oversight

The Tarrytown Municipal Housing Authority, Did Not Always Comply With HUD's Procurement, Administrative, and Program Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-11-22.

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

          Tarrytown Municipal Housing
           Authority, Tarrytown, NY
                            Public Housing Program




Office of Audit, Region 2                Audit Report Number: 2017-NY-1002
New York – New Jersey                                    November 22, 2016
To:            Luigi D’Ancona
               Director, Office of Public Housing Programs, 2APH

               //SIGNED//
From:          Kimberly Greene
               Regional Inspector General for Audit, 2AGA

Subject:       The Tarrytown Municipal Housing Authority, Tarrytown, NY, Did Not
               Always Comply With HUD’s Procurement, Administrative, and Program
               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 Tarrytown Municipal Housing
Authority’s administration of its public housing program.

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 212-
264-4174.
                    Audit Report Number: 2017-NY-1002
                    Date: November 22, 2016
                    The Tarrytown Municipal Housing Authority, Tarrytown, NY, Did Not
                    Always Comply With HUD’s Procurement, Administrative, and Program
                    Requirements


Highlights
What We Audited and Why
We audited the Tarrytown Municipal Housing Authority’s administration of its public housing
program based on an Office of Inspector General risk assessment. The objectives of the audit
were to evaluate the Authority’s financial controls to determine whether (1) U.S. Department of
Housing and Urban Development (HUD) funds were used for eligible, reasonable, and supported
expenses and (2) adequate financial controls were maintained to ensure compliance with program
regulations.

What We Found
Authority officials did not properly document the procurement of $474,571 in goods and
services. Specifically, the Authority did not prepare independent cost estimates, solicit price
quotes, and maintain procurement file documentation. Other minor deficiencies were that the
Authority did not prepare an approved statement of policies and procedures, document
inspections before occupancy, properly document tenant employees, and develop a flat rent
policy. We attributed these conditions to Authority officials’ lack of knowledge of Federal
regulations and failure to implement and follow their own policies and procedures to properly
administer the public housing program. As a result, Authority officials could not ensure that
$474,571 in public housing funds was disbursed for eligible, reasonable, and supported expenses
in compliance with applicable requirements and that adequate controls were maintained to ensure
compliance with program regulations.

What We Recommend
We recommend that the Director of HUD’s New York Office of Public Housing instruct
Authority officials to (1) provide documentation showing that the $474,571 in identified
procurements were reasonable and repay any amounts not supported from non-Federal funds, (2)
adopt a HUD-approved procurement plan, (3) develop a HUD-approved statement of policies
and procedures, (4) conduct unit inspections before occupancy, (5) obtain HUD’s approval for
all Authority employees occupying public housing units, (6) accurately report those employees
required to live in public housing as a condition of their job, and (7) develop a formal flat rent
policy.
Table of Contents
Background and Objectives ......................................................................... 3

Results of Audit ........................................................................................... 4
        Finding : The Authority Did Not Always Comply With HUD’s Procurement,
        Administrative, and Program Requirements…………………………………………..4

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

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

Appendixes................................................................................................ 11
        A. Schedule of Questioned Costs .................................................................................. 11

        B. Auditee Comments and OIG’s Evaluation ............................................................. 12




                                                            2
Background and Objectives
The U.S. Department of Housing and Urban Development (HUD) administers Federal aid to local
public housing agencies (PHA) that manage housing for low-income residents at rents they can
afford. HUD provides technical and professional assistance in planning, developing, and
managing these developments. Public housing was established to provide decent and safe rental
housing for eligible low-income families, the elderly, and persons with disabilities. Public housing
comes in all sizes and types, from scattered single-family houses to highrise apartments for elderly
families. There are approximately 1.2 million households living in public housing units managed
by some 3,300 PHAs.

Public housing is limited to low-income families and individuals. PHAs determine eligibility
based on (1) annual gross income; (2) qualification as elderly, a person with a disability, or a
family; and (3) U.S. citizenship or eligible immigration status. If an applicant is eligible, the local
PHA checks the applicant’s references to determine whether the applicant and the applicant’s
family will be good tenants. Local PHAs deny admission to any applicant whose habits and
practices may be expected to have a detrimental effect on other tenants or on the project’s
environment.
The Tarrytown Municipal Housing Authority provides affordable, low-income public housing to
qualified individuals and is located at 50 White Street in Tarrytown, NY. The Authority is
governed by a seven-member board of commissioners. Five members are appointed by the
mayor of the Village of Tarrytown, and two members are Authority residents. The Authority
was established in 1952 and is classified as a small PHA with a total of 151 public housing units.
It does not have Section 8 vouchers. For our review period of October 1, 2013, to March 31,
2016, the Authority received $867,385 in operating subsidies.

