. However, we
            did not include the attachments in the report because they were too voluminous.
            They are available upon request.
Comment 4   The resolution and memorandum of understanding (attachment B) do not state
            that the $2 million used to satisfy OIG recommendations was also supposed to be
            used to help satisfy debt owed to the City. Attachment B of the memorandum of
            understanding states that “resources derived from the proceeds” will be used to
            “pay financial sanctions imposed by HUD OIG on RHA [the Authority] in an
            amount no less than $2,257,799, and to retire outstanding debt owed to the City of
            Richmond by RHA in an amount no less than $6,600,000 upon disposition.”
            Attachment C of this memorandum of understanding was not provided by the
            Authority in its response, but we obtained it during the course of the audit.
            Attachment C specifically lists these two items as separate costs with $2.3 million
            for “Office of Inspector General Sanctions” and $8.3 million for “City of
            Richmond Advance.” Based on attachment C, the Authority anticipated that the




                                              24
             Westridge proceeds would provide $10.7 million in funds that could be used for
             these purposes.
Comment 5    The final sources and uses attachment shows that the Authority did not receive the
             anticipated $10.7 million and instead received only $7.4 million to satisfy OIG
             recommendations and debt owed to the City. This document shows that the
             Authority intended to use the $2 million in proceeds to repay OIG debt and debt
             owed to the City simultaneously. However, this spreadsheet was not provided to
             HUD and not included as part of the documentation for the $2 million OIG audit
             repayment.
Comment 6    The PHARS agreement findings concerning the OIG recommendations were
             closed out on June 11, 2014. The $976,052 was a separate issue that HUD was
             tracking and not part of the OIG repayment agreement. In addition, the emails
             and documentation to HUD were dated at least 2 months after the OIG
             recommendations related to the repayment agreement were closed.
Comment 7    We disagree that the $2 million transaction by the Authority that was used to
             repay HUD programs, based on the OIG recommendations and then used to repay
             debt owed to the City was transparent to HUD. The Authority could not provide
             documentation to adequately support that statement, and HUD stated that it was
             unaware of the funds cited in the OIG recommendations having been transferred
             out of the account shortly after the deposit was made. Therefore, the Authority
             improperly spent HUD funds for past debt owed to the City, which was against its
             PHARS agreement with HUD. If the Authority can provide further
             documentation, it can be presented to HUD during the audit resolution process.
Comment 8    We disagree that the $2,096,527 needs to be recalculated. We did not review the
             repayment to the Treasury for recommendations 1O and 1G in audit report 2009-
             LA-1020. We reviewed the repayment agreement for recommendations 1D, 1E,
             1G, 1J, 1L, and 2F for $2,257,799 that needed to be repaid to HUD programs.
             We considered the four repayments totaling $161,271, which the Authority paid
             back to HUD programs, and did not question the use of these amounts. The only
             amount we questioned was the last repayment of $2,096,527. The amount in
             recommendations 1A and 1B does not need to be adjusted.
Comment 9    The $549,483 was for a separate OIG audit; therefore, we cannot deduct the
             $549,483 from the $2 million repayment required in OIG audit report LA 2009-
             LA-1020 to reduce the amount owed. In addition, the $976,052 was a separate
             issue HUD was tracking concerning the Westridge operating accounts, not from
             the proceeds of sale from the Westridge property.
Comment 10 We look forward to working with HUD and the Authority to close out these
           recommendations. (Note: The recommendation numbers referenced in the
           response changed to recommendations 1D, 1E, 1H, 1I, 1J, 1L, 1M, and 1N.)




                                              25
Comment 11 The recommendation referenced in the response was changed to recommendation
           1F. The former maintenance building is a Federal property under the Authority’s
           annual contributions contract with HUD. Section 7 of the contract specifically
           prohibits the Authority from disposing of or in any way encumbering the project
           without HUD approval. The property is a Federal asset to be used for HUD
           programs and not for other programs. According to 24 CFR 85.31, when real
           property is no longer needed for the originally authorized purpose, the grantee or
           subgrantee will request disposition instructions from the awarding agency. Since
           the Authority no longer uses the property for its originally authorized purposes, it
           needs to work with HUD on disposal in accordance with 24 CFR 85.31. As
           discussed at the exit conference, we revised recommendation 1E to include
           working with HUD on a disposition plan for the property.
Comment 12 The recommendation referenced in the response was changed to recommendation
           1G. We commend the Authority for actively working to determine an appropriate
           percentage to split the executive director’s salary between the Authority and City.
           The Authority can provide supporting documentation to HUD during the audit
           resolution process.
Comment 13 The recommendation referenced in the response was changed to recommendation
           1K. Although the Authority switched to the California Joint Powers Authority in
           2011 after the California Housing Authority Risk Management Agency dissolved,
           it did not receive approval to be part of a risk pool not listed on HUD’s Web site
           as approved or to be part of the City’s self-insured policy. The Authority needs to
           obtain HUD approval to continue to participate in the risk pool and self-insured
           City policy as required by its annual contributions contract with HUD.




                                               26
Appendix C
                                            Criteria


24 CFR 85.1 (2014 Edition)
      Applicability of and cross reference to 2 CFR 200
      (a) Federal awards with State, local and Indian tribal governments are subject to the
      Uniform Administrative Requirements, Cost Principles and Audit Requirements for
      Federal Awards at 2 CFR part 200.

       (b) Federal awards made prior to December 26, 2014 will continue to be governed by the
       regulations in effect and codified in 24 CFR part 85 (2013 edition) or as provided by the
       terms of the Federal award. Where the terms of a Federal award made prior to December
       26, 2014, state that the award will be subject to regulations as may be amended, the
       Federal award shall be subject to 2 CFR part 200.


24 CFR 85.1 (2013 Edition)
      Purpose and scope of this part
      This part establishes uniform administrative rules for Federal grants and cooperative
      agreements and subawards to State, local and Indian tribal governments.

24 CFR 85.3 (2013 Edition)
      Definitions
      As used in this part:

       Government means a State or local government or a federally recognized Indian tribal
       government.

       Grantee means the government to which a grant is awarded and which is accountable for
       the use of the funds provided. The grantee is the entire legal entity even if only a
       particular component of the entity is designated in the grant award document.

       Local government means a county, municipality, city, town, township, local public
       authority (including any public and Indian housing agency under the United States
       Housing Act of 1937) school district, special district, intrastate district, council of
       governments (whether or not incorporated as a nonprofit corporation under state law),
       any other regional or interstate government entity, or any agency or instrumentality of a
       local government.

24 CFR 85.20 (2013 Edition)
      Standards for financial management systems


                                                27
       (b) The financial management systems of other grantees and subgrantees must meet the
       following standards:

       (2) Accounting records. Grantees and subgrantees must maintain records which
       adequately identify the source and application of funds provided for financially-assisted
       activities. These records must contain information pertaining to grant or subgrant awards
       and authorizations, obligations, unobligated balances, assets, liabilities, outlays or
       expenditures, and income.

       (3) Internal control. Effective control and accountability must be maintained for all grant
       and subgrant cash, real and personal property, and other assets. Grantees and subgrantees
       must adequately safeguard all such property and must assure that it is used solely for
       authorized purposes.
24 CFR 85.31 (2013 Edition)
      Real property
      a) Title. Subject to the obligations and conditions set forth in this section, title to real
      property acquired under a grant or subgrant will vest upon acquisition in the grantee or
      subgrantee respectively.
       b) Use. Except as otherwise provided by Federal statutes, real property will be used for
       the originally authorized purposes as long as needed for that purposes, and the grantee or
       subgrantee shall not dispose of or encumber its title or other interests.
       (c) Disposition. When real property is no longer needed for the originally authorized
       purpose, the grantee or subgrantee will request disposition instructions from the awarding
       agency. The instructions will provide for one of the following alternatives:

               (1) Retention of title. Retain title after compensating the awarding agency. The
               amount paid to the awarding agency will be computed by applying the awarding
               agency’s percentage of participation in the cost of the original purchase to the fair
               market value of the property. However, in those situations where a grantee or
               subgrantee is disposing of real property acquired with grant funds and acquiring
               replacement real property under the same program, the net proceeds from the
               disposition may be used as an offset to the cost of the replacement property.