The objectives of the audit were to evaluate the Authority’s financial controls to determine
whether (1) HUD funds were used for eligible, reasonable, and supported expenses and (2)
adequate financial controls were maintained to ensure compliance with program regulations.




                                                   3
Results of Audit

Finding: The Authority Did Not Always Comply With HUD’s
Procurement, Administrative, and Program Requirements
Authority officials did not properly document the procurement of $474,571 in goods and
services. Specifically, the Authority did not prepare independent cost estimates, solicit price
quotes, and maintain procurement file documentation. Other minor deficiencies were that the
Authority did not prepare an approved statement of policies and procedures, document
inspections before occupancy, properly document tenant employees, and develop a flat rent
policy. We attributed these conditions to Authority officials’ lack of knowledge of Federal
regulations and failure to implement and follow their own policies and procedures to properly
administer the public housing program. As a result, Authority officials could not ensure that
$474,571 in public housing funds was disbursed for eligible, reasonable, and supported expenses
in compliance with applicable requirements and that adequate controls were maintained to ensure
compliance with program regulations.

Procurement Activities Not Conducted for Seven Vendors
The Authority did not follow procurement procedures for its purchase of goods and services
totaling $474,571. It did not prepare independent cost estimates to determine price
reasonableness, solicit price quotes, and maintain procurement file documentation. Thus, it
could not support that it made purchases competitively and that prices were fair and reasonable.
Regulations at 24 CFR (Code of Federal Regulations) 85.361 required the Authority to prepare an
independent cost estimate and price or cost analysis for all procurement actions, conduct all
procurement transactions in a manner providing full and open competition, and maintain
sufficient records to detail the significant history of a procurement. This condition occurred
because Authority officials did not adhere with procurement regulations at 24 CFR 85.36 and
procurement requirements in HUD Handbook 7460.8, REV-2, dated February 2007. When the
Authority disbursed the $474,571 for goods and services, its formal procurement policy had been
submitted to HUD for review and approval but had not been approved by HUD.

During the course of our fieldwork, Authority officials received procurement training from a
HUD-sponsored contractor and contacted HUD Office of Public Housing officials to develop
and secure an approved procurement policy. These actions along with the implementation of a
HUD approved procurement policy should result in appropriate procurement actions being
properly documented.




1
 Procurement regulations contained in 24 CFR 85.36 have been incorporated into 2 CFR Part 200.317-200.326
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards effective
December 26, 2014. Our audit period is from October 1, 2013 to March 31, 2016.



                                                      4
Lack of Current Administrative Policies and Procedures Statement
The Authority did not comply with the requirements at 24 CFR 903.7 to have a statement of
current administrative policies and procedures attached to its annual plan and approved by HUD.
It used an outdated administration policy and guide plan from another PHA because Authority
officials were unaware of the requirement to have a current administrative policy and procedures
statement in place for continuity of Authority operations. During our audit, Authority officials
stated that they had begun to draft an administration policy and guide statement and would
submit it to HUD’s Office of Public Housing for review.

Inspections Not Conducted Before Occupancy
The Authority did not adequately document the inspection of its units before occupancy in
accordance with 24 CFR 966.4(i); Public Housing Occupancy Guidebook, section 9.2; and its
own Admissions and Continued Occupancy Policy, section III(9). We reviewed 20 of 151 tenant
files (13 percent), consisting of 15 tenant and 5 tenant-employee files. Of the 20 files reviewed,
14, which consisted of 10 tenant files and 4 tenant-employee files, did not contain documentation
of the required inspections before occupancy. Authority officials were not aware that
documentation was required to support that the unit was inspected before occupancy. As a
result, there was no assurance that the units were in decent, safe, and sanitary condition before
occupancy. During the course of our fieldwork, Authority officials created a preoccupancy
inspection checklist, which the Authority used to inspect units with the tenant before occupancy.
The Authority had also filed a signed and dated copy of this preoccupancy inspection checklist in
the tenant file.
HUD’s Approval To House Two Tenant-Employees Not Obtained and Improperly
Included in the Operating Subsidy Calculation
The Authority did not obtain HUD’s approval to house two maintenance employees and
improperly included these units in its calculation of operating subsidies in violation of HUD
Handbook 7465.1, REV-2, and Office of Public and Indian Housing Notice 2011-7, section 4.1.
A review of five tenant-employee files found that there was no documentation showing that the
Authority obtained HUD’s approval to house two maintenance employees who were required to
live on site. Further, the Authority had not reported them on form HUD-51234 in accordance
with HUD regulations. In addition, these two maintenance employees resided in units
designated in HUD’s Public and Indian Housing Information Center2 system as “assisted tenant,”
as opposed to “occupied employee” units, which resulted in these units improperly being
included in the calculation of operating subsidies. We attribute these conditions to Authority
officials’ not being aware of HUD’s requirements. As a result, HUD had not approved the
occupancy of the two units by maintenance employees, and the calculation of operating subsidies
could have been inaccurate.




2
 The Public and Indian Housing Information Center system allows PHAs to electronically submit information to
HUD. It enables PHAs to update their data online, which allows field personnel to focus on providing assistance to
PHAs and reduces the burden of paper submission and data entry.



                                                        5
Records Documenting the Method Used To Determine Flat Rents Not Maintained
The Authority did not document how it determined flat rents as required by regulations at 24
CFR 960.253(b)(5). Authority officials believed that they could charge tenants in public housing
a reasonable rent, which could be a flat amount not related to the person’s income. The lack of
documentation showing how the flat rents were determined provided no assurance that the rents
were appropriate.
Conclusion
Authority officials did not properly document the procurement of $474,571 in goods and
services. Specifically, the Authority did not prepare independent cost estimates, solicit price
quotes, and maintain procurement file documentation. We also identified other minor
deficiencies including the Authority did not prepare an approved statement of policies and
procedures, document inspections before occupancy, properly document tenant employees, and
develop a flat rent policy. We attributed these conditions to Authority officials’ lack of
knowledge of Federal regulations and failure to implement and follow their own policies and
procedures to properly administer the public housing program. As a result, Authority officials
could not ensure that $474,571 in public housing funds was disbursed for eligible, reasonable,
and supported expenses in compliance with applicable requirements and that adequate controls
were maintained to ensure compliance with program requirements.
Recommendations
We recommend that the Director of HUD’s Office of Public Housing instruct Authority
officials to

       1A.    Provide documentation showing that the $474,571 in identified procurements was
              reasonable or repay any amounts not supported from non-Federal funds.

       1B.    Adopt a HUD-approved procurement plan.

       1C.    Develop a HUD-approved statement of policies and procedures and attach the
              statement to the annual report submitted to HUD.

       1D.    Follow up to ensure inspections are completed before occupancy.

       1E.    Obtain HUD’s approval for all public housing units occupied by Authority
              employees.

       1F.    Accurately report employees who are required to live in public housing as a
              condition of their employment on form HUD-51234.

       1G.    Develop and implement a flat rent policy that requires documentation to be
              maintained to support how flat rents were determined.




                                               6
Scope and Methodology
The review generally covered the period October 1, 2013, through March 31, 2016, and
was extended as needed. Audit fieldwork was performed onsite from April through
September 2016 at the Authority’s office located at 50 White Street, Tarrytown, NY.

To accomplish our audit objectives, we

      Reviewed applicable Office of Public and Indian Housing notices, HUD handbooks, CFR
       regulations, and the U.S. Housing Act of 1937.

      Interviewed officials of the Authority, reviewed HUD monitoring reports, and
       interviewed HUD Office of Public Housing employees.

      Reviewed the Authority’s Admissions and Continued Occupancy Policy, monthly board
       of directors minutes, by-laws, agreements, articles of incorporation and charter, and
       administrative policy.

      Reviewed the annual contributions contract between HUD and the Authority.

      Reviewed the cooperative agreement between the Village of Tarrytown and the
       Authority.

      Reviewed Authority tenant files, disbursements, and internal controls.

      Reviewed data in HUD’s Line of Credit Control System (LOCCS).