               (2) Sale of property. Sell the property and compensate the awarding agency. The
               amount due to the awarding agency will be calculated by applying the awarding
               agency’s percentage of participation in the cost of the original purchase to the
               proceeds of the sale after deduction of any actual and reasonable selling and
               fixing-up expenses. If the grant is still active, the net proceeds from sale may be
               offset against the original cost of the property. When a grantee or subgrantee is
               directed to sell property, sales procedures shall be followed that provide for
               competition to the extent practicable and result in the highest possible return.




                                                  28
              (3) Transfer of title. Transfer title to the awarding agency or to a third party
              designated/approved by the awarding agency. The grantee or subgrantee shall be
              paid an amount calculated by applying the grantee or subgrantee’s percentage of
              participation in the purchase of the real property to the current fair market value
              of the property.

2 CFR 200.302
      Financial Management
      (b) The financial management system of each non-Federal entity must provide for the
      following:

       (3) Records that identify adequately the source and application of funds for federally-
       funded activities. These records must contain information pertaining to Federal awards,
       authorizations, obligations, unobligated balances, assets, expenditures, income and
       interest and be supported by source documentation.

       (4) Effective control over, and accountability for, all funds, property, and other assets.
       The non-Federal entity must adequately safeguard all assets and assure that they are used
       solely for authorized purposes. See §200.303 Internal controls.

2 CFR 200.303
      Internal Controls
      The non-Federal entity must:

       (a) Establish and maintain effective internal control over the Federal award that provides
       reasonable assurance that the non-Federal entity is managing the Federal award in
       compliance with Federal statutes, regulations, and the terms and conditions of the Federal
       award. These internal controls should be in compliance with guidance in “Standards for
       Internal Control in the Federal Government” issued by the Comptroller General of the
       United States or the “Internal Control Integrated Framework”, issued by the Committee
       of Sponsoring Organizations of the Treadway Commission (COSO).

24 CFR 965.201
      Purpose and applicability
      (a) Purpose. The purpose of this subpart is to implement policies concerning insurance
      coverage required under the Annual Contributions Contract (ACC) between the U.S.
      Department of Housing and Urban Development (HUD) and a Public Housing Agency
      (PHA).

24 CFR 965.205
      Qualified PHA-owned insurance entity
      (a) Contractual requirements for insurance coverage. The Annual Contributions Contract
      (ACC) between PHAs and the U.S. Department of Housing and Urban Development
      requires that PHAs maintain specified insurance coverage for property and casualty
      losses that would jeopardize the financial stability of the PHAs. The insurance coverage


                                                29
       is required to be obtained under procedures that provide “for open and competitive
       bidding.” The HUD Appropriations Act for Fiscal Year 1992 provided that a PHA could
       purchase insurance coverage without regard to competitive selection procedures when it
       purchases it from a nonprofit insurance entity owned and controlled by PHAs approved
       by HUD in accordance with standards established by regulation. This section specifies
       the standards.

       (c) Approval of a nonprofit insurance entity. Under the following conditions, HUD will
       approve a nonprofit self-funded insurance entity created by PHAs that limits participation
       to PHAs (and to nonprofit entities associated with PHAs that engage in activities or
       perform functions only for housing authorities or housing authority residents):

              (1) An insurance company (including a risk retention group).

              (i) The insurance company is licensed or authorized to do business in the State by
              the State Insurance Commissioner and has submitted documentation of this
              approval to HUD; and

              (ii) The insurance company has not been suspended from providing insurance
              coverage in the State or been suspended or debarred from doing business with the
              federal government. The insurance company is obligated to send to HUD a copy
              of any action taken by the authorizing official to withdraw the license or
              authorization.

24 CFR 990.280
      Project-based budgeting and accounting
      (a) All PHAs covered by this subpart shall develop and maintain a system of budgeting
      and accounting for each project in a manner that allows for analysis of the actual
      revenues and expenses associated with each property. Project-based budgeting and
      accounting will be applied to all programs and revenue sources that support projects
      under an ACC (e.g., the Operating Fund, the Capital Fund, etc.).

       (b)(4) Project-specific operating expenses shall include, but are not limited to, direct
       administrative costs, utilities costs, maintenance costs, tenant services, protective
       services, general expenses, non-routine or capital expenses, and other PHA or HUD-
       identified costs which are project-specific for management purposes. Project-specific
       operating costs also shall include a property management fee charged to each project that
       is used to fund operations of the central office. Amounts that can be charged to each
       project for the property management fee must be reasonable. If the PHA contracts with a
       private management company to manage a project, the PHA may use the difference
       between the property management fee paid to the private management company and the
       fee that is reasonable to fund operations of the central office and other eligible purposes.

Office of Management and Budget Circular No. A-87
       Cost Principles for State, Local, and Indian Tribal Governments


                                                 30
       1. Purpose. This Circular establishes principles and standards for determining costs for
       Federal awards carried out through grants, cost reimbursement contracts, and other
       agreements with State and local governments and federally-recognized Indian tribal
       governments (governmental units).

Office of Management and Budget Circular No. A-87
       Attachment B, Selected Items of Cost: 37. Rental costs of buildings and equipment.
       a. Subject to the limitations described in subsections b. through d. of this section, rental
       costs are allowable to the extent that the rates are reasonable in light of such factors as:
       rental costs of comparable property, if any; market conditions in the area; alternatives
       available; and, the type, life expectancy, condition, and value of the property leased.
       Rental arrangements should be reviewed periodically to determine if circumstances have
       changed and other options are available.

       b. Rental costs under “sale and lease back” arrangements are allowable only up to the
       amount that would be allowed had the governmental unit continued to own the property.
       This amount would include expenses such as depreciation or use allowance, maintenance,
       taxes, and insurance.

       c. Rental costs under “less-than-arms-length” leases are allowable only up to the amount
       (as explained in Attachment B, section 37.b) that would be allowed had title to the
       property vested in the governmental unit. For this purpose, a less-than-arms-length lease
       is one under which one party to the lease agreement is able to control or substantially
       influence the actions of the other. Such leases include, but are not limited to those
       between (i) divisions of a governmental unit; (ii) governmental units under common
       control through common officers, directors, or members; and (iii) a governmental unit
       and a director, trustee, officer, or key employee of the governmental unit or his
       immediate family, either directly or through corporations, trusts, or similar arrangements
       in which they hold a controlling interest. For example, a governmental unit may establish
       a separate corporation for the sole purpose of owning property and leasing it back to the
       governmental unit.

Annual Contributions Contract Between the Authority and HUD
     Section 4: Mission of the HA
     The HA [public housing agency] shall at all times develop and operate each project solely
     for the purpose of providing decent, safe, and 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.

       Section 7: Covenant Against Disposition and Encumbrances
       The HA shall not demolish or dispose of any project, or portion thereof, other than in
       accordance with the terms of this ACC and applicable HUD requirements. With the
       exception of entering into dwelling leases with eligible families for dwelling units in the
       projects covered by this ACC, and normal uses associated with the operation of the
       project(s), the HA shall not in any way encumber any such project, or portion therefore,


                                                 31
      without the prior approval of HUD. In addition, the HA shall not pledge as collateral for
      a loan the assets of any project covered under this ACC.