We reviewed the disbursements ledger for our review period, which totaled $3.78 million, to
identify expenses requiring proper procurement and reviewed all seven contracts or agreements
for services, including legal, elevator, independent public accountant, fee accountant, fire
protection and security, information technology, and maintenance.

We selected a nonstatistical sample of 20 tenant files (20 of 151, or 13 percent), which consisted
of 15 tenant and 5 employee-tenant files, to test for eligibility, recertification, and completeness.
The results pertain to the sample only. Therefore, we did not project the results to the universe.
While we used the data obtained from LOCCS for informational purposes, our assessment of the
reliability of the data in the system was limited to the data reviewed; therefore, we did not assess
the reliability of this system. We performed a reconciliation of the LOCCS drawdowns to
Authority records and found no discrepancies. To achieve our audit objective, we relied in part
on computer-processed data from the Authority’s computer system. Although we did not
perform a detailed assessment of the reliability of the data, we did perform a minimal level of
testing and found the data to be adequate for our purposes.



                                                  7
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 finding
and conclusion based on our audit objectives.




                                                8
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s
mission, goals, and objectives with regard to

   Effectiveness and efficiency of operations,

   Reliability of financial reporting, and

   Compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as
the systems for measuring, reporting, and monitoring program performance.

Relevant Internal Controls
We determined that the following internal controls were relevant to our audit objectives:

    Program operations – Policies and procedures that management has
     implemented to reasonably ensure that a program meets its objectives.

    Compliance with laws and regulations – Policies and procedures that management
     has implemented to reasonably ensure that the use of funds is consistent with laws
     and regulations.

    Safeguarding resources – Policies and procedures that management has
     implemented to reasonably ensure that resources are safeguarded against waste, loss,
     and misuse.

    Validity and reliability of data – Policies and procedures that management has
     implemented to reasonably ensure that valid and reliable data are obtained, maintained,
     and fairly disclosed in reports.

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.



                                                  9
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:

    The Authority did not have adequate controls to ensure that it performed proper
     procurement and maintained supporting documentation for the procurement of
     goods and services.




                                                10
Appendixes

Appendix A
                              Schedule of Questioned Costs


                          Recommendation
                                                  Unsupported 1/
                              number
                                  1A                 $474,571
                                Totals               474,571




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.




                                             11
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG
Evaluation    Auditee Comments




Comment 1
Comment 2


Comment 3


Comment 4
Comment 5


Comment 6




                              12
Ref to OIG   Auditee Comments
Evaluation


Comment 7




Comment 1




Comment 1




                           13
                         OIG Evaluation of Auditee Comments


Comment 1   The Authority indicated that it has provided documentation and explanations to
            support the reasonableness of the identified procurements. These documents
            need to be reviewed by HUD as part of audit resolution to determine if the
            procurements are reasonable or if any amounts need to be repaid.

Comment 2   The Authority indicated that it is waiting for HUD approval of its procurement
            plan. HUD should review the adequacy of the Authority’s procurement plan as
            part of audit resolution and ensure that the Authority’s procurement plan meets
            the applicable requirements for approval.

Comment 3   The Authority stated that it is preparing an updated statement of administrative
            policies and procedures and will provide it to HUD for approval. HUD should
            evaluate the Authority’s statement of policies and procedures to ensure
            compliance with the applicable requirements before approval as part of audit
            resolution.

Comment 4   The Authority stated that it inspects all apartments prior to occupancy by new
            applicants. The Authority’s new procedures for documenting completed initial
            inspections should be reviewed by HUD as part of the audit resolution.

Comment 5   The Authority stated that it had requested HUD approval for all Authority
            employees occupying public housing units. As part of the resolution process,
            HUD should evaluate the Authority’s request for approval of all Authority
            employees occupying public housing units and provide a written determination to
            the Authority.

Comment 6   The Authority stated that it continues to properly report the two approved
            employees occupying public housing units to HUD. HUD should evaluate the
            Authority’s request for the two additional employees occupying public housing
            units as a condition of their employment as part of the audit resolution and ensure
            all employees occupying public housing units are properly reported.

Comment 7   The Authority indicated that it uses the formula in the Nan McKay Public
            Housing Management Master Book for flat rents. HUD should evaluate the
            Authority’s methodology for determining flat rents as part of the audit resolution
            process and provide a written determination as to whether the procedure is
            acceptable and the rents charged are appropriate.




                                             14