      Section 8 – Declaration of Trust
      Promptly upon the acquisition of the site of any project, the HA shall execute and deliver
      an instrument (which may be in the form of a declaration of trust, a trust indenture, or
      such other document as may be approved by HUD), confirming and further evidencing,
      among other things, the covenant of the HA not to convey or encumber the project except
      as expressly authorized in this ACC. Such instrument and all amendments shall be duly
      recorded or filed for record wherever necessary to give public notice of their contents and
      to protect the rights and interests of HUD and of any bondholders. The HA shall furnish
      HUD with appropriate evidence of such recording or filing. From time to time, as
      additional real property is acquired by the HA in connection with the projects, the HA
      shall promptly amend such instrument to incorporate all such real property and shall
      record the instrument, as amended.

      Section 11 – Operating Budget
      (D) The Housing Authority shall not incur any operating expenditures except pursuant to
      an approved operating budget.

      Attachment VII Insurance Requirements
      Section 1 – Mandatory and Optional Insurance Coverage
      The following types of insurance are either required or should be purchased if the
      Authority determines that exposure exists.

      (B) Commercial General Liability. Mandatory.

      Section 2 - Authorized Insurance Companies.
      Insurance must be purchased from an insurance company or other entity that is licensed
      or duly authorized to write insurance in the State where the HA is located.

      Section 4- Waivers and Self-Insurance Funds.
      Requests for waivers not to purchase any form of required insurance, or to establish a
      self-insurance fund in lieu of purchasing insurance, must be submitted to HUD for
      approval with a justification as to why the request should be approved.

Public Housing Authority Recovery and Sustainability Agreement, Dated February 5,
2013, Action Plan Attachment
       Results and           Desired Outcome            Measures to Achieve
       Determinations from                              Outcomes
       Assessment
G001 RHA expenses have       A. The RHA will operate A. Monthly financial
       exceeded income,      within budget and cannot   statements will be submitted
       whereby the City has  use HUD program            for HUD review within 15
       provided a “loan” to  revenue to pay principal   days of the end of the


                                               32
       the RHA. The              or interest on any             following month.
       agreement between the     obligation that the City       D. Sell Property by 6/30/14.
       City and RHA to repay     considers owed them from       If RHA is unable to sell
       the loan will create      past financial transactions.   property, provide plan to
       additional financial      C. The City will suspend       repay from non-HUD sources,
       problems. The debt        charging the housing           the questioned costs identified
       was $6,842,227 at the     authority for centralized      in 2009 OIG audit.
       end of FY [fiscal year]   costs and/or indirect costs
       2011                      allocations until a cost
                                 allocation plan is
                                 submitted and approved
                                 by HUD.
                                 D. The sale of the
                                 Westridge property will
                                 provide proceeds which
                                 will be used to 1) pay off
                                 the remainder of
                                 questioned costs identified
                                 in the 2009 OIG audit, and
                                 2) repay the City for the
                                 balance of the loan.
F004   The RHA’s Finance         A. The Finance Manager         The Housing Authority
       Manager’s knowledge       over the Housing               finance department is under
       is inadequate and         Authority should be            the control of the City finance
       records are poor and      knowledgeable of HUD           department. The Finance
       unreliable. The           financial requirements,        Manager for the Housing
       Finance Manager was       organized, with the ability    Authority during the PHARS
       unable to provide         to maintain proper records     review should not have lead
       several records           and ensure federal and         finance responsibilities for the
       requested or provided     internal controls are met.     housing authority.
       incomplete or outdated
       documents. In
       addition, HUD asked
       for copies of
       depository agreements
       for RHA banks, and
       were provided a copy
       of an unsigned form.
       Bank signature cards
       initially could not be
       located and when
       finally provided, one
       of the cards still
       authorized the
       previous Deputy


                                                33
Director access to
accounts. In addition,
the credit card issued
to the same Deputy
Director was still
active.




                         34